Ministry of Commerce And Supplies - Enhanced Integrated ...

Chapter 4Access to the Chinese MarketN T I S20104.1 IntroductionThis chapter follows the structure of the previous chapter and looks at access to the Chinese market. Thechapter focuses on a discussion of tariff barriers, a detailed review of NTBs and, then, on impediments thatare not traditionally considered as NTBs but are incidental or essential to trade (i.e. transportation and/ordistribution issues, infrastructural facilities, political stability, rule of law, etc.). Much of this analysis is basedon information collected through extensive discussions with relevant Nepalese businesses, trade associations,traders, GoN officials, and other stakeholders in Nepal as well as in China. To the extent possible, this partof the analysis also seeks to identify issues specific to the 19 export potential sectors reviewed in Chapter 2.These two sections are followed by a short one that describes the views of Chinese businesses and officialswith respect to Nepalese export opportunities in their market.On the basis of these sections, the chapter identifies key challenges and opportunities before Nepaleseexporters in entering key destination markets in China and provides a number of specific recommendationsand conclusions.4.2 BackgroundNepal’s trade with China is not as important as with India. However, it is a trade that offers huge potential andlooks posed for great expansion in the years to come, even though the current picture is not very promising.Nepalese goods exports to China decreased from Rs. 2.348 billion in 2003/04 to Rs. 736.405 million in 2007/08(as a share of total goods export, exports to China decreased from 4.4per cent in 2003/04 to 1.2 per cent in2007/08).The deficit in trade in goods with China increased from Rs. 6.95 billion in 2003/04 to Rs. 21.52 billion in2007/08. As a share of Nepal’s total trade in goods deficit, the deficit with China increased from 8.5 per centof total to 11.91 per cent in 2007/08. This reflected a surge in goods imports from China.The main Nepalese goods exports to China are cereals, vegetable fats, oil, metal-based items, jewelry,handicrafts, wooden products, hides and skin, carpets, wool, apparel, and articles of textiles. In general,Nepalese exports to China are of low value-added as compared to the products from other SAARC countrieslike India, Pakistan, and Bangladesh. Indeed, the trend in Nepal’s recent exports is in contrast with that ofother SAARC countries. In contrast, between 2004 and 2008, Chinese imports from SAARC countries grewfrom US$8.36 billion to US$21.53 billion.In general, there is lack of consistency and growth in nearly all exported Nepalese products, with the exceptionof cereals, metal-based products, wooden items, edibles, and carpets. In addition, the range of Nepaleseproducts that can be offered to the Chinese market is quite limited, whereas China has a wide range ofproducts to offer (from consumer items to industrial products of high value-added nature).To mitigate these observations, it must be noted that there is sizeable informal and unrecorded border tradebetween China and Nepal. The Trade and Payment Agreement of 1981 allows traditional barter trade byresidents of the two countries within 30 km of the border. There is no study to quantify the actual volumeof this informal border trade. The products involved in border trade are handicrafts, food items, agriculturalproduce, etc. In addition, it seems that there is some amount of informal exports from Nepal to China ofproducts of third country origin.NEPAL TRADE INTEGRATION STRATEGY 2010BACKGROUND REPORT137