Glossary for China economic and trade

1st tier cities
1st tier cities are municipalities directly administered by the central government (Beijing, Tianjin, Shanghai Chongqing) that are designated as the major economic and commercial centres of China. But in terms of the actual state of development, only Beijing, Shanghai and Guangzhou are recognized as the first tier cities.

2nd and 3rd tier cities
s are regional economic centres/cities other than Beijing, Shanghai and Guangzhou. Administratively, regional economic centres are basically provincial capital cities or subprovincial cities which have independent economic status within a province. 3rd tier cities are larger cities which are economically more developed but are not the provincial capital or subprovincial cities.

Production line in a PRD factory
Acronym in full: The Pearl River Delta
The Pearl River Delta (PRD) is one of China’s leading economic regions and a major manufacturing center located at the south. The PRD economic zone is formed by 9 cities, namely Guangzhou (the provincial capital), Shenzhen, Foshan, Zhuhai, Jiangmen, Zhongshan, Dongguan, four districts and counties of Huizhou and four districts and counties of Zhaoqing.

Acronym in full: Greater Pearl River Delta
The Greater Pearl River Delta region is the PRD region plus Hong Kong and Macau.

The Pan-PRD economic region consists of 9 provinces (Fujian, Guangdong, Guangxi, Guizhou, Hainan, Hunan, Jiangxi, Sichuan, Yunnan) and 2 sepcial administrative regions (Hong Kong and Macao). The idea of Pan-PRD was first advocated by Guangdong in 2003 to promote cooperation in the region.

Acronym in full: Yangtze River Delta
The Yangtze River Delta (YRD) metropolitan region refers to 16 cities in Shanghai, southern Jiangsu and the eastern & northern part of Zhejiang. The cities included are Shanghai, Nanjing, Suzhou, Wuxi, Changzhou, Yangzhou, Zhenjiang, Nantong, Taizhou, Hangzhou, Ningbo, Huzhou, Jiaxing, Shaoxing, Zhoushan and Taizhou.

Tri-networks integration
Tri-networks integration or convergence is the integration of telecommunications networks, cable TV networks and the Internet.

Shanghai Free Trade Zone
Acronym in full: free trade zone / export processing zone
Under the concept of a country’s external trade, a free trade zone or sometimes called an export processing zone, is a designated area within a country’s territory, usually for the purpose of re-export or export processing, where goods can be landed, handled, repackaged, manufactured and re-exported without paying any customs duties. Only when the goods are moved to consumers in the country outside the zone, the goods will be subject to the prevailing customs duties.

12th Five Year Plan
The 12th Five Year Plan for Economic and Social Development of the People’s Republic of China. Central planning is a characteristic of a socialist economy. Since 1953, China has adopted a five-year planning cycle. The 12th five-year plan period is from 2011 to 2015.

The Third Plenum
Full name: The Third Plenary Session of the CPC Central Committee
The Central Committee is the highest authority within the Communist Party of China. Its members are selected once every five years by the CPC National Congress. The Central Committee Plenary Session is held at least once a year.

Rmb internationalisation
Rmb internationalisation means the general acceptance of Rmb as a currency in trade settlement, direct investment and portfolio investment in the international market. According to the Society for Worldwide Interbank Financial Telecommunication (SWIFT), the path of Rmb internationalisation can be divided into three phases – first as usage for trade finance, then for investment and in the longer term as reserve currency.

Rmb trade settlement
The Chinese mainland announced the Pilot Rmb Trade Settlement Scheme in April 2009, with eligible enterprises allowed to settle in Rmb their merchandise trade with enterprises in Hong Kong and ASEAN countries. The scheme was extended in 2011 to allow all importers and exporters in all provinces and cities on the Chinese mainland to settle in Rmb their merchandise trade with the rest of the world. Besides, service trade can also be settled in Rmb.

Acronym in full: Renminbi Qualified Foreign Institutional Investor
The RQFII scheme was an expansion of the QFII scheme in 2011 to allow qualified institutional investors to raise offshore Rmb funds in Hong Kong and invest directly into the mainland’s onshore securities through the RQFII quotas.

Offshore Rmb centre
Offshore Rmb centre is a Rmb market outside China where non-mainland Chinese companies, institutions and residents can trade the currency and settle trade deals easily. Since 2004 when Rmb business was first launched in Hong Kong under the authorisation of the People’s Bank of China (PBOC), expansion of the business has been fast in both scope and volume. With strong support from the Central People’s Government, Hong Kong has developed as a major offshore Rmb centre.

Triangular debt
Triangular debt refers to liabilities owed by companies to each other in a debt chain where the debtors are at the same time creditors. For example, company A owes money to company B, which in turn owes money to company C, which owes money to company A.

Acronym in full: foreign direct investment
Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or company of another country. It can be a brand new investment or M&A with an existing business. Foreign direct investment is used to distinguish from portfolio investment.

Acronym in full: Qualified Domestic Institutional Investor
These are institutional investors approved by the China Securities Regulatory Commission to invest in foreign securities markets. QDII scheme is used in China as its capital account is not yet completely open.

Acronym in full: Qualified Foreign Institutional Investor
The QFII scheme was first introduced in 2002 by the Chinese government to allow qualified institutional investors from Hong Kong to trade RMB denominated securities on the Chinese mainland by converting foreign currency to RMB within the quota obtained from relevant authorities.

Acronym in full: Closer Economic Partnership Arrangement
The Mainland-Hong Kong Closer Economic Partnership Arrangement (CEPA) is a free trade agreement concluded by the Mainland of China and Hong Kong in June 2003. CEPA adopts a building block approach, and the two sides have been working closely to introduce further liberalization measures continually. Between 2004 and 2013, 10 supplements were signed. Effective January 2014, 1,757 Hong Kong-origin products exporting to the Mainland can enjoy zero tariffs. Also, CEPA opens up 50 service sectors to Hong Kong companies.

Dim Sum Bonds
Dim sum bonds are Renminbi-denominated bonds issued in Hong Kong since 2007. They are named after dim sum, a popular local delicacy which is usually small in size.

Customs duty deposit system
Customs duty deposit system was introduced in 1995 to strengthen trade management and stem irregular activities in processing trade such as smuggling. Processing trade units or enterprises must apply to designated banks for the establishment of a customs duty deposit account for import materials and parts.

Acronym in full: foreign-invested enterprises
Enterprises that have utilised foreign capital approved to be set up in China either in the form of Sino-foreign joint ventures, Sino-foreign cooperative enterprises or wholly foreign owned.

Outward processing and compensation trade
Outward processing and compensation trade refer to processing with supplied materials, processing with supplied patterns and samples, assembly with supplied components, and compensation trade.

Processing trade
Processing trade refers to a preferential export mode whereby all or part of the raw and auxiliary materials, parts and components, accessories, and packaging materials needed for production are imported in bond, and the finished products after processing or assembly by enterprises on the mainland are re-exported.

Classification of processing trade enterprises
Processing trade enterprises are classified into five categories, namely AA, A, B, C and D, according to the “evaluation criteria for consignors and consignees” in the management of customs declaration units. Category AA enterprises, in addition to enjoying other customs facilitation measures applicable to Category A enterprises, are eligible for release of goods on confidence principle. Category A enterprises are bonded factories with customs officers posted on-site and online links established with the customs office.

Classification of processing trade goods
Import and export products in processing trade are classified into prohibited, restricted and permitted. The catalogues of products under the prohibited and restricted categories are released by MOFCOM and GAC from time to time.

Domestic sale of processing trade
Chinese customs authorities require that bonded materials of processing trade enterprises should be 100% re-exported out of China upon completion of processing. If any processing trade enterprise is unable to comply with the re-export requirement due to special reasons, and the bonded materials or finished products have to be sold in China or used to produce goods for domestic sale, approval has to be sought from the commerce department at the provincial level. By presenting the approvals documents to the Customs and repaying the import duty, the goods can be sold domestically.

“Exemption, offset and refund” is a rule for VAT export refund in China. Exemption means exports managed by production enterprises or entrusted to foreign trade enterprises as agencies shall be exempted from the valued added; offset means exports as aforesaid shall be exempted from or refunded of the tax payment already made for raw materials, parts and components offsetting the payable tax payment of goods marketed domestically; refund means the amount of tax which should be offset is greater than the payable taxation and has not been completely offset, shall be.

Acronym in full: Economic Cooperation Framework Agreement
Economic Cooperation Framework Agreement (ECFA) is a free trade agreement concluded by Taiwan and the Chinese mainland in June 2010, which came into effect on 12 September 2010. By January 2013, both parties have completed liberalization measures committed in the early harvest lists for trade in goods and trade in services. Both parties have agreed to undertake further negotiations on the areas of further reduction of tariff, service sectors liberalisation, investment facilitation and protection, and economic cooperation.

Bonded supervision
Products imported under processing trade or transshipment arrangement that are allowed to defer payment of tariffs and import-related taxes are under bonded supervision by the Customs Department to avoid smuggling.

Bonded areas
Bonded areas are designated areas under customs supervision where enterprises are subject to special policy of tax exemption and bonded treatment.

Bonded factories
Bonded factories are enterprises duly approved by customs authorities to carry out bonded processing for producing export goods. Customs may post their staff at these factories or send their staff to these factories anytime to carry out supervision, inspection as well as checking of the books.

Bonded warehouses
Bonded warehouses are warehouses approved by customs authorities to store goods under bonded supervision.

Individually owned businesses
Individually owned businesses are usually shops operated by an individual or a family. An individually owned business that is properly registered according to relevant rules and regulations will enjoy civil rights as a legal commercial entity. CEPA allows Hong Kong and Macau permanent residents with Chinese citizenship to set up individually owned stores in the Chinese mainland, but can only take the form of “individual operations”.

Transfer of bonded goods
Transfer of bonded goods for deep processing means a processing trade enterprise transfers its processed bonded goods to another processing trade enterprises for deep processing and re-export.

Cross customs areas processing
Cross customs areas processing means a processing trade enterprise commissions the processing of imported materials and parts to a processing trade enterprises in a different customs area for deep processing.