Tax sparing credit
A Foreign Investment Enterprise who is a resident of a PRC treaty country is deemed to have paid the income tax under the indirect tax sparing credit provision in respect of any PRC tax concession and tax breaks being granted.
However, there is no tax sparing credit provision in the treaty concluded between the PRC and the USA.

Major PRC treaty countries by geographic area

Asia
Australia, Cyprus, India, Indonesia, Japan, Malaysia, New Zealand, Pakistan, the Philippines, Singapore, Sri Lanka, Thailand, and Vietnam;

Europe
Austria, Britain, Belgium, Denmark, Finland, France, Germany, Greece, Luxembourg, Norway, Sweden, Ireland, Italy, the Netherlands, Portugal, Slovakia, Spain, Switzerland, and the Russia;

Africa
South Africa, Mauritius, Egypt, and Nigeria

America
Canada, USA, Brazil, Cuba and Jamaica

Hong Kong residents are entitled to benefits of avoiding double income tax under the Arrangements concluded between the PRC Central People’s Government and the Government of the Hong Kong Special Economic Region.

It has been a 13-year journey from the preliminary work in 1994 to the passing of thePRC Enterprise Income Tax Law (referred to as “the EIT Law” hereafter) on 16th March 2007, which marked the completion of the unification of two tax systems for  domestically funded and foreign funded enterprises in China. It is a system innovation in the process of building socialism and a harmonized society within the country. To reap the benefits of the new tax system depends very much on its implementation in an effective manner. A few days ago, the State Council announced the long-awaited  Implementation Regulations of the PRC EIT Law (referred to as “the Implementation Regulations” hereafter), which is to come into play with the implementation of the  EIT Law.

To enable the taxpayers and the tax administrators to better understand and  follow the spirit inside the Implementation Regulations, the reporter interviewed theofficials in charge of the State Administration of Taxation on certain questions about  the Implementation Regulations. The officials in charge made the remarks that the drafting of the Implementation  Regulations followed the principles of legality, practicality, global convergence,conservatism, and easy operability. The drafts have brought the existing tax policyinto the contents of the Implementation Regulations and demonstrated the continuity  of the tax policies, without stepping outside the scope of the EIT Law. The Implementation Regulations give details to the EIT Law taking into account the economic activities and the latest development of the economic systems, and this hasdemonstrated the scientific properties of the current policies. In addition, the drafting  committee borrowed the prevailing international income tax policies and learned from  the experiences of international tax reforms. The Implementation Regulations have  embodied international custom and shows the forward-lookingness of the tax policies.According to the officials in charge, the Implementation Regulations contain 8 chapters with 133 clauses, mainly giving details to the provisions in the EIT Law. The  officials in charge gave detailed elaborations on certain key policies and designs in  the EIT Law.

The definition of actual management organization is to protect tax sovereignty.

To share the international experiences, the EIT Law expressly lays down the legal person income tax system, adopting the defined concept of resident and non-resident   enterprises.

The key to define the taxpayer under the legal person income tax system is the  criteria for resident enterprises and non-resident enterprises. The EIT Law uses the  place of incorporation and actual management organization as the criteria todetermine the resident and non-resident enterprises. It is easier to understand and  apprehend place of incorporation but it is difficult to understand the criteria for placeof actual management. How is the place of actual management determined in theImplementation Regulations and what are the relevant considerations?

The officials in charge made the remarks that from the experiences of international practices in recent decades, the place of actual management is in general the place where the enterprise carries on its daily production and business activities. From a legal perspective, it also includes the place where important business decisions are made. From an administrative perspective, the tax law only lays down the principle or

does not lay down anything, leaving the detailed rules to be developed from decided tax cases. To protect tax sovereignty and the willful tax evasion, the Implementation Regulations have expanded the scope for place of actual management and provide that it is the place where the enterprise exercises actual and overall management and control over its production, staff, books of accounts and assets. That helps the issue of administrative decisions later with reference to the actual situations of the enterprises, better protect the tax sovereignty of our country. Detailed criteria can be developed by issuing ministerial rules from the practices in tax collections and administrations.

Budgeted fiscal appropriation is non-taxable income

The EIT Law introduces the concept of non-taxable income. Fiscal appropriation is one of the three items of non-taxable income. What about the various types of subsidies enterprises receive from local governments at the provincial levels or below? How is it provided under the Implementation Regulations?

The officials in charge remarked that the fiscal appropriation, defined as non-taxable income under the Implementation Regulations, is the funds appropriated to the institutions, social bodies and organizations administered under the budget of the local governments, with the exceptions that the State Council, the Ministry of Finance and the State Administration of Taxation provide otherwise. That in general excludes the subsidies and the rebates of local taxes that the enterprise receives from various local governments, and narrows down the scope for fiscal appropriations as an item of nontaxable income. The main considerations for these are (i) the various types of subsidies that the enterprise receives not only include exemption and reduction of turnover taxes, but also include special subsidies for the enterprises to carry on designated activities, both resulting in the increase in net assets and economic benefits flowing in, thus the imposition of income tax being lawful; (ii) the imposition of income tax on the enterprises that receive subsidies from local governments strength the dministration of tax exemption and reduction since the local governments offer various types of tax exemption and reduction in disguise in luring inbound investments, resulting in the erosion of the tax base at the national level; and (iii) the existing legal rules on accounting for government subsidies classify government subsidies as non-operating revenue. That tax rules should be consistent with the accounting rules on government subsidies.

Deduction of reasonable wages and salaries before tax

The EIT Law unifies the deduction of actual payments for various items of expenses,and provides that enterprises can claim deductions of actual and reasonable cost and expense before tax. The Implementation Regulations make specific provisions for the items to be deducted and the criteria for deduction before taxes.

According to the officials, in respect of deduction of wages and salaries, the Implementation Regulations provide that actual and reasonable wages and salaries can be deducted from income. It means that scrapping the limited deduction of wages and salaries for domestically funded enterprises in the past years relieve them of the tax burden. The amount of deducted wages and salaries must be reasonable. Obviously unreasonable amount is not deductible. To the employees in general, the remunerations that the enterprise pays should be considered to be reasonable. There

may be exceptions. Where the shareholders and their close relatives work as the employees in the company, the payment of excessive wages and salaries is thedistribution of dividends in disguise. Alternatively the wages and salaries of the management working for the state owned enterprises are raised in breach of the rules of the departments for the supervision and administration of state owned assets. All

these complicated cases relating to wages and salaries will erode the tax base of the enterprise income tax. To strengthen the administration over tax bases, the Implementation Regulations add the qualification “reasonable” to wages and salaries.The official revealed that the State Administration of Taxation shall issue the 5 “Administrative Measures for the Deduction of Wages” to clarify what is considered

to be “reasonable” wages and salaries in the Implementation Regulations.

60% of the incurred business entertainment expenses are deductible, not exceeding 0.5% on the sales (business) turnover for current year

The Implementation Regulations provide that 60% of the business entertainment expenses incurred in connection with production and business activities shall be deductible from income, but the maximum amount shall not exceed 0.5% of the sales (business) turnover for the current year. What are the policy considerations lying behind this rule?

The official said that the amount of business entertainment expenses is a mix of corporate entertainment and personal consumption. Among them, the personal consumption falls under non-business expenses that should not be deducted before tax. Therefore, there is a requirement to limit the amount of business entertainment to a certain percentage. However, it is difficult to distinguish between business entertainment and personal consumption. The international practice is to arbitrarily set

a relative percentage between the two. In Italy 30% of the business entertainment expenses is deductible before tax. In Canada, the amount is 80%. In the US and New Zealand, the amount is 50%. Taking into consideration of international practices and the existing practice of limiting the deduction of business entertainment to a percentage of the sales amount, we combine the two practices as per experts’ recommendations on the adoption of a strict policy: business entertainment is subject to a 60% deduction and not exceeding 0.5% of the sales amount (business turnover) for the current year.

Limiting the deduction of advising expenses to 15% on sales revenue, and remaining amount being carried over for deduction in future years

The Implementation Regulations consider the combined amount of advertising expenses and business promotion expenses, and provide that the amount of deductible advertising and promotion expenses shall not exceed 15% of the sales amount (business turnover), except for the provisions of the Ministry of Finance and the State Administration of Taxation to the contrary. The amount exceeding the prescribed 15%

can be carried over to future tax years for deduction.

The officials in charge explained that advertising expenses that possess the properties of one-off payment of a large sum and benefit the enterprise for a long period of time should be regarded as a capitalized payment and cannot be deducted in whole in the current tax year. Business promotion has similar properties and should be subject to limits on deduction. The Implementation Regulations permit the deduction of advertising and promotion expenses up to 15% of the sales amount (business turnover), and that the portion in excess of the 15% can be carried over to future tax

years for deduction. The administration has given due consideration to the advertising and business promotion expenses in some industry sectors that require specific

measures to be adopted. In the light of expert opinions and views from relevant departments, the qualification “except for the provisions of the Ministry of Finance and the State Administration of Taxation to the contrary” has been included in the Implementation Regulations with a view to making ministerial rules on the deduction of advertising and business promotion expenses for different industry sectors, in accordance with the provision for the delegation of rule making power in the EIT Law.

Indirect credit helps Chinese enterprises “go abroad”

In accordance with the EIT Law, the corporate income tax the resident enterprises bear indirectly on the dividend and bonus issues from equity investment outside China is eligible for indirect credit. The Implementation Regulations provide that the resident enterprise should hold 20% controlling interest in the equity of the foreign company. What are the policy considerations on this?

The officials said that the PRC EIT law retains the direct credit for tax paid on dividends and bonus issues at the shareholder level and it also introduces the indirect credit for tax on profits earned at the company level out of which the dividends and bonus issued are paid. The adoption of direct and indirect credits gives a helping hand to Chinese resident enterprises going international and increases their competitiveness

in international market. From the perspective of international practices, indirect credit are given on condition that resident enterprises should have actual equity investments in foreign companies. In accordance with the tax laws in the US, Canada, the UK, Australia, and Mexico, resident enterprises holding 10% or more voting rights in the equity investment in foreign companies are eligible for indirect credit. The tax law

requires the equity interest in foreign companies to be 25% for Japanese and Spain investors. It is the first time the PRC EIT law adopts the indirect credit method. The Implementation Regulations provide that the equity interest in foreign companies is 20% for resident enterprises to receive the indirect credit.

New and high technology enterprises by industry sectors

In the light of the requirement for national economic and social development,successful international experiences and the requirement for simple tax system, broad tax bases, low tax rates, and stringent tax collections and administration, the PRC EIT Law adjusts and integrates the tax preferential policies for both domestically and foreign funded enterprises, and gives effect to changes in two dimensions: the tax

policy changes from region-specific preferences to industry-specific preferences,which is to be supplemented by regional tax preferences; the form of tax preferential treatment changes from direct tax exemption and reduction to direct tax exemption and reduction, which is to be combined with reduction in tax bases for indirect taxes.The Implementation Regulations make clarifications on the scope, the conditions, and

the recognition criteria for tax preferential treatments as laid down in the EIT Law.

The officials in charge said that there are three important issues in the recognition of new and hi-tech enterprises. The first is the scope of new and hi-technology enterprises. The Implementation Regulations change the classification of new and high technology by products to classification of the new and high technology by sectors. The Implementation Regulations provide that the products (services) of new and hi-tech enterprises should fall under the scope of <the new and hi-technology industry sectors that receive prior supports from the State> so that it can avoid the problems that product listing and coverage under existing policies are too narrow and that the existing policy is not forward looking. The second issue is the recognition criteria. The Implementation Regulations provide those criteria in principle: the amount of research and development as a percentage to sales; the sales revenue of new and hi-tech products (or services) as a percentage of total revenue; the ratio of employees who possess technical qualifications to the total number of employees in

the company, and other conditions to be met. The Ministry of Science and

Technology, the Ministry of Finance, and the State Administration of Taxation shall formulate policies on this and give the detailed benchmarks with the flexibility to make adjustments for later development.

The third issue is the core proprietary IP rights. The Implementation Regulations lay down the primary requirement for getting recognized as new and high technology enterprises is the ownership in “proprietary IP rights”. In view of the fact that there is no official definition of “proprietary IP rights”, the inclusion of trademark rights, exterior design, copyright that may not have bearing on the core technological

competitiveness of the enterprise into the “proprietary IP rights” will make the scope too wide. The Implementation Regulations finally adopt the “core proprietary IP rights” as one of the criteria for getting recognized to be new and hi-tech enterprises. It is relatively easy to operate and has pointed out the direction for technological innovation. The key point is the IP rights that the enterprise owns and that give core

technical support to the main products and services of the enterprise.

Annual taxable income of small and low profit-making enterprise not exceeding

RMB300,000

The Implementation Regulations give the amount of annual taxable income, the number of employees and the amount of total assets as the benchmark for small profit-making enterprises. Specifically for production enterprises, the annual taxable income shall not exceed RMB300,000, total number of employees shall not exceed 100, and the total asset amount shall not exceed RMB 30 million; for non-production enterprises, the annual taxable income shall not exceed RMB300,000, the number of employees shall not exceed 80, and the total amount of assets shall not exceed RMB 10 million. The scope of the tax concession is larger and the magnitude of tax concession is higher than that as given under the old tax law for domestically funded enterprises.

The officials said that the dividing line that the annual taxable income is RMB300,000 drawn under the Implementation Regulations results from careful testing. About 40% of the enterprises shall be taxed at 20% given that this benchmark is adopted.

The business profits that non-profit making organizations earn are taxable

The PRC EIT Law provides that the income of qualified non-profit making

organizations is exempted from tax. Article 85 of the Implementation Regulations provides that the income of the qualified non-profit making organizations excludes the income derived from profit-making activities of the non-profit making organization. Why is it?

The officials in charge said countries all over the world make a distinction between profit-making and non-profit making activities and give tax preference to non-profit making activities. The relevant legal rules in China provide that non-profit making organizations cannot carry out profit-making activities. To regulate these organizations and plug the loophole that may arise from the profit making activities

carried out by these tax-exempt organizations, the Implementation Regulations expressly provide that the income derived from the profit-making activities would not be exempted from tax. Where some non-profit making organizations derive income from profit-making activities and use them in whole for charitable events, that should

be primarily encouraged under the national policies. Therefore, the Implementation Regulations include the qualification “except for the provision of the Ministry of Finance and the State Administration of Taxation to the contrary”.

Dividend and bonus issue derived from investment over 12 months being exempted from tax

The PRC EIT Law provides that dividends, bonus issues and income from equity investment are tax-exempt income if they are distributed by resident enterprises that satisfy prescribed conditions. What are differences between the conditions to be met by the resident enterprises and the provisions on the taxation of dividends and bonus issues in the old tax law for domestically funded enterprises? What are the policy

considerations?

The officials in charge said that the exemption of income tax on dividend and bonus issues that are distributed among resident enterprises is to eliminate double taxation. Under the old tax regulations for domestically funded enterprises, the distribution of dividends from an enterprise that pays tax at a lower rate to an enterprise that pays tax at a higher rate attracts additional taxes for the high-tax enterprise on the rate

differences. In order to make the tax preferential treatment available to enterprises created in the development of the Western region, the new and high technology enterprises, and the small and low profit-making enterprises, the new EIT Law scraps the practice of imposing additional tax on the rate difference and exempts the income tax on dividend and bonus issues that are distributed by unlisted companies and listed companies, of which the ownership in the investment in the listed companies is over

12 months. To encourage direct investment in production and business activities, the stock speculations in the secondary capital market that is characterized by short-term ownership (less than 12 months) without the primary objective of receiving dividends and bonus issues should not become targets for tax preferential treatments.

The tax exemption and reduction commencing in the year the first sales transaction is reported

The Implementation Regulations provide that enterprises deriving income from the investment in projects of public basic infrastructure that receive primary support from the state shall enjoy tax preferential treatment in the form of “three years’ tax exemption and three years’ tax reduction”, commencing from the tax year in which the first sales transaction for the project is reported. The old tax law for foreign

invested enterprises provided that the year for tax exemption and reduction commences from the first profit-making year. The EIT Law has changed the previous practice from the first profit-making year to the year the first sales transaction occurs. What is the reason for this?

The officials in charge said that the old tax law for foreign invested enterprises adopted the first profit-making year as the year in which the tax exemption and reduction period commenced. That would in practice encourage the postponement of the first profit-making year to avoid paying taxes and made the tax collection and administration a difficult job. The Implementation Regulations adopt a new method under which the tax exemption and reduction commence from the year in which the first sales transaction is recorded. On one hand, this policy change can avoid the

practices by the foreign invested enterprises of putting off the first profit-making year to later years. On the other hand, this policy change can address the issue that the investment scale is big with long period of construction. It is more realistic to the situation under which the domestically funded enterprises receive tax preferences from the date of incorporation. It also encourages the enterprises to shorten the construction period, make the project profitable at the earliest possible moment and improve the return on investment.

Tax adjustment to strengthen the anti-tax avoidance measures

To comply with the relevant provisions on special tax adjustments in the EIT Law and learn from international experiences, the Implementation Regulations expressly lay down provisions for the related parties or associated enterprises in the transactions

with related parties, the adjustment methods for related party transactions, the principle of arm’s length transactions, advanced pricing agreements, the obligations for providing information, collecting taxes as per prescribed profit margins, preventing the use of controlled foreign corporations, prevention on thin capitalization,

general anti-tax avoidance, and the imposition of additional interest on overdue taxes.

The officials in charge said that these provisions strengthen the measures to combat tax avoidance, help prevent and stop acts of tax avoidance and safeguard the interests of the nation. He specially emphasized that after tax adjustments taking effects, the taxpayer, in addition to the payment of additional tax, is liable to a penalty interest that is computed with reference to the bank’s lending rate plus 5% in the period for which additional tax is collected. Where the taxpayer can submit the information to

the tax authority on time, it can be exempted from the payment of additional interest on tax.

Separate rules to be made for filing consolidated tax returns

The EIT Law follows model of the income tax on legal persons. Organizations that are not legal persons should file income tax returns that forms part of the consolidated tax turn for the head office. The filing of consolidated tax returns by head offices would relocate the tax revenues between different regions in the country. Both the taxpayers and local governments are very much concerned about this issue. The Implementation Regulations only lay down one provision in principle. What are the

policy considerations for this?

The officials in charge told us that in accordance with the EIT Law, business organizations that are not legal persons should file tax returns to the tax bureau in the city where the head office is located. That will cause relocation of tax revenue among different regions in the country, and should be dealt with in a reasonable way. We have performed many studies in order to solve the problem of relocation of tax revenues among different regions in a reasonable and proper way and balance the

interests among them after the implementation of the EIT Law and the

Implementation Regulations. The detailed measures shall be formulated by the Ministry of Finance and the State Administration of Taxation, and submitted to the State Council for approval before taking effect. Therefore, the Implementation Regulations only state the principles in general.

Parent and subsidiary companies no longer file group tax returns

The EIT Law provides that except for the provisions by the State Council to the contrary, enterprises should not file group income tax returns. However, the Implementation Regulations do not make relevant provisions for group of companies to file tax returns on a group basis. How will this problem be solved in future?

The official in charge said that as from 1994, the State Council has given approval to 120 large groups of corporations/enterprises to file group tax returns on a trial basis. The policy objective at that period of time is to relieve the enterprises of tax burden and support the development for the groups of enterprises because the operating results of the parent and individual subsidiaries did not present the true information

and it is difficult to distinguish between the enterprises that are operated in accordance with commercial principle and the enterprises that form part of the governmental organizations. With the implementation of the EIT Law, the parent and subsidiary corporations that are legal persons shall file tax returns and pay tax separately. Where there is a requirement to file group tax returns, the State Council shall make separate regulations. Implementation Regulations need not deal with this again since the EIT Law has already made the provisions and delegated the authority on this.

In view of such situation, the introduction of VAT transformation reform will perform the important function of boosting the development of the enterprises, improving the competitiveness of the Chinese enterprise and the capability to cope with risks, and overcoming the adverse influences on China economy brought about by the international financial crises. According to estimates, the reform will cause fiscal revenue to drop by over RMB120 billion, and is the single largest tax cut in the history of the PRC. It is believed that the reform policy will have a positive impact on the sustained steady and relatively fast development of our country’s economy.

The VAT reform plan was tabled during the third plenary session of the 16th Central Committee of the Communist Party of China (the CPC), and the reform must be completed during the period of the 11th five-year plan in China. Since 1st July 2004, the experimental trials have been completed in the North East and Central part of China. The experimental trials were successful and have achieved the expected target. The 2008 State Council Work Report officially kicked off the reform plan for VAT system transformation. In the same year the 11th Session of the National People’s Congress examined and approved the report of the fiscal budget committee of the 11th Session of the NPC, which provides that the reform shall commence in 2009. The State Council decides to commence the transformation reform and perfect the VAT system of our country in order to meet the requirement of scientific
development of the tax system, finally perfect the VAT system and create the condition for the enactment of the VAT law by the NPC Standing Committee in five years’ time.

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    US treasury yields have again approached 4.5%, some 75 basis points below the cash rate, and at this level bond yields are attractive. For bonds to rally further requires a recession, but we believe the risk of an outright recession is very low. Though we expect global growth to moderate this year, we think it is likely to be mild as we do not expect significant problems in the global economy from either the US housing slow down or industrial activity. Whilst in the short term bond prices could remain strong as investors seek safety, we see this as an opportunity to adjust exposure for the medium term as we remain cautious on fixed income.
     Over the month, the yen was supported by better than forecast Japanese Gross Domestic Product, which boosted confidence in the economy. However, despite raising interest rates to 0.5%, the Bank of Japan’s comments that the outlook was for gradual future rises saw the Japanese currency give up some of its earlier gains. Over the month the yen was stronger against the dollar and the US currency also fell against the Euro which was supported by market expectations of an interest rate rise from the European Central Bank in March.
    Against the Euro and Sterling, we expect the US dollar to be range bound. But the Yen can continue to strengthen against the US Dollar as the Japanese economy is likely to be hold up in 2007. The low interest rates in Japan have prompted heavy selling of the Yen over the past year and its recent rebound indicates that investors are aggressively buying the currency back. Over the coming months, we will see high volatility in the currency markets. Asian currencies are fundamentally undervalued and we favour Asian currencies against the US Dollar

The correction in the market does not change our positive view on Asia for 2007. Fundamentals have not changed and we continue to expect solid economic growth across the region. Indeed, the correction has helped to ease valuations, which had begun to test more stretched levels in certain sectors and markets. The rise in risk aversion suggested by the increase in emerging bond market yields encourages investors to trim positions in overvalued growth stocks and markets. We expect to see earnings growth in the region of 10- 15% for the year. Key themes in 2007 will likely include the continued appreciation in Asian currencies, the easing of interest rates across the region, continued strength in the Chinese economy, and strong earnings growth amongst Asian companies. We continue to be positive on domestic consumption plays. With prospects for interest rates to ease in 2007, we are also comfortable with the outlook of financials and property. We maintain a neutral view on technology and energy.
       The correction wiped out most of the gains that the Asian markets had seen year to date (6 March). Thailand is now the best performing market in 2007, as it did not experience as significant a fall due to its already cheap valuation. Southeast Asia (Malaysia, the Philippines and Singapore) also saw a rebound in performance post the correction. China’s domestic A-share market, which had led the market decline at the end of last month, is also back in positive territory as at the time of writing.

   Whilst there isn’t enough evidence to prove conclusively that the unwinding of the Yen carry trade is a major cause behind the turmoil in markets, the perception of its significance to investors is apparent. Investors that borrowed cheaply in Yen (due to the low interest rate) to invest in higher yielding positions elsewhere, have now been settling their positions due to the strengthening of its currency. This has been cited as a key reason behind the sell-off in global equities, including Japan. Once this trend decouples, i.e. markets no longer react to movements in the Yen, risk aversion is likely to settle. Meanwhile as private consumption grows, the Bank Of Japan is likely to stay under pressure to raise interest rates. Last month the BOJ raised interest rates to 0.5%, but noted that this would not be followed by consecutive
moves to raise borrowing costs. Japan currently has the lowest interest rates among industrialized nations, and the government has been pressuring the central bank to keep rates low so as to not endanger the economic recovery. While the performance of Japanese equities in 2006 and at the start of 2007 has been disappointing, economic expansion has remained solid. As such, Japanese equities could outperform this year. Within equities, small caps underperformed in 2006, and may have significant potential upside.

He also estimated that foreign investment had exceeded 90 billion U.S. dollars, up about 20 percent.

China has been hammered by the global financial crisis, which has cut exports and foreign investment as the world economy went into a downturn.

The economy grew 9 percent in the third quarter, the slowest pace in five years, as the global crisis sapped demand for Chinese goods and domestic industrial production waned in response to weak demand and rising raw material costs.

Foreign direct investment was 86.4 billion U.S. dollars in the first 11 months, up 26.3 percent year-on-year. The increase was lower than the average of 35 percent for the first 10 months.

The actual use of foreign investment slipped 36.5 percent year-on-year to 5.32 billion U.S. dollars in November.

Cai Qiusheng, an official with the State Administration of Foreign Exchange, was quoted by Tuesday’s Shanghai Securities Journal as saying that foreign exchange reserves were below their peak at 1.9 trillion U.S. dollars as of the end of September.

From January to November, foreign trade was 2.38 trillion U.S. dollars, jumping 20.9 percent year-on-year. However, November’s total trade stood at 189.89 billion U.S. dollars, down 9 percent year-on-year.

Chen told a national conference on commerce on Tuesday that the ministry would take steps to maintain stable export growth next year.

The measures will include expanding financial and fiscal support for exports, such as more credit support to exporters, and making more efforts to explore emerging markets in south and central Asia, the Middle East, South America and Eastern Europe, while consolidating China’s food hold in traditional markets.

The ministry would also strive to improve the structure of export products next year by promoting domestic brand-name products, large machinery and equipment and agricultural products. It would also emphasize labor-intensive products and support small firms’ technological innovation.

The ministry pledged to boost service trade, including software, culture and traditional Chinese medicine. It also vowed to expand imports, especially of equipment with up-to-date technologies as well as key spare parts, through policies including tariff cuts.