EMBASSY OF SWITZERLAND


CHINA BUSINESS
BRIEFING (*)

17 June - 23 June 2002

No 100


Beijing closes internet cafes after fire kills 24
The Beijing government is closing most of the Chinese capital's hugely popular Internet cafes, cutting off Web access for many residents after a fire killed 24 people in an unlicensed cyber cafe.The move was motivated strictly by safety concerns, but the closures coincide with a nationwide crackdown on Internet cafes. (Dow Jones Newswires, 17 June)

China's fixed-asset investment grows 23.9% in May
China's investment in fixed assets including government spending on infrastructure grew 23.9% to RMB 243 billion in May against the same month in 2001. (People's Daily, 18 June)

State initiates huge gov't spending plan
China will make a government procurement of RMB 100 billion this year, almost doubling last year's figure. The amount of procurement will grow rapidly in the coming three years to reach up to RMB 400 billion a year. The money will largely go to domestic enterprises in order to stimulate their development. The Ministry of Finance stressed that the preferential treatment does not go against China's WTO commitments, as China has not yet signed the Government Procurement Treaty under the WTO. China has committed to initiating negotiations within two years following its entry to the WTO last December. (Business Weekly, 18 June)

Energy scheme finds new fuel
China is planning to kick off a mega coal-to-oil project. The project is believed to be a vital component of China's energy strategy, as the country in the past heavily relied on domestic supply but has been forced to turn to overseas markets in recent years due in part to the rapid growth of its economy. China holds one-third of the world's coal reserves, which supplies around 70% of its basic energy needs. But the country's oil reserves are on the decline. China consumes 4.9 million barrels of oil per day and imports one-fourth of this. Over half of its imports come from the Middle East, and the number will increase rapidly in the coming decade. (Business Weekly, 18 June)

State firms shrink but profits remain stable
The number of State-owned enterprises fell last year by 17'000 - a reduction of 8.9% as a result of restructuring, bankruptcies, mergers and sell-offs of enterprises. State firms performed well last year, generating profits of RMB 281.12 billion, down just 0.8% on the record year of 2000. (China Daily, 19 June) This article is misleading as losses from unprofitable SOEs are not reported nor deducted from the profits mentioned above. The total profitability of alll SOEs therefore remains unknown.

Stage set for entry of foreign funds
China will beef up legislation and policy planning for the securities fund industry to clear way for foreign entry into the sector. While legislators are still viewing the Investment Fund Law, the government will work out supporting regulations to create a sound legal and policy environment to boost the development of the fund industry and prepare for opening-up. (China Daily, 19 June)

Funds raised from stock market slide 53.68% in Jan - May
From January to May, RMB 33.91 billion of funds was raised from the mainland stock market, down 53.68% from the same period of last year. (China Online, 19 June)

Ericsson obtains RMB 1.6 billion credit line from China Merchants Bank
Ericsson (China) Co. signed a RMB 1.6-billion credit-line agreement with China Merchants Bank. The agreement marked a new era of cooperation between Chinese banks and foreign enterprises. (China Online, 19 June)

China seeks foreign investors for sewage treatment
The Chinese government has put out the welcome sign for foreign businesses prepared to help with sewage treatment. According to the Ministry of Construction's blueprint, all cities are required to establish waste water treatment facilities that process 45% of sewage by 2005 and 60% by 2010.This means the daily capacity of Chinese urban sewage treatment plants is expected to more than double, providing great business opportunities for international companies and financial institutions. (People's Daily, 20 June)

Foreign insurance companies frustrated by delays
Many foreign insurance companies are experiencing great difficulty in establishing joint ventures. Over 100 foreign insurance companies from all over the world have established approximately 200 representative offices in China. So far, only 19 Sino-foreign joint venture insurance companies, 13 foreign insurance companies and one foreign reinsurance company have received permission to operate. (China Online, 20 June)

BMW gets approval for car-manufacturing venture in China
Bayerische Motoren Werke AG has received the Chinese government's approval to set up a car-manufacturing joint venture in China. The German car manufacturer began talks with minibus maker Brilliance China Automotive Holdings Ltd. in late 2000, to jointly manufacture BMW luxury cars. If successful, BMW will become the first foreign luxury car maker to produce automobiles in the China. (People's Daily, 21 June)

Brilliance China Automotive dismisses chief executive
The head of one of China's biggest auto companies, Yang Rong, was abruptly removed from his position, casting uncertainty over the company and underscoring the lack of transparency surrounding even the country's best-known listed companies. Rumors that the Chinese government was investigating Mr. Yang for financial irregularities have been circulating for weeks and sent Brilliance shares tumbling in the past month and raised concern that its proposed joint venture with BMW was in trouble. (WSJ, 21 June)

Forex rules to be eased for full RMB convertibility
China will quicken its steps to relax controls on foreign exchange to finally realize full convertibility of its currency, renminbi, while at the same time improving its regulatory administration. Shanghai will play a leading role in the process. After lowering the bars for local enterprises to set up settlement accounts for foreign exchange, the city will take the lead in allowing all enterprises to open such accounts. (China Daily, 22 June)

Censors slap ban on top magazine
Authorities have taken the unprecedented step of banning the June 15 edition of the Economist magazine from being distributed on the mainland - as the issue contains an in-depth survey of the nation and an editorial entitled "Set China's Politics Free". China-related articles were frequently ripped out of the magazine before. The China survey contains eight articles that stress the necessity of political reform, at a key moment of leadership transition, in order to meet the country's economic growth targets. The magazine's mainland distribution is about 3'100 copies, and while about 1'000 copies normally available in five-star hotels were banned, all subscribers received the magazine. (SCMP, 22 June)

Mainland stocks surge on news of asset restructurings
Chinese mainland stocks jumped as investors piled into Shenzhen-based firms in the expectation that the local government would organize asset restructurings. Brokers said the Shenzhen city government vowed earlier this month to help local companies revamp assets and boost earnings, spurring investment in these firms by Chinese punters who often like to gamble on possible government incentives. (China Daily, 22 June)

Overseas-funded firms dominate Shanghai's exports
Overseas-funded enterprises in Shanghai became the city's dominant exporter for the first time. They exported USD 7.095 billion worth of products during the first five months of this year, 60% of the total for the city. Overseas-funded firms have reported a more than 50% annual growth rate in exports since 1998. (Xinhua, 23 June)

Metro opens membership store in Tianjin
German Metro, the world's third largest retailer after Wal-Mart and Carrefour, has invested USD 17 million in a membership supermarket in Tianjin. Unlike most supermarkets that are frequented by individuals, the Metro store will solely target corporate consumers and small and medium-sized retailers, who will enjoy membership discounts. (Xinhua, 23 June)

Weekly Market update  21 June 2002  14 June 2002
Shanghai A 1631.02 1559.33
Shanghai B 141.74 136.47
Shenzhen A 495.80 465.67
Shenzhen B 220.33 209.13
Hong Kong Red Chip  1187.19 1244.63
Hong Kong H 2129.92 2219.98
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 
23.6.2002

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