In recent years, as China's consumer market gradually becomes matured and the residents' consumption capacity improves gradually, it has become numerous investors’ focus to open up the consumer market in Chinese mainland. Due to the difference of management mode in domestic sale and export, their requirements for operation and management capacity are quite different. In Dongguan, a city based upon exogenous economy, most of processing trade enterprises (PTEs) are export-oriented, so there are many problems in operation and management of domestic market. The People’s Government of Dongguan Municipality (PGDM) will give priority to the aid and guidance of these export-oriented enterprises in rapidly and efficiently exploiting the domestic market.
Under the support from the People’s Government of Guangdong Province (PGGP) and related departments, Dongguan regards the advancement of the PTEs to exploit the domestic market as the important way to change the mode of developing foreign trade and economic cooperation. In accordance with the important content of transformation and upgrading of processing trade, Dongguan has promulgated a collection of aiding policies and measures and built “six platforms” by which the enterprises can open up the domestic market.
A. Working out a collection of aiding policies and measures
(A) Providing funding support for domestic sale
The following special items shall be established in the PGDM’s special fund of 1.0 billion Yuan for transformation and upgrading of processing trade to encourage the export-oriented enterprises to open up the domestic market:
1. For the enterprises of which legal domestic sales of their products increases as against that of last year, they shall be rewarded by 10% of newly paid VAT to our tax departments for this year (their domestic sales of this year shall not be less than 5.00 million Yuan and their newly paid VAT not less than 1.00 million Yuan). The annual maximum reward for each enterprise amounts to 1.00 million Yuan.
2. For the enterprises that participate in the domestic fairs identified by PGDM to exploit the domestic market, they shall be subsidized by 50% of booth fees and setup cost. The maximum subsidy for each project amounts to 0.10 million Yuan.
3. For the enterprises that advertise their products by use of media (including e-business platform), they shall be funded by 50% of the actual expenses. The maximum subsidy for each project amounts to 0.15 million Yuan.
4. For the enterprises that have their trademarks registered at home, they shall be fully funded in accordance with the registration charges they have actually paid.
(B) Providing policy support for domestic sale
“Some Measures concerning Strengthening the Management of Domestic Sale for Processing Trade” promulgated by Huangpu Customs District (HCD) contains such contents as fully promoting the “window operation” of domestic sale, optimizing the mechanism for price appraisal of domestic sale and setting up the “fast track” for domestic sale of processing trade.
1. Trial implementation of “centralized declaration” mode for domestic sale. The “centralized declaration” mode for domestic sale is put into trial implementation among the enterprises under the networked supervision, the Category-AA and Category-A enterprises in processing trade, that is to say, in the range of the “Approval Certificate for Domestic Sale of Bonded Imported Materials in Processing Trade”, for the bonded products sold at home that month, such enterprises can handle the customs taxation procedures for domestic sale in the centralized way prior to the 15th of next month (it is not allowed to extended beyond the write-off period or contract life).
2. HCD promotes the “window operation” of domestic sale in an all-round way and actualizes the “real-time declaration and issuing” in review of domestic sale.
3. HCD further simplifies the price appraisal formalities by constituting the system for pre-review of domestic sale to carry out the pre-classification and price pre-review. It shall not conduct the focal review to enhance the customs clearance efficiency.
4. Optimization of the mechanism for price appraisal of domestic sale. The enterprises’ actual trade situation should be highlighted, but the enterprises should declare the truth to the customs house. The customs house shall, on the basis of the enterprises’ transaction price, examine and approve the duty-paying price.
5. An incentive is given to the PTEs with export difficulty due to financial crisis to carry out the domestic sale. For the PTEs that carry out the domestic sale through importing equipment in accordance with the foreign-invested project under the allowable category of direct export of non-priced equipment and products, the customs house shall, in the range of the “Approval Certificate for Domestic Sale of Bonded Imported Materials in Processing Trade” issued by the competent commerce departments, handle the related customs formalities of domestic sale for processing trade goods and continuously supervise the related equipment in accordance with the original favorable policy of tax concession to support the enterprise to expand domestic sale and open up the domestic market.
(C) Providing the development environment for bonded logistics
With the full support of HCD, Dongguan has set up its bonded warehouse and export supervised warehouse at the main customs clearance port to establish the “port bonded logistics center” with Dongguan’s characteristics through combining the functions of the bonded warehouse and export supervised warehouse.
1. The products processed with supplied materials can be sold at home through the domestic carry-over supervised warehouse instead of the “one-day tour to HK” domestic sale. In such a case, the enterprises engaging in processing with supplied materials can continue their original operation mode of “import and export on a big scale”; it avoids the expenditure of interest of deferred tax arising out of domestic sale of bonded materials in processing trade; it reduces the procedures for examination and approval of domestic sale of such materials; it is unnecessary for the CPEs to conduct the domestic sale by exporting and importing the goods. It can do so through changing the “one-day tour to HK” domestic sale into the “supervised warehouse tour” domestic sale to reduce the transport cost and enhance the operational efficiency; this can avoid the requirements for “separate equipment, warehouse and materials” in customs supervision when the enterprises engage in domestic sale.
2. In order to encourage our PTEs to use the bonded logistics warehousing equipment, we shall fund them in using the public bonded warehouse and export supervised warehouse. Each shipment into and out of the warehouse (The number of each customs declaration form submitted to the customs house by the enterprises means one shipment and same below) shall be funded by 150.00 Yuan, including 120.00 Yuan to each shipment from the enterprise and 30.00 Yuan to each shipment from the warehouse. Every quarter the bonded logistics warehouse shall submit the data of shipments from Dongguan’s PTEs into and out of the warehouse (subject to the customs declaration form issued by the customs house). The related departments shall appropriate such money after evaluation.
Besides, Dongguan Bonded Logistics Center (Type-B) approved by the relevant state departments was accepted in the end of 2009 and will be put into real operation. The products processed with supplied materials can be sold at home through the Dongguan Bonded Logistics Center (Type-B) instead of “one-day tour to HK” domestic sale.
(D) Providing the enterprises with personalized service in domestic sale
1. PGDM establishes the joint conference system with HCD. Every quarter they will congregate related departments to study the policies and measures of supporting the transformation and upgrading of processing trade and solve the practical problems in foreign trade and domestic sale.
2. Establishment of the liaison system with the key enterprises in domestic sale. Efforts are made to implement the strategy of supporting key competitive enterprises. 1000 key enterprises of domestic sale are selected within the city to establish the special liaison system of town (sub-district) to provide the personalized service and assist them in using the relevant policies well so as to solve the actual problems in domestic sale.
3. DBFTEC sets up the service window of domestic sale to accept and complete the application for domestic sale of bonded materials by the PTEs on the same day.
B. Building “six platforms” for the enterprises in exploiting the domestic market
Platform 1: Wal-Mart, a platform of carrying out the domestic sale
For the outstanding problems the export-oriented enterprises met in opening up the domestic market, such as difficulty in shelving and risky in collection of payment for the goods. PGDM signed the framework agreement of cooperation with Wal-Mart in 2009 to assist our export-oriented enterprises in directly or indirectly shelving their choice and competitive products in 140 stores of Wal-Mart in 76 cities through grasping the domestic sale policy and acquinting themselves with the cooperation mode with the domestic market and home large retailers so as to exploit the selling market rapidly. The framework agreement of cooperation mainly contains the following:
1. Jointly building an environment of supporting enterprises in opening up the market. No efforts are spared to make Dongguan’s choice and competitive products directly or indirectly shelved and sold in Wal-Mart’s stores at home and abroad by making full use of Wal-Mart’s advanced retailing technology, rich trading experience and hude commercial network, and to provide Dongguan’s enterprises with policy guidance and business training in developing markets. We also impel the enterprises to make independent innovation, build their brands and improve the market competitiveness and risk-withstanding ability so as to realize the sustainable growth of domestic and foreign trade.
2. Exchanging the experiences of domestic sale. Such related activities to exploitation of domestic market and development of domestic sale as forum, symposium and field investigation are held irregularly to set up the platform of experience exchange for Dongguan’s export-oriented enterprises in domestic sale so as to help them develop an inside outlook and learn experiences of domestic sale and deepen their understanding of domestic sale.
3. Purchase matchmaking. The purchase matchmaking meeting is jointly held between Wal-Mart and Dongguan’s export-oriented enterprises to make the choice and competitive products directly or indirectly shelved and sold in Wal-Mart’s stores at home so as to assist the enterprises in exploiting the domestic market further.
4. Conducting the policy guidance and business training. The guidance meeting or training courses concerning exploitation of markets are jointly given to the enterprises. Wal-Mart will assign professional personnel to guide the enterprises in national laws and rules, as well as the policies and measures of the government at different levels in helping enterprises with opening up markets, and provide such enterprises with the guidance and training services in the relevant national standards, the domestic market information of commodity, briefing of domestic customers’ shopping behavior, product R&D, product design and packaging, logistics distribution, brand creation, marketing strategies and the process and rules of cooperation with domestically large retailers.
5. Providing the key enterprises with the one-to-one guidance. Wal-Mart will pick out some key export-oriented enterprises according to the true situation and give them one-year in-depth guidance in order to help them improve innovative ability and build brands for domestic sale.
6. Wal-Mart’s fostering its commodity suppliers of independent brands in Dongguan. It will increase its understanding and investigation of the export-oriented enterprises in Dongguan and select the enterprises with strong production ability and choice products to make them its commodity suppliers of independent brands through sustainable training and cultivation so as to prompt them to be geared to and familiarized with the domestic market.
7. The “Dongguan Show Week for Foreign Trade Commodity” is held to popularize the choice products from Dongguan’s export-oriented enterprises to the domestic consumers through building the Dongguan’s product area and carry out relevant propaganda and promotion.
8. Assisting the enterprises in solving the backlog. For the export-oriented enterprises that have a big inventory build-up due to the cancellation of export orders, Wal-Mart will conduct a special campaign of purchase and sale to help them clear off the stocks and promote products so as to recover the funds.
9. Strengthening the purchase of the products from Dongguan’s enterprises. Wal-Mart will enlarge the range of product purchase in Dongguan and increase the purchase quantity.
10. Helping the export-oriented enterprises opening up the new markets. Both parties will continuously explore the cooperation mode. Party B will invite the overseas buyers to attend the matchmaking meeting held with Dongguan’s export-oriented enterprises to sell their products directly or indirectly in Party B’s stores at home and abroad and help them expand into overseas markets.
In 2010, we will continuously deepen the cooperation with Wal-Mart and continue different types of guidance in domestic sale policy and business. In the next half of this year, we shall hold the Dongguan Show Week for Foreign Trade Commodity to help the enterprises open up the domestic market.
Platform 2: The “Centralized Declaration” platform for domestic sale of Processing trade enterprises
In 2009, we finally won the special policy General Administration of Customs granted to Dongguan. The PGDM issued the “Implementing Program of Huangpu Customs House and the People’s Republic of Dongguan Municipality concerning Conducting the Special Work of Promoting the Transformation Upgrading and Domestic-sale Facilitation of Processing Trade” with HCD and carried out the domestic-sale experiment of “centralized declaration” among the networked supervision enterprises, Category-AA and A enterprises of processing trade. On the basis the experimental range was enlarged. As applied by the enterprises and jointly approved by the customs house and the foreign economic cooperation office, some qualified Category-B enterprises that are applying or ready to apply for Category-A management are allowed to carry out the “centralized declaration” for domestic sale, but they must provide efficient guarantee.
In 2010, we will enlarge the range of the “centralized declaration” for domestic sale by summarizing the experimental experiences. Meanwhile, for the fund guarantee involved in the domestic-sale “centralized declaration” mode experimented among some enterprises, we will set up the guaranty money in the special fund of 1.0 billion Yuan for transformation and upgrading of processing trade and provide the countersecurity to the letter of guarantee of which the qualified PTEs apply for the issuance to the bank in order to conduct the “centralized declaration” for domestic sale so as to solve the problem of capital tie-up for the enterprises.