January - April: China posts strong economic performance
Foreign direct investment surged 29.06% to USD 14.1 billion year on year in the first four months as China extended its role as a global manufacturing powerhouse after joining the WTO. In the same period contracted FDI rose a meager 5.1% year on year to USD 21.28 billion, apparently because of the high comparison base. Exports in the January-April period rose 12% to USD 91.38 billion and imports grew 8.8% to USD 83.14 billion, leaving a trade surplus of USD 8.24 billion. Exports surged 17.2% in April. The growth in exports was one of the main driving forces for the progress in the nation's industrial output, which reached a value of RMB 906.3 billion during the first four months, up 11.2% compared to the same period in 2001. Economists cautioned, however, that the economic health of the economy was in some senses skin- deep. Aggressive fiscal stimulus spending by the government is straining state finances, state banks continue to lend despite high levels of non-performing loans, consumer prices are falling and unemployment is on the rise. (various sources)

Pay rise boost for public servants
The central government has decided to raise the salaries of public servants from July 1. It will be the third time the government has raised the wages of public servants since 2000. (China Daily, 13 May)

DVD-player royalty agreement signed
After lengthy negotiations, the China Audio Industry Association and six foreign companies signed a basic framework agreement regarding DVD-player royalties. Although the precise amount of the fees was not disclosed, sources representing the six foreign companies said the rate was initially set at 4%. (ChinaOnline, 13 May)

China household savings rose 16% to record USD 960 billion in April
China's household savings climbed 16% from a year earlier to a record RMB 7.97 trillion in April as rising unemployment undermined government efforts to get consumers to spend more. (Bloomberg, 14 May)

China Telecom's breakup includes ambitious plans
China Telecom, for half a century the state's monopoly provider of local and long-distance phone service, has been split into two competing companies launched at a ceremony in Beijing. The larger of the two will retain the China Telecom name and control networks in 21 provinces in China's south and west. Its new competitor, China Netcom Group, is also state-owned and will control networks in 10 provinces in the north. A third operator set up three years ago, China Netcom Corp., will become a subsidiary of China Netcom Group but will continue to operate independently, providing high-speed network services to corporate clients. (WSJ, 15 May)

China steps up pressure on Transrapid consortium
China is stepping up pressure on Germany's Transrapid International by demanding a 50% reduction in cost for any future projects it may award the consortium and by pushing ahead with the development of its own magnetic levitation railway. (Handelsblatt, 15 May) There goes another China dream?

China, Asean seek trade pact
China and the Association of Southeast Asian Nations have launched formal negotiations to establish the world's biggest free-trade area, with a combined population of 1.7 billion, GDP of USD 2 trillion and trade of USD 1.2 trillion. Negotiations expected to take 10 years began in Beijing. The ambitious scheme comes as Asean's members have become increasingly concerned about the impact on their economies of the rise of the mainland. Beijing's drive for a free-trade agreement with Asean is seen by observers as an attempt to usurp Tokyo's traditional leadership role in the region. (SCMP, 15 May)

Private sector creates almost a third of all new jobs
China's private sector created almost a third of all new jobs in the country in the first three months of the year, according to a Ministry of Labor survey. Reflecting the changing balance of economic power, private firms now produce a third of China's GDP - just a few percentage points less than the state sector. (FEER, 16 May)

Redistribution of economic activity in Asia
Morgan Stanley chief economist for Asia-Pacific Andy Xie Guozhong said: "The big story about the redistribution of economic activity in Asia is that we see half of Asia's manufacturing value worth USD 850 billion [excluding Japan] already making its way into China. And we will be seeing half of Japan's USD 1 trillion worth of manufacturing value moving into China in this decade." (SCMP, 16 May)

Open gates boost river trade
New customs procedures announced by mainland authorities will dramatically enhance the flow of river trade between Hong Kong and the Pearl River Delta. (SCMP, 16 May)

State-owned companies on their own as Beijing refuses protection
The Government, facing contingent liabilities (obligations of the state, including the bad loans of the banks and pension payments) equivalent to 40% of GDP, would no longer protect state-owned companies, Vice-Finance Minister Jin Liqun said. "Our domestic companies will survive or perish, depending only on their management," he said. (SCMP, 16 May)

Policy bank to issue bonds
The China Development Bank, the country's largest policy bank will issue financial bonds to Chinese citizens and domestic institutional investors soon. Once approved, the CDB will be the only Chinese bank authorized to issue financial bonds to the public. (China Daily, 16 May)

China publishes 313 categories of National Fees
By the end of 2001, China had a total of 313 categories of national fees, with 242 categories levied upon businesses, the Ministry of Finance said. A circular on the national levy collection for 2001 jointly issued recently by the Ministry of Finance and the State Development Planning Commission said that businesses and individuals had the right to refuse to pay the charges not included in the published catalogue. (People's Daily, 16 May)

PBoC punishes 114 state bank employees over creation of unhealthy loans
The People's Bank of China has punished 114 employees at the country's four state commercial banks following an investigation into the creation of unhealthy loans at 118 of the banks' branches. All of these loans were worth over RMB 100 million each, and their total value amounted to RMB 57.28 billion. (AFX News, 16 May)

Break-up of largest operator marks milestone in drive for competition
The Government broke up China Telecom, a milestone in the effort to create a competitive climate for telecommunications in the world's fastest growing market. China Telecom has been split into one large and one small operator. The larger operator will retain the China Telecom name and control networks in 21 provinces in the south and west, including the most prosperous mainland regions. The small operator, also state-owned and to be called China Netcom Group, will control the networks in 10 provinces in the north. A third operator, China Netcom, set up three years ago, will become a subsidiary of China Netcom Group but continue to operate independently, providing high-speed network services to corporate clients. (SCMP, 17 May)

Oil deal bridges strait
State-controlled oil firms in the mainland and Taiwan will jointly undertake oil and gas exploration in a bold piece of economic co-operation across the Taiwan Strait. Analysts said the latest deal would set an example for closer integration between the two economies. (SCMP, 17 May)

CSRC official jailed for accepting bribes
In one of the first announced cases of its kind, a Chinese court has sentenced a local securities regulator to eight years' jail for accepting bribes in return for backing the listings of 12 companies. Listing abuses have long plagued China. Companies with political connections found it easier to list, while others - such as private firms - were often barred from going public. (SCMP, 17 May)

Consumer price index sees sharpest fall
China's consumer prices dropped by 1.3% in April compared with the same month last year. This was the sharpest decline for the CPI in the past two years. The index in the first four months of this year was down 0.7% compared with a year ago. Urban consumer prices in April dropped 1.7% compared with a year ago, while rural prices fell 0.5%. (China Daily, 17 May)

Retail sales seen driving growth
China's retail sales rose 8.2% year on year last month in line with expectations and analysts predict sustained consumer growth this year in light of the impressive pick-up in exports and industrial output. Nomura International said consumption demand remained positive, taking into account falling product prices triggered by oversupply and keen market competition. (SCMP, 18 May)

Regulators talk up market
China's securities regulators, unnerved by heavy stock losses, talked up the market, telling investors not to panic. After a seven-day losing streak on mainland markets, an unprecedented series of articles on the front pages of some of the mainland's leading financial newspapers said the Government would not be dumping its state-held shares on to the market. (SCMP, 18 May)

Beijing sets ambitious goals at session
Beijing will take the lead in China to achieve modernization in the next five years, with an annual GDP growth rate of 9%, Jia Qinglin, secretary of the Beijing Municipal Committee of the Communist Party of China, pledged presenting his work report to the city's Ninth Party Congress. To achieve that goal, Beijing will have to take a more active role in global economic co-operation and competition, Jia said. (China Daily, 18 May)

Weekly Market update		17 May 2002	10 May 2002
Shanghai A		1635.63	1711.10
Shanghai B		143.78	142.93
Shenzhen A		483.64	506.45
Shenzhen B		222.21	223.15
Hong Kong Red Chip		1382.60	1326.24
Hong Kong H		2123.87	2069.00
Source: South China Morning Post