EMBASSY OF SWITZERLAND


CHINA BUSINESS
BRIEFING (*)

03 July - 09 July 2000

No 06


Swiss Re strengthens presence in China
Swiss Re has acquired 9.9% of China Insurance International Holdings Company Limited (CIIH) for approximately USD 15 million in CIIH's initial public offering. CIIH is a member of the China Insurance Group, one of four major state-owned insurance groups in China, and is among the largest locally incorporated groups of insurance companies in Asia. (www.swissre.com)

Swiss companies Schindler and Datwyler Co under one roof
Schindler, the world's leading producer of elevators, has brought its main supplier of harnessing cables - Datwyler Co - to its factory in the Suzhou Industrial Park. Schindler invested USD 11 million in building their new factory and importing equipment. Datwyler, which has rented about 60% of the building and contributed USD 2.7 million worth of advanced equipment, will co-produce electronic controllers - the brains behind all elevators and escalators. Schindler entered China in 1980, when it set up the first Sino-foreign industrial joint venture in Beijing. (China Daily, 9 July)

On-line advertising gearing up
According to a survey, China's on-line advertising market was valued at USD 8 million last year and will be worth about USD 440 million by 2004, while another study reveals that the total advertising market (excluding outdoor ads) in China was worth USD 5.7 billion last year and will reach USD 19.92 billion by 2004. The growth of on-line advertising is thus expected to far outpace that of the conventional ad industry. (China Daily, 3 July)

Troublesome debt for equity swap
The South China Morning Post (3 July) takes a look at Beijing Cement Factory, which is the first of 600 big state firms due to be restructured by debt for equity swap. The article concludes that "secrecy, fear and doubt shroud cement giant's debt swap landmark". The debt for equity swap approach is the most important government initiative to help the ailing state sector, but turns out to be more complex than initially thought. There are difficulties of valuing the assets of the firms, uncertainty over ownership, shortage of qualified staff and fear of public anger over unemployment.

Trademark law to be amended
China will finish drafting the amendments to its Trademark Law at the end of this month. The amendments are expected to include not only items pertaining to WTO rules, but also actual needs arising from China's experience during the past two decades of reform. (People's Daily, 4 July)

Beijing cracks down on online book retailers
The State Press and Publishing Bureau announced that book retailers must obtain an official operating license and register with the State Administration of Industry and Commerce, if they wish to do business online. In order to qualify for an operating license, online booksellers must first be subject to examination and approval. Those already selling online, particularly commercial operations, will be subject to review. (ChinaOnline, 4 July)

Goldman Sachs: China's e-commerce immature, won't grow up until 2003-04
While many reports suggest that Internet use in China is growing rapidly, the U.S. investment bank says Chinese business-to-business e-commerce still needs three to four more years to reach their mature stage. In its most recent research, Goldman Sachs predicted that by 2005, online commerce around the world will total as much as USD 4.5 trillion. Of this amount, 10% or USD 440 billion, will be generated in the Asian-Pacific region, and Japanese companies alone will earn USD 297 billion of it. (ChinaOnline, 4 July)

Bottled water springs toward the top
Bottled water accounts for a large portion of China's booming soft drink industry, which has grown at an average of 22.9% annually for the past 20 years. China produced nearly 12 million tons of soft drinks last year, over a third of which was bottled drinking water. (ChinaOnline, 4 July)

US software firm wins lawsuit on infringement
In Shanghai, US-based Adobe Systems Inc. has won a lawsuit for infringement of copyright by a local computer firm. The ruling said that the plaintiff had its software registered by the copyright authorities of the United States, and the copyright is under the protection of Chinese law as both China and the United States are members of the Berne Convention for the Protection of Literary and Artistic Works. (China Daily, 5 July)

Accounts unreceivable
Not getting paid for goods sold has become a huge headache for foreign investors in China. High receivables are starving many firms of working capital and increasing their cost of doing business. The Far Eastern Economic Review (6 July) takes a look at the problem and describes how some are tightening up on credit to customers while others are demanding third-party guarantees or finding even more creative solutions to the problem.

The long road to profits
Out of 70 multinationals surveyed by A.T. Kearney in 1998, only 41% were able to claim profits. The rest were either losing money (34%) or merely breaking even (25%). Only 25% of the companies said they were confident of exceeding profit targets in the following three years. Of the 50 manufacturers surveyed, only 38% reported that they were making a profit. (Far Eastern Economic Review, 6 July)

China plans to introduce 3G mobile phones in late '01
China will launch third-generation mobile telephones on a trial basis at the end of next year, then introduce the phones to the market in late 2001 or early 2002. China Unicom, China Mobile Communications and China Telecom will receive licenses. (ChinaOnline, 6 July)

Beijing opens construction market equally to foreign contractors
From now on, all large-scale construction projects in the municipality will be decided by international competitive bids, with foreign and domestic construction firms receiving equal treatment. Beijing's decision to open up its construction market has two major components:
1. Each phase or element of a construction project (site-selection process, planning, design, supervision, purchase of major building materials and equipment etc.) should be opened to competitive bidding. As a result, the project proprietor will have a free hand to choose builders and suppliers through public tenders. 
2. Construction projects are now open equally to foreign and domestic enterprises. This means that the contracted construction, design and supervision of large-scale projects, especially "trophy" buildings, are all subject to international open bids without exception. 
(ChinaOnline, 6 July)

Beijing-Shanghai high-speed rail link
China might build a high-speed magnetic levitation rail link from Beijing to Shanghai if a proposed German-built line in Pudong is successful. German Thyssen Krupp AG is to conduct a feasibility study on the Pudong rail project. However, government officials and engineers are still debating, whether to build a high-speed rail link and what kind of line to construct. (China Daily, 6 July)

Information technology growing fast
China's information technology sector registered buoyant growth in the first half of this year, with the telecommunications industry reporting a 35% increase in business. The electronic industry also reported a 25% year on year increase in output. Mobile telecommunications are still the main engine driving the growth. In the first half of 2000, the revenues of China's mobile telecommunication sector topped RMB 100 billion for the first time, more than 50% higher than the same period last year. (South China Morning Post, 7 July)

Foreign Brewers in retreat
According to Tsingtao Brewery Group, foreign companies which flooded into the market during the 1990s are in full retreat as they can not compete successfully because of high production and personnel costs and an inability to adapt. The company also said it would soon announce its takeover of two foreign-invested breweries. (South China Morning Post, 8 July)

Bank backs Shanghai Auto Industry
The Shanghai Auto Industry Group signed an agreement in Shanghai Friday with the Industrial and Commercial Bank of China, which has promised to provide RMB 9 billion of credit. The money will help auto dealers to buy the group's products. Individual customers can also apply for loans from the bank to buy the group's autos. Shanghai regards the auto industry as one of its six pillar industries. The city is striving to make the group one of the 500 biggest companies in the world. (Xinhua, 8 July)

E-commerce still hindered by inferior infrastructure
Although China's Internet players promote e-commerce as a creative business mode for the new economy, few of them can break through the last-mile barriers against on-line purchasing, such as lack of a standard credit system and an effective express network). A recent report from the State Economic and Trade Commission showed that although 70% of the country's enterprises have connected with the Internet, most of them simply opened a homepage and an e-mail address. The small and medium-sized enterprises are primarily left out of the Internet access. (People's Daily, 9 July)

Credit cards gain popularity
The People's Bank of China has predicted that the number of credit cards on the Chinese mainland will hit 200 million by 2003. Visa International expects this number to be reached by the end of this year. Although the number of bank cards issued by China's commercial banks has soared to more than 100 million, the new payment method is still playing an insignificant role in private spending in China at less than 1%. (Business Weekly, 9 July)


China Business Briefing is a random selection of business related news gathered from various media and news services covering China, edited by the Embassy of Switzerland in Beijing and distributed among Swiss Government Offices and other interested parties. The Embassy does not accept responsibility for accuracy of quotes or truthfulness of content. Upon request and depending on the resources available, the Embassy will provide further information on the subjects mentioned in the China Business Briefing.
vertretung@bei.rep.admin.ch 

19.11.2000

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