03 June - 09 June 2002

No 98

China to regulate overseas tourism market
Beijing released a new regulation governing Chinese tourists travelling abroad. Chinese tourists are not allowed to get involved in such activities as pornography, gambling, taking drugs as well as other dangerous activities, according to the new regulation. Tour leaders and guides are not allowed to induce tourists to go shopping and then take commissions from shops. (China Daily, 4 June) In your dreams…

China's TV plans may create foreign-media opportunities
China's state broadcasters are preparing to launch their first pay-television services, which could give international media companies the best opportunity yet to distribute their programs to the world's largest market of TV viewers. (Dow Jones Newswires, 4 June)

Chinese regulator unveils fund rules for foreigners
China's securities regulator has released rules that allow the establishment of fund-management joint ventures between Chinese and foreign firms. Central to the newly released regulations is the CSRC's clarification that it will oversee the fund-management joint ventures. The regulations stipulate that foreign companies investing in Chinese fund-management companies must have actual paid-in capital of at least RMB 300 million and fall under China's definition of a financial institution. The CSRC reiterated that foreign shareholders in fund-management companies couldn't hold more than a 33% stake for as long as three years after China's entry into the WTO, and not more than 49% after three years. The joint-venture fund company's chairman, general manager and deputy general manger must qualify under CSRC management guidelines, yet it isn't clear if foreign investors will have any input over these appointments. (WSJ, 4 June)

Volkswagen to invest EUR 2.5 billion in China
Volkswagen AG plans to invest another EUR 2.5 billion in China over the next five years. The company expects its sales in China to grow by more than 21% in 2002 to more than 400'000 cars. Volkswagen expects that the passenger car market in China will grow to about 1 million units (annually) in the next two years, and that in 2006, nearly 50% of all car purchases are going to come from private customers. (Dow Jones Newswires, 4 June)

Penalties on small depositors banned
Mainland banks are banned from copying the international practice of charging penalty fees on small deposits as it is against the law, according to the country's central bank. The law does not apply to foreign banks as they are controlled by other regulations. (SCMP, 5 June)

Volkswagen repairs relationship with SAIC
Volkswagen solved a dispute with Shanghai Automotive Industry Corp (SAIC), its Chinese joint venture partner, after the German auto maker found original VW parts in a best-selling car manufactured by a rival part-owned by SAIC. The unauthorized transfer of key technology is among the worst-case scenarios identified by overseas auto makers. (FT, 5 June)

Consumer price index on the decline
Influenced by the country's entry to the WTO, Chinese consumers are adopting a wait-and-see attitude towards buying. The realize the country is diversifying its commodities, cutting prices, improving services and building up brands - all of which suggest that commodity prices will see a sharp drop in the coming few years. High-income earners in urban areas, on the contrary, are consuming heavily with the assistance of loans. (Business Weekly, 5 June)

Shenzhen firm wins suit against finance magazine
In a landmark case which could set back the mainland's financial news media's crusade against unscrupulous companies, the influential Caijing magazine has lost a defamation suit to a Shenzhen-listed company. The suit followed an article in Caijing's March 5 issue raising concerns about the firm's annual report accounting methods. (SCMP, 6 June)

Private Dollar holdings soar
The Bank for International Settlements reported that the amount of U.S. dollars held by Chinese rose sharply in recent years and large amounts were flowing into U.S. bonds. Foreign-currency bank deposits held in mainland China by "nonbanks"--largely individuals and corporations--had more than doubled to USD 154.5 billion since 1992. (FEER, 6 June)

Government grip hurts banks
Reform of China's four large state-owned commercial banks is being impeded by multiple layers of government control that are hampering implementation of official policies. At least eight different ministries and government bureaus have regulatory authority over China's banks, complicating efforts to improve their management and their financial control systems. (FEER, 6 June)

China faces long road to status as motoring giant
Foreign car-makers are increasing their investment in China but the country will not become a global production base for at least 10 years, according to the president of Volkswagen Asia-Pacific. He said VW, like many other firms, had overestimated the rate of growth in the Chinese market, especially of passenger cars. (SCMP, 6 Juni)

China increases anti-dumping suits over imported products
China has carried out 19 anti-dumping investigations up until this May since it laid its first anti-dumping suit in 1997. China's anti-dumping suits against imported products have greatly increased. MOFTEC is currently investigating applications sent by 60 enterprises querying foreign goods which may have been dumped in China. (People's Daily, 6 June)

ICBC reductions lift efficiency
China's biggest lender, Industrial and Commercial Bank of China, last year fired 47'000 people and closed 3'400 loss-making branches as it drove to boost efficiency and competitiveness. ICBC still has 429'000 staff 28'300 branches. (SCMP, 7 June)

Peugeot renews production in China
French carmaker PSA Peugeot Citroen's Peugeot division will resume vehicle production in China by 2004. The announcement came six years after Guangzhou Peugeot, a joint venture with Guangzhou Automotive Industry Corp, fell flat largely due to the lack of competitiveness of its products. (China Daily, 8 June)

Weekly Market update		7 June 2002	31 May 2002
Shanghai A		1596.11	1581.82
Shanghai B		139.78	138.16
Shenzhen A		477.88	472.44
Shenzhen B		212.42	207.64
Hong Kong Red Chip		1270.71	1282.82
Hong Kong H		2220.53	2130.60
Source: South China Morning Post