EMBASSY OF SWITZERLAND


CHINA BUSINESS
BRIEFING (*)

03 December - 09 December 2001

No 75


Taiwan replaces Hong Kong as biggest investor in Xiamen
Taiwan has replaced Hong Kong for the first time in history as the biggest investor in Xiamen in east China's Fujian province. Taiwanese investors injected a total of USD 232 million into 124 projects in the city during the first 10 months of this year. (Xinhua, 2 December)

Developer puts RMB 3.3 billion into US-style mall
A developer is investing RMB 3.3 billion on Beijing's first American-style shopping mall, hoping consumer spending habits will follow those of Europe and the United States and be built around the car. Economists are sceptical about the project and say Beijing is suffering from a glut of retail space, intense competition and price-cutting and may not be able to absorb such a large new addition of space. (SCMP, 3 December)

China refuses to lift veil of secrecy over terms of its WTO membership
On the eve of China's entry into the body that protects global free trade, the accord that negotiators brokered last month in Qatar remains a mystery to most Chinese. The complete agreement is widely available online in English, and scholars said a full Chinese text exists as well. But the lack of a publicly available official version has caused consternation among provincial officials, who want to learn the details of the pact. Analysts said the government is purposely trying to manage the message, winning support from regional officials while silencing critics who worry that entry will mean bankrupt companies and lost jobs. The government attributes the delay in disclosure to painstaking translation. (WSJ, 3 December)

New stock rules aimed at curbing speculation
China introduced new stock trading rules in its two bourses of Shanghai and Shenzhen to help curb price manipulation and better protect small investors. In what analysts say is a major improvement, investors are now not allowed to sell hard-currency denominated B shares until the day after they are bought, or the "T+1" mode. (China Daily, 4 December)

Tax reforms to grind to a halt
A number of trial tax reforms are likely to be delayed until after the reshuffle of China's State Council and local governments in 2003. The complexity of the reforms and the current abundance of tax revenue are some of the reasons for the delay, according to a senior official with the State Administration of Taxation. More importantly, the severe impact of China's entry to the WTO makes stability an urgent issue. The reforms, especially those in rural regions, might cause instability. The reforms likely to be suspended include the fee-to-tax reform applied in rural areas and adjustments in value-added taxes. (Business Weekly, 4 December)

China's IT sector expects winter chill
High-tech company executives downgraded their forecast for business growth in China in 2002 amid fears that the global economic downturn and the impact of the terrorist attacks on the United States have yet to run their full course. Many said they are adjusting their budgets and production to prepare for a possible "winter season" ahead despite the country's robust economic performance, huge market potential and the widely lauded WTO accession. (Business Weekly, 4 December)

Economic boom creates room for turnkey contractors
As more domestic companies seek to expand their presence abroad and foreign companies swarm into China, business for turnkey contractors has huge market potential. Industry experts widely agree that the demand for design and construction of industrial and service sector buildings in China is expected to boom after China's official accession into the WTO. (Business Weekly, 4 December)

Foreign experts now eligible for permanent residence in China
People from overseas who wish to live and do business in China can now apply for a "green card" for permanent residency, so that they will not have to go through complicated visa application processes when they enter or leave China. (China Daily, 5 December)

Motorola to set up software development center in Southwest China
Motorola (China) Electronics Ltd. will set up a major software research and development base in a high-tech zone in Chengdu, with an investment of RMB 500 million to 600 million for the first five years. The base, Motorola's third software project in China, will carry out a series of high-tech cooperation projects with local software companies. (People's Daily, 5 December)

China top target for anti-dumping
China was the top target, during the first six months of this year, of anti-dumping investigations for allegedly exporting goods at prices below production costs, followed by South Korea, Taiwan and India, a WTO report said. 10 of the 22 actions against Chinese exports between January and June had been initiated by the United States. (FEER, 6 December)

Copyright law strengthened
The newly amended Copyright Law, passed on October 27, significantly expands the definition of copyright and the rights of copyright-holders, bringing the law into compliance with international codes. It is one of the first major legal changes China made in preparation for WTO entry and will provide a stronger basis for foreign companies to defend their intellectual property rights. (FEER, 6 December)

The 96-km Beijing fifth-ring road to start construction
The feasibility report on the fifth-ring road construction has been approved by the State Development Planning Commission, so construction of the whole project will formally start. According to the plan, the fifth-ring road is going to be located at the fringe belt between the urban area and the outskirts, 10-15 km from the city center. (People's Daily, 6 December)

China to control land use through public bidding
China will adopt a market-oriented mechanism to control its land sales within five years. All applications for land, especially those involving profit-driven real estate projects, are resolved through public bidding. It is believed that the practice is necessary for China to fit in with the rules of the WTO. (People's Daily, 6 December)

Guaranteed-return ban on brokers
The China Securities Regulatory Commission, in a bid to bring order to the unruly asset management industry, has banned domestic brokerages from promising clients good returns or pledging to shoulder their losses. China's markets have shed about 15% this year mainly due to a crackdown on corruption that drove illegal hot money away from speculative bourses. Many securities firms have promised clients annual returns as high as 15% and most brokerages now have to pay customers from their own pockets. (SCMP, 6 December)

Government allocates RMB 80 billion for closing state owned enterprises
China's State Council has allocated a fund of RMB 80 billion to be used for the bankruptcies of state-owned enterprises next year. The money will be used to close down 193 military enterprises, as well as firms in the nonferrous metals, coal and mining industries. (Dow Jones Newswires, 6 December)

Microsoft strikes accord in China against piracy
Microsoft has claimed a breakthrough in its battle against software piracy in China by striking an agreement with most of the country's top PC makers to bundle its new operating system into their computers. (FT, 6 December)

State radio, film and television conglomerate established
China Radio, Film and Television Group was formally established in Beijing. The state level media conglomerate was formed by all the broadcasting stations and other companies and institutions of the State Administration of Radio, Film and Television (SARFT). The group has more than 20'000 staff and holds a total of fixed assets valued at RMB 21.4 billion. According to WTO agreements, China has not promised to open the broadcasting and television sector and therefore forbidden foreign capital into the country's radio station, television station, broadcasting and television network and movie studios. (People's Daily, 7 December)

USD 2.4 billion tax fraud exposed
Police have uncovered what is likely to prove China's largest tax fraud case involving losses of more than RMB 20 billion to the state treasury. The chief suspect set up 28 front companies over the last two years, used them get false tax receipts from a corrupt Beijing official, then sold the receipts to other firms to be offset against genuine taxes. (SCMP, 7 December)

Beijing Telecom plans RMB 55billion Olympic budget
Beijing Telecom, a branch of China Telecom, plans to spend more than RMB 55 billion on infrastructure and an Olympics communications network over the next seven years to support Beijing's goal of a "digital Olympics" in 2008. (SCMP, 7 December)

Car loan market to open up after WTO entry
China will allow foreign companies, excluding banks, to make car loans on the mainland once it formally enters the WTO. (SCMP, 7 December)

China to make companies liable for poor disclosure
In what is becoming an almost daily crackdown on China's stock markets, the country now looks set to toughen penalties on companies that fail to disclose changes in shareholder structure in a timely way. The key new provision of the rules is that company officials will be liable for investor losses suffered as a result of false or misleading statements, or poor disclosure. (Dow Jones Newswires, 7 December)

China Development Bank to issue mainland's 1st bond with options
China Development Bank said it is auctioning off a 10-year fixed rate bond with put and call options, the first option-embedded bond to be issued in China. Bond traders welcomed the news, saying that it will add variety to the staid and moribund bond market in China. (Dow Jones Newswires, 7 December)

Giant state-owned enterprises to aid WTO role
Up to 50 giant SOEs are to be created with international competitiveness within four years, in response to entry to the WTO. "The decision is a response from central government to increase competitiveness of Chinese industry in the globalized market,'' Vice-premier Wu Bangguo told a national conference on economic and trade work. The State will encourage these enterprises to seek capital in the overseas stock markets. (China Daily, 8 December)

Ericsson to double investment in China in 4 years
Ericsson's investment in China will reach USD 5.1 billion by the end of 2005. The company intends to triple its annual export from China to 4.5 billion U.S. dollars while making efforts to invest more in research and developing human-resource and creating more jobs. Ericsson has ten joint-ventures and four solely-funded companies in China employing more than 4'500 workers. (People's Daily, 8 December)

China incorporates pharmacy into WTO rules
The newly revised Pharmaceuticals Control Law stipulates that China's medicine manufacturers must operate in accordance with the good manufacturing practice (GMP) standards. China introduced concepts and provisions about GMP into the domestic pharmaceutical industry in the early 1980s, but the results were unsatisfactory. Statistics show that China had over 7'500 medicine producers in 1998, and only 87 enterprises or workshops gained GMP certification. With the implementation of the new law, some 6'300 domestic pharmaceutical enterprises will be required to abide by GMP standards before the end of 2004. Experts estimate that about a half of them will be shut down, which enables the powerful enterprises to expand their scales quickly at a low cost. The amended law has also simplified the administrative approval procedures and established the regulations over the imported medicine's examination and registration, which both meet the demands of China's WTO entry. (People's Daily, 8 December)

Weekly Market update  07 December 2001  30 November 2001
Shanghai A 1818.40 1822.84
Shanghai B 172.07 165.31
Shenzhen A 535.17 533.40
Shenzhen B 274.20 264.63
Hong Kong Red Chip  1397.45 1349.36
Hong Kong H 1777.89 1789.82
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 

9.12.2001

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