EMBASSY OF SWITZERLAND


CHINA BUSINESS
BRIEFING (*)

25 September - 01 October 2000

No 16


Swiss - Chinese agreement on China's accession to WTO
On 26 September, Federal Councilor Pascal Couchepin and Moftec Minister Shi Guangsheng met in Geneva to sign an agreement which concluded negotiations between Switzerland and China on the latter's accession to WTO. China has yet to finalize bilateral talks with Mexico as well as ongoing negotiations with the body of all WTO Members concerning the introduction and enactment of all WTO agreements. (Embassy of Switzerland, 29 September)
See also the more detailed press release below.

China and WTO: no break-through yet
While optimists had hoped that negotiations would conclude early and thus clear the way for China's accession to WTO by the end of this year, the 12th round of talks ended on a rather disappointing note. The Chairperson of the WTO Working Party on China, Swiss Ambassador Pierre-Louis Girard urged a "fundamental re-examination of negotiating positions in capitals" to meet the target of concluding this year. China's Vice-Minister Long Yongtu underlined the importance of cooperation in the final stage of negotiations. Negotiations are expected to resume in late October or early November. (Embassy of Switzerland, 29 September)

President of Swiss Business Federation visits Beijing
Andres F. Leuenberger, president of the newly merged Swiss Business Federation ("economiesuisse") visited Beijing from 26 to 28 September. He met with Mme. Wu Yi, State Councilor, and held talks with high ranking representatives from the State Economic and Trade Commission (SETC), the Chinese Insurance Regulatory Commission (CIRC), the State Development Planning Commission (SDPC), the Ministry of Labor and Social Security and the China Council for Promotion of International Trade (CCPIT). Discussions concentrated on questions of health reform, pharmaceutical and insurance industry. (Embassy of Switzerland, 29 September)

Swiss Life and Tongfang set up joint venture
Swiss Life Private Equity China Limited Partnership Fund has invested RMB 40 million in a joint venture with Qinghua Tongfang Co Ltd, the listed flagship of Qinghua University. The fund will own 40% of the JV. Sponsored by Swiss Life and managed by Jardine Fleming in Hong Kong, the fund's investment focus is on industries directly linked to the basic needs of China's large population, in particular in areas of communications, technology, transport, food supply, housing and health. Qinghua Tongfang Co Ltd is a well-known IT operation of Qinghua University involved in Internet technology, computer system integration, software exploitation and manpower environment projects. (China Daily, 30 September)

Hitic late again with payment
Hainan International Trust & Investment Corp, the fund-raising and investment company of the Hainan provincial government, has again missed a payment on a bond in Japan. It is the third time this year Hitic has been unable to meet a bond interest payment deadline and the company's tardiness underscores the thorny issues in the government's attempts to clean-up and consolidate its non-bank financial institutions in the wake of the collapse of Guangdong International Trust & Investment Corp in 1998. (South China Morning Post, 26 September)

China's auto production to top 2 million
Auto production and sale by Chinese auto enterprises January to August numbered 1'320'000, an increase of 18% over the corresponding period last year. This year's auto production and sales is expected to exceed 2 mio. By 2005, auto production is estimated to reach at least 3.2 mio, of which 1.4 mio will be sedans. (People's Daily, 26 September)

CCTV launches international 24-hour programming in English
China's government-owned television network has started a 24-hour international English language service in an effort to project a better image of China abroad. Programs include 15 minutes of news every hour plus cooking shows, kung fu demonstrations and Chinese music and dance performances. Viewers will also find dramas, documentaries and talk shows. All programs are made in China about China. (ChinaOnline, 26 September)

Shanghai Harbor set to become 6th-busiest port in the world by 2001
By the end of this year, Shanghai Harbor is expected to surpass California's Long Beach Harbor as the sixth-busiest port in the world. In the first half of this year, Shanghai already has handled a total of 2.5 million standard containers, which is a 33% increase over the same period of last year. It's container-handling capacity constitutes up to two-thirds of that of all the country's harbors. (ChinaOnline, 26 September) Not including Hong Kong, of course.

Prices of industrial goods rise, wholesale cost of consumer goods falls
Triggered by increased cost of raw materials, fuel and power the wholesale price of industrial goods rose nearly 4% in August, while wholesale prices of consumer goods continued to fall by 2.1%. (ChinaOnline, 27 September)

Housing market picks up in year's first 8 months
China's real estate market is showing signs of growth with RMB 241 billion of actual investment during the first eight months of this year, up 24.3%. The nationwide selling price of houses during that period averaged RMB 2'072 per square meter, up 1.9%. The amount of land developed during the year's first eight months reached 36.44 million square meters, up 28.1%, while the area of unoccupied houses declined by 6.1%. (ChinaOnline, 27 September)

Reinsurer to expand operations nationwide
China Reinsurance Company opened branch offices in Shanghai and Shenzhen as part of the company's drive to expand operations throughout China. The network will help China Re become stronger before the influx of international rivals in the years ahead. It is estimated that around USD 400 million of foreign exchange insurance business goes outside of China every year while China Re last year only won USD 24 million in commercial reinsurance premiums from domestic insurers. (China Daily, 27 September)

No foreign investment in cable TV
Contradicting rumors that China's cable TV industry would soon open its doors to foreign investment, an official from the State Administration of Radio, Film and Television said in an interview that China plans to keep that doors firmly shut. "SARFT networks are special and will not open to foreign investment". (China Online, 28 September)

Beijing opens infrastructure sector to overseas investors
While in the past, the government was the sole investor in the sector, overseas investors are now welcome to participate in Beijing's infrastructure construction. They may get compensation funds from the municipal government and enjoy preferential policies on tax, land development, advertising and many other fields. Beijing's infrastructure projects this year mainly involve traffic, environmental protection, urban road network and water supply, including the No. 5 subway line, the 4th belt highway and urban rails. (Xinhua, 28 September)

Haier forms technological alliance with Microsoft
Haier and Microsoft will jointly develop personalized user software for Haier's PCs, as well as information appliances, wireless personal digital terminals and other broadband products. (ChinaOnline, 28 September)

Beijing Jeep staying afloat
DaimlerChrysler and Beijing Automotive Industry (Group) announced that the former will inject USD 226 million into their joint venture, Beijing Jeep Co Ltd. The German-US auto giant also agreed to increase its stake in the JV when the time is ripe. To date, both sides have invested about USD 411.2 million in the JV, and DaimlerChrysler holds 42.4% of the stake. The JV has began to suffer losses from 1998 largely due to a lag in new model development. (China Daily, 28 September)

Drug industry beset by redundant products, imitations
Drug imitiation is one of the main causes of the chaos in the Chinese pharmaceuticals market and for the superabundance of fake and low-quality drugs. Currently, most Chinese drug makers are small to medium-sized. They suffer from poor management and idle equipment. For example, only 30% of pill production capacity is being utilized. The government has begun to implement good manufacturing practice (GMP)-certification for pharmaceuticals. Companies that cannot fulfil the requirements will be shut down or their drug production will be halted. (ChinaOnline, 29 September)

China issues RMB 90 billion yuan of T-bonds
China has issued RMB 90 billion of treasury bonds so far this year. The State Development Bank plans to issue a total of RMB 170 billion of T-bonds, including RMB 150 billion of long-term T-bonds and RMB 20 billion of short-term. With the goal of issuing RMB 24.5 billion of T-bonds this year, the China Export and Import Bank has issued RMB 10 billion worth of 10-year T-bonds, the longest term the bank has ever issued. (Xinhua, 29 September)

Analysis: Oil price hike not to damage China's economic recovery
China has been a net oil importer since the 1990s, and its oil imports have increased since 1998, mainly because of stagnant domestic oil production and rising domestic oil consumption. However, the direct impact of any oil price hikes on China's economy should be much less than that on most Asia-Pacific economies as the ratio of net oil imports to domestic oil consumption is much lower than the Asian average (The ratio for China is only 22%, compared to 100% for Japan and 61.4% for the rest of Asia Pacific). Second, oil occupies only 26.6% in China's primary energy consumption, much lower than several other Asian economies. Merrill Lynch estimated that, with the oil price at USD 33 per barrel, the estimated accumulative direct and indirect impact on China should be no more than 0.5% of the GDP. (People's Daily, 29 September)

Tax collection raising
Total taxes collected during the 9th Five-Year Plan Period (1996-2000) will reach RMB 4'670 billion, 2.2 times that of the 8th Five-Year Plan Period. Tax revenue increased 15% annually during the period, which is higher than the average annual growth of 8.5% for GDP. The proportion of tax income to total GDP has risen from 10.2% in 1995 to the expected 14% in 2000. (Xinhua, 29 September)

In first 8 months, Taiwan pours USD 1.6 billion into China
Latest statistics show that investment in mainland China by residents of Taiwan totaled USD 1.6 billion from January to August this year. The figure represents a jump of 146% over the same period last year. (ChinaOnline, 29 September)

China raises central government's share in stamp tax on securities trading
The Chinese State Council has decided to raise the central government's share in stamp tax on securities trading from the current 88% to 97% in three years, reducing that for local governments to 3%. China currently imposes a 4% stamp tax on both sides of all securities trading. In the first six months of this year, the government's stamp tax revenue soared by 147.7% to RMB 26.8 billion. (Xinhua, 29 September)

China officially adopts consumer price index (CPI)
The government will substitute the current commodity retail price index with a consumer price index. The change is considered a major adjustment, making Chinese statistics compatible with international practice. Unlike the commodity retail price index, CPI will be more comprehensive by including statistics on housing and services. (ChinaOnline, 29 September)

Textile sector profits expected to rise sharply
The State Textile Industry Bureau reported that demand for textiles has rallied with rising domestic spending, a 6.7% increase in prices and a 37.3% increase in exports compared to a year ago. According to a survey of 18'519 textile enterprises, net profits for the textile sector skyrocketed 205% in the first seven months from the same period last year. The total profit for the textile sector is expected to exceed RMB 20 billion this year. These are the first good indicators for the textile industry in several years. (ChinaOnline, 29 September)

Regulations on telecommunication released
China Saturday released regulations on telecom passed by the State Council in September. The general principles of the regulations are to regulate the telecom market, safeguard the legitimate rights and interests of users of telecom and proprietors of telecom business, ensure the safety of telecom network and information, and promote healthy development of the industry. (Xinhua, 1 October)


Enclosure

Beijing, 29 September 2000

Swiss - Chinese agreement 
with regard to China's accession to WTO

On 26 September 2000, Federal Councilor Pascal Couchepin met with Shi Guangsheng, Minister of Foreign Trade and Economic Co-operation, in Geneva. The two ministers signed a bilateral agreement with regard to China's accession to the WTO. The agreement is the result of several years of negotiations between the two countries, the last round of which took one week of extensive talks. Both countries consider the result to be balanced and in line with their respective interests.

China started accession procedures to the GATT in 1987 when a working party was established to that purpose. However, it was not possible to realize accession before the signing of the Uruguay-round agreements in 1994, and negotiations were interrupted until 1997. Between 1997 and today, China has undertaken major efforts in order to achieve accession to the WTO as soon as possible. She concluded bilateral negotiations with the United States in November 1999 and with the European Union in Mai 2000. Only after negotiations with those two powers had been finalized, talks between Switzerland and China started in earnest. After the conclusion of the bilateral negotiations with Switzerland, China has yet to conclude her bilateral talks with Mexico.

Like the other Members of the WTO, Switzerland stands to gain from the gradual opening of various sectors of the Chinese economy, such as banking, insurance, inspection services, machine tools, watches, pharmaceutical and chemical products. However, such liberalization will only be effective after China's formal accession to the WTO.

At the end of their negotiations, Switzerland was able to obtain some last-minute concessions from the Chinese side in the fields of insurance, inspection services and watches. With regard to insurance, one Swiss company will be granted a license for "non-life" insurance before China's entry into the WTO. Furthermore, the applications submitted by Swiss companies for "life" and "re-insurance" will be treated in such way that these licenses shall be granted shortly after China's accession to the WTO. Concerning inspection services, negotiations between Switzerland and China will continue until the end of this year in order to find a solution which will be acceptable to the Swiss companies. The latter subject is also being discussed thoroughly on the multi-lateral level. Last but not least, Swiss watches will enjoy a reduction of Chinese import duties by more than half.

Before she can accede to the WTO, China must conclude the ongoing negotiations with the body of all WTO Members concerning the acceptance and enactment of all WTO agreements (multilateral process).

Embassy of Switzerland, Beijing 
Tel. +86-10-6532-2736
Fax +86-10-6532-4353
vertretung@bei.rep.admin.ch 


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 

17.11.2000

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