EMBASSY OF SWITZERLAND


CHINA BUSINESS
BRIEFING (*)

16 July - 22 July 2001

No 56


KFC settles second English receipt dispute
For the second time, KFC settled a suit, brought by a Chinese-speaking customer over an English-language receipt she was issued in a KFC restaurant. KFC agreed to compensate the customer with a one-time payment of RMB 1'000. The customer had argued that companies operating within the borders of China are supposed to serve Chinese consumers and should provide Chinese-language receipts. The restaurant's refusal to provide her with a Chinese-language receipt was a violation of her right to know. (ChinaOnline, 16 July)

China's foreign exchange reserve hits USD 180 billion
China's foreign-exchange reserves have reached USD180 billion as of the end of June. Due to a further slowdown in export growth, the country's foreign-exchange reserves only increased by USD 1 billion during June, the lowest monthly growth in recent years. (ChinaOnline, 16 July)

2nd quarter GDP up 7.8%
China's GDP rose 7.8% in the second quarter of this year. China's economy grew 7.9% year-on-year in the first half of this year and it is expected to expand by 7.0% in the whole of 2001. Fixed asset investment rose 15.1% in June, the same percentage rise as for the first half of 2001. The consumer price index rose 1.1% in the first half. Retail rose 10.3% in the first six months. (South China Morning Post, 17 July)

Treasury bonds: time to cool down?
The Ministry of Finance launched RMB 20 billion of treasury bonds, marking its sixth bond issuance this year. Treasury bonds worth RMB 360 billion were issued in the past three years, and the government is planning to issue a total of RMB 150 billion this year. Meanwhile, experts worry it may be time to cool down the fervour for treasury bonds. Many infrastructure projects like roads and bridges can hardly make returns and some are even running into the red. Although treasury bonds can produce an instant effect in fuelling economic expansion, the risk of a debt trap must be taken into account. Experts also feel that tapping the Huge potential of private capital would be better than relying on treasury bonds. (China Daily, 17 July)

Beijing offers slice of RMB 180 billion Games pie
Foreign companies are to be given fair opportunities in bids for infrastructure projects aimed at giving Beijing a facelift ahead of the 2008 Olympic Games. Beijing mayor Liu Qi made the pledge upon unveiling a record RMB 180 billion municipal-spending plan for basic infrastructure projects in the next five years. (SCMP, 17 July)

Growth will lift middle class
In one of many reports released upon the IOC's decision to award Beijing the 2008 Olympics, Morgan Stanley Dean Witter predicts that 40% of China will have become middle class by 2010 and another third will be on the way if the country can sail through this decade with stability and strong economic growth. The reports also says that joining the WTO and hosting the 2008 Olympics will anchor stability and reform in this decade. (SCMP, 17 July)

Premier Zhu Rongji urges tough stand against fake products
In an article published in People's Daily, Premier Zhu Rongji said that strengthening market supervision and management is a necessary requirement for establishing the socialist market economy and enforcing market laws and fair play in competition. Zhu emphasized that special attention should be given to the fight against fake products that harm people's interests and health. (China Daily, 17 July)

First online investment banking services
Shanghai-based Shenyin-Wanguo Securities opened China's first online investment banking services. The Web site, www.sywg.com.cn, operates in a B2B manner to provide company account services. Customers can post or acquire information about the buying and transfer of stocks and assets management. (Xinhua, 17 July)

Non-banking sector to play bigger role
From practically zero two decades ago to more than 400 institutions operating RMB 1.8 trillion of assets by the end of last year, non-banking financial institutions have experienced rapid growth in China. The counter, including securities and trust firms, insurers and fund managers as well as leasing and finance corporations, is quickly catching up with the dominant force of commercial banks in the country. Whether financial institutions in different businesses should be regulated separately or put under a unified regulation is a major issue under discussion by the Chinese authorities in financial system reform. But no clear decision has been made yet, she said. (China Daily, 18 July)

Oil pipeline plan linking Siberia to Beijing under study
Russia and China agreed to prepare a feasibility study for a 1'700 kilometre oil pipeline from Siberia to Beijing, with a view to completing construction by 2005 to pump up to 30 million tonnes of crude a year. (Reuters, 18 July)

Sports lottery to aid 2008 Olympics
In the next eight years, a total of RMB 8 billion in sports lottery tickets will be issued to specifically raise funds for the 2008 Olympic Games. The money raised will be used in the construction and maintenance of various sports arenas in Beijing and in improving the environment. (ChinaOnline, 18 July)

LG Electronics to invest USD 1 billion in China
LG Electronics, the second largest electronics and telecommunications equipment manufacturer in South Korea, plans to invest USD 1 billion in China in the next four years to expand production capacity of flat-screen TV displays, liquid crystal displays and DVDs. (ChinaOnline, 18 July)

Foreign direct investment up
China had a greater influx of foreign direct investment in the first half of this year, with USD 20.69 billion. That was up 20.53% for the period, year on year. There were 11'973 new foreign-funded enterprises approved, an 18.35% increase, with investment contracts worth USD 33.41 billion, up 38.23%. Average investment per project was USD 400'000 more than for last year. (Xinhua, 18 July)

Tax revenues up 27%
Tax revenues on the mainland jumped 27% in the first half of the year to RMB 758.5 billion. The central government accounted for RMB 450.1 billion of that, up 30.5%, while local government tax revenues were up 22.2%, at RMB 308.4 billion. (Economic Daily, 18 July)

In- and outbound travel up
In the first half of the year, over 5.48 million mainland Chinese travelled outside the mainland, up 10% from the same period last year. More than 5.28 million foreigners visited China, up 13.23% increase. There are now 191 countries and regions for mainlanders to visit, with Hong Kong, Macau and Thailand topping the list. (China Central TV, 18 July)

Failure to improve rural life could undermine stability
Per capita cash income of Chinese farmers reached RMB 1'063 during the first half of this year, an increase of only 4.2% from the same period last year, falling short of a 5% growth target. According to the Development Research Centre under the State Council, the growth of farmers' incomes will greatly affect the implementation of the government's demand-stimulating policy, as 800 million farmers form a huge rural market vital to the country's domestic demand. A slowdown in the income increase will hinder overall economic development and even undermine social stability. (China Daily, 18 July) The title to this report in China Daily in fact read "Farmers earn more"...

Double digit growth for telecom sector
The country's telecom industry recorded double digit growth in the first half of this year as operators invested heavily in basic infrastructure. The total income of both telecom and postal industries is RMB 189.36 billion, 15% up from the same period last year. China Telecom, the country's dominant fixed-line carrier, is still the biggest contributor with half of the income generated. The telecom sector has become the most important revenue pool of the government. (China Daily, 19 July)

Beijing turns to private sector for better Olympic city management
Managers who have worked in shareholding, foreign-funded or private enterprises for more than three years are being invited to apply for senior positions with Beijing's city government in a bid to improve efficiency ahead of the Olympic Games in 2008. This is the first time private managers have been able to compete for senior government posts in the nation's capital. (SCMP, 19 July)

Warning on fiscal expansion
According to SG Securities, China will not be able to sustain strong economic growth if the government continues to boost the economy by fiscal spending. "The total contingent liability of China has reached 70% of GDP and the fiscal assets cannot last for long." SG Securities urged the government to encourage private-sector spending to drive economic growth. One of the key measures to boost private-sector spending was to allow private enterprises, including foreign-owned firms, access to the domestic capital market. (SCMP, 19 July)

Six airlines decry CAAC discount ban
Six domestic airlines complained to the General Administration of Civil Aviation of China in a letter that the ticket discount ban it imposed on Chinese airlines had blocked the development of the industry. Printed in state media, the letter once again revealed the strong differences that exist between aviation companies and their administrators. (Business Weekly, 19 July)

Beijing to build the largest hospital in Asia
A 3'000-bed hospital will be built in the northern part of Beijing to be finished before 2008 so that it can provide first-class medical services for the Olympic Games and people living in the area. The cost is estimated at USD 400 to 700 million. (Beijing Morning Post, 19 July)

Agricultural output down
Agricultural output in China this summer was down 4.6%, or 4.91 million tonnes, year-on-year. Total output was 101 million tonnes. The decrease was attributed to a reduction in the amount of cultivated land and droughts. (China News Service, 19 July)

Beijing to double number of luxury hotels
Beijing plans to double the number of its luxury hotels over the next seven years, to 800, in anticipation of a large influx of tourists for the 2008 Olympics. The city estimates that it will host 600'000 overseas visitors during the Olympics. (China Central Television, 20 July)

US House backs normal trade relations
The US House of Representatives voted 259-169 to back President Bush's request to continue normal trade relations with China. In light of the overwhelming vote, the Senate is expected to go along. (SCMP/Reuters, 20 July)

Rights plea for private sector
Jing Shuping, chairman of the All-China Federation of Industry and Commerce, appealed for China's constitution to be amended to introduce rights for private business ownership. The appeal follows calls by President Jiang Zemin for capitalists to be admitted to the Communist Party. China Daily yesterday led its front page with Mr Jing's suggestion, apparently indicating that top leaders were serious about making a change or seeking reaction to a serious proposal. The mainland constitution currently states only that state properties are "sacred and inviolable". (SCMP, 20 July)

Bank of Communications sets out to woo foreign partners
State-owned Bank of Communications, the mainland's fifth-largest bank, is to invite at least two foreign financial institutions to take a strategic stake to help bolster its capital base and management skills. The Shanghai-based commercial lender said it had already obtained regulatory approval for the move, which it hopes will help it be more competitive after China joins the World Trade Organisation. (SCMP, 20 July)

Crackdown clouds B shares
China's B shares plunged on rumours that Beijing is moving to clamp down on illegal funds believed to have flooded the hard-currency stock markets. Buying sentiment was also hit by a delay from stock market regulators in spelling out how to allow more share offerings in the wake of Chinese investors being allowed to buy B shares since February. (SCMP, 20 July)

CPI down 1.2%
China's consumer price index dropped 1.2% in June from the May level because of a fall in vegetable and fruit prices. (China News Service, 20 July)

Price plunge sparks market growth
The retail sales of consumer goods reached RMB 1.8 trillion (USD 215.8 billion) between January and June, up 10.3% on the same period last year. People's confidence in buying goods rose because incomes also increased during the period. (China Daily, 20 July)

Real estate prices up
Real estate prices in 35 major Chinese cities continued to rise in the second quarter of this year. Prices of ordinary residential housing were up 2.5% year-on-year, while luxury housing was up 1.2%, and non-residential buildings up 2.5%. Rents also grew 3.1%. (Xinhua, 20 July)

Central bank may start lending to private funds
The central bank may allow domestic banks to provide bridging loans to open-ended mutual funds to help them tackle investor redemption pressure. A bridging loan is a short-term loan to meet interim financing needs while awaiting intermediate or long-term financing. Domestic fund management companies are now banned from borrowing from banks because the People's Bank of China is wary of letting bank capital flow into the wildly speculative stock markets. (Reuters, 20 July)

Insurance liberalization takes time
With reference to ongoing disagreements concerning the liberalization of the insurance sector during negotiations on China's WTO accession, Ma Yongwei, chairman of the China Insurance Regulatory Commission, said in a press conference that liberalization of China's insurance sector will be carried out gradually to leave more space for the fledgling domestic insurance industry. Many foreign insurance giants are craving a share of the China market in view of its prosperous future. (China Daily, 20 July)

Insurance revenue up
In the first six months of this year, the total premium revenue of China's insurance industry stood at RMB 102.23 billion, up 27.69% over the same period last year. Among the total premium income, non-life insurance stood at RMB 37.9 billion, up 14.26%, while life insurance premiums stood RMB 64.3 billion, up 36.78%. (China Daily, 20 July)

WTO: Final documents ready for entry
Preparations of the multilateral legal documents for China's accession to the WTO have been made at the 17th session of the Working Party on the access of China, last week. Long Yongtu, China's chief negotiator, said completion of these documents, including the protocol, its annex and the Working Party Report, has paved the way for final approval at the 18th Session in September. Pierre-Louis Girard, chairman of the Working Party and Switzerland's trade representative to the WTO, said that in the course of informal meetings this week, the Working Party has been able to conclude work on almost all elements of China's accession package. (China Daily, 23 July)

Weekly Market update  20 July 2001   13 July 2001
Shanghai A 2,273.97 2,251.33
Shanghai B 199.06 210.42
Shenzhen A 680.74 676.07
Shenzhen B 306.33 337.40
Hong Kong Red Chip  1,069.66 1,139.19
Hong Kong H 457.58 495.88
Source: South China Morning Post

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 

23.7.2001

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