Foreign Trade

In the first six months, the volume of China's foreign trade reached $795.74 billion, increasing 23.4 percent over the same period last year, according to statistics released by the General Administration of Customs (see graph 1). The trade surplus stood at $61.44 billion at the end of June.

In June alone, the foreign trade volume was up 21.3 percent to $148.12 billion. Of the total, exports arrived at $81.31 billion and imports stood at $66.81 billion, growing 23.3 percent and 18.9 percent, respectively, year on year.

From January to June, total volumes of general trade and processing trade amounted to $342.28 billion and $374.83 billion, up 22.9 percent and 22.6 percent, respectively, over the year-earlier period.

The EU, the United States, Japan and the Association of Southeast Asian Nations remained China's four largest trading partners (see graph 2).

Guangdong, Jiangsu and Shanghai were the three provinces and municipalities with the largest foreign trade volumes, accounting for 58.6 percent of the country's total (see graph 3).

Machinery and electrical products contributed 56.9 percent to total exports. From January to June, exports of machinery and electrical products were valued at $243.99 billion, surging 30.5 percent compared with the same period last year. Of the total, exports of hi-tech products reached $123.47 billion, shooting up 32 percent over a year ago. Exports of clothes and shoes expanded 27.6 percent and 16.6 percent to $39.69 billion and $10.21 billion, respectively. However, exports of crude oil and refined oil decreased 17 percent and 18.3 percent, standing at 3 million tons and 6.2 million tons, respectively.

During the January-June period, China imported $90.69 billion worth of primary products, shooting up 31.8 percent from the previous year. Of the total, soybean imports grew 17 percent to 14.06 million tons. The country also bought manufactured goods worth $276.45 billion, growing 18.2 percent over the same period last year, accounting for 75.3 percent of its total imports. Of this total, imports of machinery and electrical products were valued at $195.41 billion, increasing 26.5 percent from a year ago. During this period, China bought 10,400 automobiles, soaring 61.3 percent compared with the same period last year, while imports of rolled steel saw a decline of 28.8 percent to 9.41 million tons.

Tax Revenues

China's tax revenues hit 1.93 trillion yuan in the first six months, a rise of 22.3 percent, or 352.2 billion yuan, over the same period last year, said the State Administration of Taxation.

An administration official attributed the rapid growth of tax revenues to the "stable and sound" development of the economy. He said the strict implementation of tax policies had also played an important role, predicting that tax revenues would maintain a steady uptrend. The growth rate of the tax revenues, which excluded revenues from customs tariffs and the farming sector, was in step with the development of the nation's economy, said the official.

China's income tax revenues from foreign-invested businesses, domestic enterprises and individuals amounted to 546.5 billion yuan in the first half, an increase of 27.8 percent from the same period last year.

Increasing revenues from customs tariffs, stamp duties on stock trading and motor vehicle purchase taxes also contributed to the growth. During the January-June period, the country's customs collected 239 billion yuan of tariffs, a rise of 21.1 percent over last year. Revenues from stamp duties on stock trading amounted to 7.2 billion yuan, soaring 144.3 percent, and motor vehicle purchase taxes rose 23.6 percent year on year to 33 billion yuan.

Added tax revenues from these three sources combined to arrive at 52.3 billion yuan in the first half, accounting for 14.8 percent of the national total, and helped push up the country's tax revenue growth by 3.3 percentage points.

Revenues from the country's economically developed eastern area rose 22.7 percent to hit 1.38 trillion yuan, while those from central China increased 20.3 percent to 297.2 billion yuan, and the taxes from the less developed west jumped 22.5 percent to stand at 260.3 billion yuan.

Internet Portals

Major Chinese Internet portals, including Sina, Sohu and Tom Online, have revised their forecasts downward for profits and revenues for the next quarter after China Mobile, the country's largest mobile operator, imposed a strict policy that is expected to affect their ability to attract new subscribers for value-added services.

The policy, which compels the websites to offer users a one-month free trial and asks users to double confirm before they pay, took effect on July 10.

According to Sina, which gets 49 percent of its revenue from value-added services, the adjustments would reduce its ability to acquire new monthly subscribers and increase the "churn" of the company's existing monthly subscribers. "Churn" is an industry term that describes the turnover rate of an operator's subscribers.

"The policy changes may be significantly more negative than previously considered," Tom Online said in a statement, predicting its mobile value-added businesses would "operate at 15 percent lower."

Sohu said the new policies would cause a drop of $1.5 million to $2 million in its quarterly wireless revenue in the second half of this year. The firm's first quarter wireless revenue was $8 million.

KongZhong revised downward its revenue projection for fiscal year 2006 to the range of $85 million to $105 million. Earlier, on May 18, the firm projected its fiscal year 2006 revenue at between $110 million and $115 million.

China Mobile also will begin to annul existing WAP (Wireless Application Protocol) subscriptions that have not been active for more than four months. In the next two months, the company and its provincial subsidiaries plan to gradually send messages to all existing value-added mobile service subscribers to remind them about their subscriptions and fees being charged. If the users fail to reply, China Mobile will suspend the service.

China-Iceland Free Trade Agreement

The Second Session of the feasibility study on the China-Iceland Free Trade Agreement was held in Reykjavik, the capital of Iceland, on July 3-5, according to the Ministry of Commerce.

During the two-day consultations, representatives from the two countries exchanged views on issues concerning bilateral trade and investment, and reached a consensus on the content and conclusion of the feasibility study. According to the study report, the establishment of the China-Iceland Free Trade Agreement is beneficial to improve the economic development and people's living standard in the two countries. The report suggests that the Chinese and Icelandic governments should launch negotiations as soon as possible. Therefore, the work for the feasibility study on the China-Iceland Free Trade Agreement ended.

Iceland is the first developed country in Europe to recognize China's full market economy status and also the first one to launch a feasibility study with China on a free trade agreement.