Chinese companies engaged in foreign trade have urged the Ministry of Foreign Trade and Economic Co-operation (Moftec) not to speed the entry of foreign investors to the sector, ministry sources say. At the Guangzhou Trade Fair yesterday, they said domestic players, facing their toughest challenge this year, needed time to improve operations and raise profitability. The call by Chinese firms comes as the ministry plans to reform the sector and possibly open it to foreign competition. An official said the ministry had asked companies whether trading firms could survive if the foreign-trade monopoly held by the Chinese companies was liberalised and opened to foreign investors. Most of the companies believe the sector will not be opened in the near future, to give more time for reform of trading enterprises. An official said the turnover and profit of Chinese trading firms had fallen in the past few years, but this year could be the worst because the negative impact of last year's problems would be felt. China National Electronics Import and Export Corp vice-president Lu Jide said that besides the credit squeeze, companies had suffered interest burdens because they had to borrow due to a shortfall in working capital. This was because of the massive amount of export tax rebates the government still had not paid. China cut export tax rebates twice last year and the government failed to pay rebates to exporters on time. More than 50 billion yuan (about HK$46.35 billion) worth of rebates are thought to be in arrears. Another trading official said: 'We are saying that more than one-third of the trading companies are losing money, one-third breaking even and less than one-third is profitable.' Only those trading protected products could make profits. These included firms with export quotas or export licence controls, and those with a monopoly on import rights. Under the current system, foreign investors are barred from participating in the trading sector, except for pilot experiments in Pudong, Shanghai. Foreign-funded enterprises can import material they need and export finished goods they produce, but not indulge in other types of trading. Chinese trading firms with import-export rights granted by the ministry can trade with foreigners directly, while the rest have to trade through agents with import-export rights. The pessimism of Chinese foreign traders was reflected by the substantial drop in exports in the first quarter. Another official said Chinese trading firms accounted for a smaller portion of total exports, while exports of foreign-funded enterprises were increasing. In the January-March quarter, foreign-funded enterprises comprised 45.9 per cent of China's trade, compared with 36.5 per cent last year. China's exports fell by 8.7 per cent in the first quarter, valued at US$28.25 billion.