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Processing for overseas orders Three supplies and one compensation refers to processing with supplied materials, processing with supplied examples and assembling with supply parts, and compensation trade. They represent a form of foreign trade developed after China launched the reform and opening-up policy. Processing with supplied materials means that the foreign businessmen supply the necessary raw materials, spare parts or component elements and Chinese enterprises do the processing or assembly job and give the finished products to the foreign businessmen. In order to encourage the localities and enterprises to develop processing with supplied materials, in 1988 the Ministry of Foreign Trade and Economic Relations issued the Regulations on Loosening Restrictions Regarding Processing and Assembly with Supplied Materials and Relevant Issues. Moreover, a series of encouraging measures were also adopted, which greatly aroused the enthusiasm of the localities and enterprises. Compensation trade means that foreigners supply the technology, equipment and services while the Chinese enterprises repay them with products or labor service in the same amount of value. In order to bring into full play Chinas advantage in rich labor resources and low labor cost to make up for its shortage of funds and inferiority in technology, the government has adopted an encouraging attitude towards compensation trade. Three supplys and one compensation ushered in for China a new form of trade, promoted the production of export commodities, improved the structure of export commodities, expanded export, increased income in foreign exchange, made use of large amount of foreign capital and imported for the country internationally advanced technology and equipment. As most of the enterprises engaging in Three supplys and one compensation are labor-intensive, they have helped increase employment and improve peoples living standard. From 1978, when Chinas first enterprise undertaking pr