Estructuring of Foreign Trade
For two decades after Government Administration Council adopted the "Interim Regulations on Foreign Trade Management" in 1950, China had carried out a state-monopoly system over foreign trade. In this period of time, China did trade with the former Soviet Union and other Eastern European countries in form of credit transaction. After its relations with the former Soviet Union fell out, China traded with some capitalist countries and regions with ready exchange. As of 1979, along with the deepening of the reform and opening-up drive, China's foreign trade has diversified in form to include compensation trade, processing with supplied materials, trade on commission basis, border trade, local trade, small-deal trade, processing and assembling with imported materials, processing for export, chartering and leasing trade.
To meet the need of opening up to the outside world and enliven the domestic economy, a series of reforms were conducted in China's foreign trade system.
From 1979 to 1987: Delegating power of foreign trade to lower levels, changing the highly concentrated planning management system to carry out decentralized management; canceling the national purchasing and allocating plans to practice management that combines commanding plans and instructive plans with market regulation; and carrying out the import and export license and quota system.
From 1988 to 1990: Comprehensively implementing the contract responsibility system in foreign trade; and freezing foreign trade subsidies and launching the contract system.
From 1991 to 1993: Readjusting and reforming the foreign exchange mechnism and adopting a double-track system in exchange rate; allowing foreign trade enterprises to retain part of their foreign exchange earnings; completely stopping giving financial subsidies to foreign trade enterprises; and making all foreign trade enterprises shoulder responsibility for their own profits and losses.
From 1994 on: Unifying the dual rates in foreign exchange; thoroughly abolishing the practice of allowing foreign trade enterprises to retain part of their foreign exchange earnings, and adopting a unified system in the settlement and selling of foreign exchange and adopting a unified floating exchange rate for Renminbi on the basis of market need and supply; perfecting the tax refunding system on export; abolishing commanding plans, vastly cutting the range of import and export quotas and licenses, lifting control over more than 90% of the export commodities and letting the market decide the prices; and introducing the bidding system for some important export commodities. On July 1, 1994, the "Foreign Trade Law" was officially put into effect, which states that China practices a unified foreign trade system and, while giving appropriate protection to domestic enterprises, adopts such internationally conventional anti-dumping, anti-subsidy and guarantee practices. It also states that the country will adopt the measures commonly adopted by other countries in promoting the development of foreign trade.
Through these reforms, China has initially established a new foreign trade framework that complies with the requirements of the market economic system and internationally conventional rules regarding world trade, thus providing the necessary system and legal guarantee for the development of international trade and economic cooperation.