Sri Lanka China economic and trade ties in historical context

Historical relations in the field of economics and trade entered through the silk-route from ancient China many centuries ago. In 1952 the Sri Lanka - China Rubber Rice Pact marked a new chapter in economic and trade relations. More recently economic and political ties have been cemented since the establishment of formal diplomatic relations in 1957. In 1981 the Sri Lanka China Society and in 1982 the Sri Lanka China Joint Committee for trade and economic cooperation were formed.

China has become Sri Lanka’s fourth largest trading partner.

Investment

China has become a major investor in Sri Lanka. Investment by China in Sri Lanka as at end of 2005 was USD 11.66. Mn. Major sectors into which FDI was received include the apparel and textile sectors, services and fishery products. As per statistics from the BOI, there are 63 entrepreneurs, from China and more Chinese enterprises are interested in the Sri Lankan market.

Aid and Economic Cooperation

China has been always ready to assist Sri Lanka within her own capability. To date, China has implemented more than 20 complete projects in Sri Lanka through various forms of assistance, including the BMICH, Supreme Court Complex, Nilabe Hydro Power Station, Gin Ganga Flood Protection Project and the Udawalawe freshwater fish breeding and experimental station.

The Asia-Pacific Trade Agreement (APTA), previously known as the Bangkok Agreement was signed in July 1975. The member countries are Bangladesh, India, China, Republic of Korea, Laos and Sri Lanka. The objectives of the Asia- Pacific trade Agreement are to promote Economic Development through a continuous process of trade expansion among the developing member countries and to further enhance international economic cooperation. Three rounds of negotiations have been completed and the third round of negotiations aimed at offering a maximum of 50% Margin of Preference (MOP) on tariffs in respect of agreed items taking into account 2001 as the base year. The consolidated national lists of concessions came into force on 1st July 2006. These consolidated lists of concessions of the member countries cover a total number of 4,857 tariff lines including special concessions on 587 tariff lines offered to the least developed countries.

New Projects Include
following:

China provided monetary support and relief goods to Lanka after the Tsunami ad undertook reconstruct projects in tsunami affected areas. Examples are China - Lanka friendship Village, Red Cross Village and restoration work in 3 fishery harbours.

Concessions In the Chinese Market under APTA

>Fish Products 67

>Vegetable products 32

>Coconut products 22

>Tea 10

>Spices 08

>Oil seeds and other 46

>Medicaments 45

>Cosmetic products 15

>Chemical Products 19

>Plastics, and Articles 61

>Rubber and Articles 18

>Man made fibre 26

>Fabric 46

>Garments 213

>Jewellery 15

>Machinery and mechanical

Equipment 295

>Electric machinery and Equipment 148

>Vehicles 73

>Other Miscellaneous

products 538

Total 1697

Opportunities related China

With a population of 1.3 bn. The largest country in the world, China’s tremendous market provides endless opportunities for Sri Lankan companies looking to do business in China.

Overview

Sri Lanka has achieved much in the field of economic development despite the ethnic conflict and the Tsunami. The economy is growing at over 6 percent annually. Sri Lanka’s economy has shown remarkable resilience. It has tremendous development potential in the South Asian region.

How to sell Sri Lankan Products and services to China

Channels to do business In China Include:

Economic organizations

Trade Regulations of China

1.Trade Policy

China has continued to reduce administrative trade barriers and switch to the use of tariff and exchange rates adjustments from 2001. According to Foreign Trade law all types of enterprises including private enterprises can register for trading rights.

2. Import Licensing
administration

China maintains an import licensing system applicable to AV laser discs and electronics products, chemicals that are used for military weapons, toxicants and drugs, as well as ozone depleting materials.

3. Automatic Import Licensing

All quantitative restrictions on imported goods were removed and transferred to the category of free import or automatic import licensing for monitoring, e.g. ‘poultry vegetable oils, wine,’ tobacco, asbestos, copper ore and concentrates, coal, plastic raw materials, natural rubber, waste paper, copper, aluminium, iron and steel billets, mechanical and electrical products, iron ore, crude oil, processed oil, alumina, chemical, fertilizers, pesticides etc. For products under automatic import licensing, so long as the content and format of the application are correct, the issuing entity should grant the license immediately or within a few days.

4. Airport Duties and Taxes Related to foreign Trade and Business

Since its WTO accession China has fulfilled its tariff reduction commitment. The overall level of import tariffs has dropped to an average of 9.8%, with agricultural products at 15.2% and industrial goods at 8.95%. To encourage imports, lower provisional tariffs have been applied to 209 types of imported products we.f. June 2007. Imported agricultural products subject to tariff rate quotas include wheat., corn, rice, soybean oil, rapeseed. oil, palm oil, sugar, cotton and wool. VAT on imported goods is at the basic rate of 17% for general goods and at a lower rate of 13% for some products. Consumption tax is applied to imports of cigarettes and tobacco, alcoholic drinks, cosmetics, skin and hair care products, jewellery and precious stones, motor cycles, motor cars and tyres, gasoline and diesel oil, golf clubs and equipment, high priced watches, pleasure crafts, chopsticks and wood floorings.

5. Free Trade Agreements (FTA) With China

China has concluded free trade agreements with many countries e.g. Pakistan, Chile, Jordan, Thailand and other. ASEAN members to be fully effective by 2010 2015 and FTAs with Australia, New Zealand and India are being negotiated. Reduced import tariff rates may be applied to certain commodities imported from FTA countries into China.

6. Customs Requirements

Most goods are subject to mandatory inspection and quarantine under the Catalogue of Import-Export Commodities. ‘Pre-shipment inspection is required for importing wastes.

7. Documentary Requirements

Commercial Invoice, Bill of Lading/Air Way Bill, Packing List and Certificate of Origin are required upon request.

8. Product standards

Import commodity inspection is required for all goods in the published inspection List, or subject to inspection pursuant to other laws and regulations. Safety license and other, regulatory requirements apply to imports ‘of medicines, foodstuffs, animal and plant products, and mechanical and electronic products. The China Compulsory, Certification (CCC), mark is a compulsory Safety and Quality mark effective., from 1 May 2002 for electrical and electronics goods, motor vehicles, agriculture machinery, medical devises etc. For toys and playthings it became effective from 1 July 2007. China has a complex system governing the standards and hygienic conditions of food and agricultural products, wines, and cosmetics imported into the mainland.

9. Trade Description ad Labelling Requirements

All goods sold in China must be labelled in the Chinese language with a true description of their contents, grades ad specifications as to quantities where applicable, production date and expiration date (in particular for food related items and pre-packaged foods), explanatory warnings as to potential hazards associated with the product etc. Effective from March 2002, imports of genetically modified organisms (GM0) must be labelled according to China’s Measures for Agricultural GMO marking.

10. China Foreign Trade Relations

Hong Kong is the most important entrepot of China, accounting for more than 60% of re-exports of mainland origin goods and 50% of re-export goods destined for the mainland market (transhipment goods included).

Under CEPA IV, the Mainland and Hong Kong have agreed on a package of further liberalization measures to be effective from 1st January 2008 covering both goods and services, as wells as other cooperative measures.