Limiting Factors to the Foreign Trade Development on Hubei
Province
Chang Wenjuan
College of economics
South-Central University for Nationalities
：
Abstract Hubei is granary province and industrial province, but the development lag behind in foreign
trade. In this article, the limiting factors to the foreign trade development are analyzed, further more
countermeasures are proposed.
Key words: Foreign Trade
individually-run enterprises Processing Trade Advantages
1. Status quo of Hubei’s foreign trade development
1.1. Processing trade development lags behind
Processing trade has become the top one pattern of trade in China’s foreign trade. In 2001, 2002,
2003 and 2004, the percentage of processing trade are 47.4%, 48.7%, 47.6% and 47.6% in China, but in
Hubei Province they are 24.3%, 27.04%, 25.13% and 22.41%.
Obviously, the percentage of processing trade has been hovering around 25%, the highest
proportion is only 27.04% in 2002. The development of processing trade is slow, and it is an important
reason why Hubei lag behind other provinces in foreign trade.
1.2. The development of foreign trade is unbalanced regionally
In Hubei, the regional foreign trade imbalance is typical. For example: In 2001, 2002 and 2003,
respectively, about 52.7%, 51.98% and 55.76% of the total volume of the foreign trade are from Wuhan.
This uneven distribution of the major factors is constraining the development of foreign trade in Hubei
Province.
1.3. Foreign-invested enterprises and private enterprises export a smaller proportion of total
exports
Hubei deeply affected by the planned economy, it has a large state-owned industries. More than
half of the province's foreign trade volume is from state-owned enterprises. The foreign trade
development of foreign-funded enterprises and private enterprises is comparatively slow. The export
value of foreign-funded enterprises in 2004 accounted for 29% of the total, far below the 57% of the
national average, rapid development of private enterprises in recent years, comparing with the coastal
provinces, its overall quality is not high. Except for a very small number of private enterprises, most are
small-scale enterprises of. The structure of these enterprises is not the best in comprehensive and the
overall strength is not strong.
1.4. The market mechanism largely influence the foreign trade structure of Hubei
2001, Hubei optimizes the structure of import and export commodities, exports example, the major
export products include: agricultural products, textiles and clothing products, machinery and electrical
products and high-tech products. Hubei exports of agricultural products have long played the leading
role, reached a peak in 1988; exports amounted to 300 million U.S. dollars, accounting for one-third of
total exports.
With the rapid growth of the textile and garment industry, on the early 1990s, Replacing the
agricultural exports, the textiles and clothing exports occupied the first. In 2004, the export of
mechanical and electronic products was over textile and garment. Such changes in order reflect a
continual optimization in the export commodities.
Electromechanical products are the primary export products, however, Hubei's electromechanical
products account for a small share in China, and so do high-tech products.
In Exports, the leading products are affected by the market mechanism, showing unstable
characteristics. Example: in 2004, the province's steel exports 320 million U.S. dollars, which accounted
for 9.5% in Hubei’s export total value. But in 2005, there’s a sharp drop. In 2002, Fiber export was in a
serious disruption, the export fiber only 10.938 million U.S. dollars, down 70.9%.
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2. The factors restraining the development of foreign trade in Hubei
2.1. The system disadvantages hinder the advantages transformation from resources to
competitive advantages.
In contemporary society, the influence of resource endowment on the sustainable development of
our economy is constantly weakening. Local economic growth is more dependent on the efficiency of
the allocation of production factors, depends on the competitiveness of enterprises.
As an old industrial base, Hubei has a good industrial base, including Machinery, Metallurgical,
Chemical, Power, Building materials and Light Industries. They are called six pillar industries of Hubei.
So, in large equipment, machinery , electronic products, high-tech products, Hubei has advantages.
As a large agricultural province, Hubei has some traditional export products, as the landscape is
rich in resources, Hubei has two advantages, livestock and aquaculture industries.
However, the development of foreign trade in Hubei Province has the advantage of the elements,
there are also institutional disadvantages, the system disadvantages hinder the advantages transformation
from resources to competitive advantages. For example, most of the state-owned enterprises are bearing
huge unproductive staff, operating inefficiencies, heavily indebted as well as the shortage of funds. In
the foreign trade of agricultural products, marketing gap in the management structure remains and
lacking of the international market information, producers always go with the trend of trade acquisitions
passively.
2.2. The lack of state's preferential policies and regional improving policies
From the external policy environment, the state has adopted a non-balanced development strategy
in the early stages of opening up a series of preferential policies given to the eastern region, the eastern
coastal areas advantage by virtue of this policy, coupled with the inherent geographic and market
advantages, it has attracted a large amount of foreign investment. Currently, eastern regions are no
longer dependent on edge, but by virtue of skilled labor, good infrastructure, entrepreneurs groups, the
higher wage rates and the rate of return to capital is more attractive, and economic development has
entered a self-growth type. Since preferential policies to attract foreign investment and exports are
highly relevant, foreign-invested enterprises and enterprises become the main element of export trade.
In Hubei, the support system to private enterprises is not sound. They are in an unequal position in
the competition with state-owned enterprises. In particular, they can’t get some export or import quotas
because of their small scale, size, and age. Their exports have been largely restricted.
2.3. The l ack of hi gh-te c h e ntre pre ne ur s and se ni or ma nage me nt pe r s on ne l
Hubei province has 76 colleges and universities, post-graduate training unit 42, more than 1,700
scientific research institutions, more than 90 million scientific and technical personnel. It is one of the
country's three intelligence-intensive areas. But in the process of science and technology into productive,
high-level professionals and Hubei province's status is not matched, High-tech talents in the application
areas are lack. especially in new materials, new energy, and fiber technology, bio-technology, ecological
construction and environmental protection. Meanwhile, the province is lack of business management
talents, well-known entrepreneurs.
2.4. Lack of a sound legal system and the standard system
Hubei's quality supervision, inspection system is not sound. At present, the province has informed
the provincial agricultural quality inspection agencies 10, involving agricultural ecological environment,
soil and fertilizer, pesticides, bee products, livestock products and other fields. But due to insufficient
input, backward testing equipment and methods and the lack of necessary funds, the work of these
agencies are largely restricted.
Hubei legal system is not yet perfect. It has no special regulations governing the quality and safety
of agricultural products and specific legislation on the protection of intellectual property rights also.
3. Suggestions for Hubei's foreign trade development
Generally speaking, Hubei must deepen reform and speed up the pace of the market to gradually
reduce the impact of the current resources to play the role of institutional factors. In addition:
3.1. Accelerate the pace of marketization and improve the system
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After reform and opening up, China has four regional government policy adjustments, the favored
regions were Guangdong, Shanghai, northeastern and western, but the results are not the same ideals.
Regional preferential policies can play a key role in the development of a region. But its effectiveness
will depend on market factors; so cultivating the market is the foundation for the development of foreign
trade in Hubei Province. We should learn from the advanced experience of other provinces, formulate
corresponding policies to encourage the development of foreign trade, improve local laws and
regulations, thereby strengthening institutionalized.
3.2. Encourage the export of foreign-invested enterprises
Promoting the export of foreign-invested enterprises, Hubei should focus on supporting leading
enterprises and their products, optimizing the layout, to promote their upgrading, scale, expand exports
main force. Meanwhile, efforts to attract more foreign capital to set up more enterprises to further
expand the export volume of foreign-invested enterprises, to promote the development of foreign trade
in Hubei Province.
3.3. Support the development of private enterprises in foreign trade
First, create a favorable environment for private foreign trade and economic development. The
government must cancel or relaxation of the existing unreasonable policy, gradually establish and
improve local regulations to support and protect private enterprises. Establish a social service system in
Commercial, banking, insurance, taxation, industry and commerce, quality inspection, commodity
inspection, customs, transportation departments and so on to support foreign trade development of
private enterprises.
Second, establish a sound private enterprises development funds and secured financing system;
Establish small and medium-sized private enterprise development fund; To support the development of
small and medium-sized private enterprises, including: developing new products, marketing, researching,
introduction of key equipment and renovation. Government can designate relevant banks, encourage to
form private organizations financing foreign trade companies, to solve difficulties such as hard to obtain
loans and guarantees according to the credit ratings of private foreign trade enterprises.
3.4. Develop processing trade, encouraging the development of deep processing
In the manufacturing sector: the government dominates and private enterprises participate in the
transformation and restructuring of existing enterprises. Introduce advanced foreign technologies,
encourage technological innovation, and guide the flow of deep-processing technology and high
value-added sectors to expand exports.
In agriculture sector:
Focus on fiscal, monetary and tax policy support. Such as: improvement of township processing
enterprises capital construction investment accounted for the province capital construction investments,
various government funds(such as the development of science and technology funds, education and
training funds) should be used to support township export processing enterprises, in land-use, electricity
supply and so on, fix preferential policies towards, and through policy-oriented banks (such as the
Agricultural Development Bank) the town and township the export processing enterprises to give
funding support, in new products, new technologies, and new techniques.
References
[1]. Wuhan Customs General Statistics Office, “Customs statistics and analysis”, 2005
[2]. Yangchangchun, “Central and western regions to the outside world”, Foreign Economic and Trade
University Press, 2000
[3]. Wangxingkui Liuguangxi, “WTO and agricultural trade disputes”, Shanghai People's Publishing
House, 2001
[4]. Longyongtu, “WTO and agricultural market liberalization”, China's foreign economic and trade
publishers, 2002
[5]. General Statistics Division, General Administration of Customs, People's Republic of China
"dynamic analysis of the import and export trade," Chinese customs Press, 2003
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