EMBASSY OF SWITZERLAND


CHINA BUSINESS
BRIEFING (*)

09 September - 15 September 2002

No 112


Olympic contracts up for grabs soon
Beijing said that foreign capital is welcome in the construction and management of venues for the 2008 Beijing Olympic Games, the bidding for which will begin this month. The municipal government will offer preferential policies on investment and land use to all entities, at home and abroad, involved in venue construction and management. 32 venues for the 2008 Games require an estimated investment of USD 14 billion. (China Daily, 7 September)

China allows state-owned companies issue foreign currency bond
China will allow large- and medium-sized qualified state-owned companies to issue foreign currency-denominated bonds inside China to help restructure their foreign currency debt. China's outstanding foreign currency debt of USD 170.1 billion is mostly attributable to state owned companies. The vast majority is long-term, rather than short-term, debt. (Dow Jones Newswires, 8 September)

Stakes sought in China banks
The International Finance Corporation and Scotiabank of Canada are set to take an initial 2% stake in the Xian City Commercial Bank, one of the first acquisitions in what is set to become a mini-boom in foreign investments in the country's banking sector. A draft law allowing foreign investors to take equity in Chinese banks stipulates an upper limit for foreign ownership at 25%, but there have been no clear signals as to when China will pass such regulations. (FT, 9 September)

China Unicom approved for A-share listing
The China Securities Regulatory Commission approved China Unicom's application to list on the A-share market. China Unicom expects to raise around RMB 20 billion, which would be a record high in China's domestic stock markets. (ChinaOnline, 10 September)

Private businesses up 25% in 1st half
According to the State Administration for Industry and Commerce, in the first half of this year, 129'900 new private businesses registered all over China, reflecting an increase of 24.78% over the same period last year. By the end of June, there were 2.22 million private businesses in China with 29.36 million employees. (ChinaOnline, 10 September)

Foreign businesses to receive foreign-trade rights in 3 years
According to a deputy director of the Department of Foreign Investment under MOFTEC, China will grant trade rights to all businesses with foreign investment within 3 years following its WTO accession. (ChinaOnline, 10 September)

Logistics battle looming
Logistics companies are preparing for cut-throat competition from international firms as various market-access restrictions are lifted over the next two years due to China's WTO commitments. The American Chamber of Commerce estimates logistics accounts for more than 16% of overall business costs in China, while it accounts for only 4% in industrial countries. (Business Weekly, 10 September)

Three Gorges dam will cost RMB 203.9 billion
The figure is more than double the RMB 90.9 billion forecast in 1993. The dam is the world's largest hydro-electric project and will eventually form a lake more than 600 kilometers long and around 200 meters deep. (AFX, 10 September)

Air reform taking flight
Air China is about to implement massive reforms to transform its status into a world-class air carrier. The reforms will include inner restructuring, a planned initial public offering, launching joint ventures, international alliances and attracting foreign investments. Dogged by obsolete management systems, soaring oil prices and the Asian financial crisis, the carrier's financial performance since 1998 has been bleak. (Business Weekly, 10 September)

Chinese-car sales rise 40%
Sales of domestically made passenger cars surged 40.13% year-on-year to 573'440 units in the first seven months of the year, stimulated by strong private demand and new car models. Volkswagen AG's and General Motors' local ventures were the biggest winners. Automotive imports also did well, rising 44.2% over the 2001 period to 67'419 units, including 37'662 passenger cars. China cut its tariffs on imported sedans about 30% after joining the WTO, as well as setting the 2002 import quota for all auto-motive products at USD 8 billion, almost five times last year's quota. Analysts project that more than 900'000 passenger cars will be sold in China in 2002. (Shanghai Daily News, 10 September)

Toshiba plans to make, sell appliances in China
Japanese Toshiba is planning to make and sell home appliances such as refrigerators in China. The company would start local production only after foreign makers are allowed to operate in China without a local partner. After the initial stage of production, Toshiba plans to relocate plants to China's inland areas to take advantage of cheap labor costs there. (Reuters, 10 September)

China's industrial output up 12.7% in August
China's industrial output grew by 12.7% year-on-year in August, reaching RMB 263.4 billion. In the first eight months of the year, industrial output reached RMB 1'966.2 billion, up 12% compared with a year ago. The five major industries accounted for 46.9% of industrial output, namely transportation equipment manufacturing, electronics and telecommunications equipment manufacturing, textiles, chemicals and metals. Sales of industrial products reached 98% of the total output in August, 0.61 percentage points higher than the last month, while the sales during January-August reached 97.47%. (China Daily, 11 September)

China's auto manufacturing leads way in industrial growth
China's auto manufacturing contributed the most to the growth of the country's industry in August, leaping to the top of the 40 industrial sectors in China. The hot sales of autocars led to a contribution of 14.4% in the transport equipment manufacturing sector. (People's Daily, 11 September)

Canon to move Asia headquarters to Beijing
Canon has decided to move its Asian headquarters to Beijing. Analysts say Canon decided to relocate after it obtained approval from the Chinese government this January to sell products directly in the local market. Before, Canon's China-made products had to be exported first and then re-imported to reach Chinese consumers. (ChinaOnline, 12 September)

China ceases blocking of Google search engine
Blocking by Chinese authorities of the Internet search engine Google was lifted without explanation. Starting about Sept. 1, those trying to reach the Google site found themselves rerouted to heavily censored, less effective search engines run by private Chinese Internet companies. Analysts said popular outcry and pressure from businesses that rely on Web tools like Google for research may have persuaded Beijing to reverse the restrictions quickly. Another new censorship technology remained in place. Users this week have begun complaining of an increase in selective blocking -- being able to visit Web sites but not being able to see specific articles or other content of a politically sensitive nature. (AP, 12 September)

China Jan-Aug actual foreign direct investment up 25.5%
Foreign direct investment into China accelerated in the first eight months of the year, continuing a surge fueled by the country's entry into the WTO. Actual FDI in the January-August period rose 25.5% on year to USD 34.44 billion. Pledged FDI rose 42.4% to USD 62.31 billion in the same period, further accelerating from the already high growth of 35% in the January-July period. Wholly owned entities are the preferred vehicle for companies investing in China, reflecting a shift from the joint venture model that dominated in the 1980s and 1990s. (Dow Jones Newswires, 12 September)

Tsingtao looks to Taiwan
Tsingtao Brewery plans to build a plant in Taiwan to tap booming demand. It would be Tsingtao's first brewery outside the mainland. Local reports said Taiwan Tsingtao Beer had purchased land in the southern county of Pingtung for the brewery. Tsingtao started selling its beer in Taiwan in April. (FEER, 12 September)

Machinery and electronics fuel export growth
In the first eight months, China's exports rose 18% from the same period last year, on the back of a surge in machinery and electronics shipments, maintaining brisk growth despite a weak United States economy. Although exports account for a small portion of the country's gross domestic product, they are a key factor in job creation and in boosting domestic demand. Imports climbed 15% year on year in the January to August period. (SCMP, 13 September)

Nissan talking of JPY 100 billion drive into mainland
Nissan Motor is set to become the latest foreign car giant to make an aggressive expansion into the huge mainland market, with a reported investment of 100 billion yen (about RMB 6.9 billion). Japanese news media reported that Nissan and Dongfeng Automobile, the mainland's No 2 vehicle maker, planned to establish a joint-venture in central China's Hubei province. (SCMP, 13 September)

Beijing to strengthen safeguards from rackets
People's Bank of China said it would issue new rules governing anti money-laundering by financial institutions; rules governing settlements and payments; and provisional rules governing large and suspicious funds of the financial institutions. The drive comes in the wake of eight people appearing in a Hong Kong court over their alleged involvement in a HKD 50 billion cross-border money laundering racket. (SCMP, 13 September)

Climate changes to hammer China's agriculture sector
About 10% of China's farmland is going to vanish because of global warming, according to a research findings of a group of scientists from China and the United Kingdom who are studying the impact of climate change on China's agriculture. Between 1998 and 2002, China earmarked a total of RMB 580 billion for environmental protection, accounting for 1.29% of its GDP. (China Daily, 13 September)

KFC chain stores over 700 in China
Tricon Global Restaurant Inc. announced it has opened more than 700 Kentucky Fried Chicken (KFC) chain stores in more than 150 Chinese cities. KFC also committed to spending RMB 38 million in the next decade to help China's poverty stricken students. It will also offer jobs for students in their spare time to help them earn money to complete their studies. (People's Daily, 13 September)

Joint Venture to produce regional jets
China has approved a regional aircraft joint venture between the China Aviation Industry Corp. II and Brazilian aircraft manufacturer Embraer. The joint venture will be located in Harbin and is expected to produce 50-seat aircraft. Experts say the country will demand some 600 regional jets, with 50 to 110 seats and a flight range of 600 to 1,200 km in the coming two decades. (People's Daily, 13 September)

China consumer prices fall 0.7%
China's consumer price index fell 0.7% on year in August, as deflation continued to dog the local economy. Prices in major cities fell further than the national average, with China's urban CPI down 0.8% on year in August. Rural CPI fell 0.6% in August, a slightly slower decline than the drop of 0.7% in July. China has been gripped by deflation since 1998, emerging only briefly in 2000 and early 2001 before prices again began falling. (WSJ, 13 September)

Bank loans up 13.3% to USD 1.5 trillion
Improved economic activities led to rapid increases in bank loans last month, underscoring optimism about economic growth prospects for the whole year. Outstanding loans by financial institutions rose by 13.3%, 1.1 percentage points up from July, to RMB 12.3 trillion at the end of August. The growth in the broad measurement of money supply grew by 1.1 percentage points from the previous month to 15.5%, the fastest since August 2000. Outstanding deposits at all financial institutions soared by 17.8% to RMB 16.2 trillion. Meanwhile, personal savings deposits accelerated even faster, jumping by 18% from a year earlier to RMB 8.3 trillion. (China Daily, 13 September)

German BASF sets up first solely funded firm in China
The German chemical multinational BASF has set up its first solely funded enterprise, BASF in Shanghai. The newly established firm will build an integrated production line that is expected to produce annually 80,000 tons of THF and 60,000 tons of PolyTHF, both to be used mainly in the textile industry, particularly the elastic fiber industry. (People's Daily, 13 September)

Asean backs China trade deal amid investment concerns
Asean Economic Ministers met in Brunei this week where they agreed on a draft Framework Agreement on ASEAN-China Comprehensive Economic Cooperation. The agreement is expected to be signed at the Asean-China summit in Cambodia in November. Asean and China plan to start cutting tariffs on certain products by the end of next year as part ("early harvest"). The Asean ministers hope the free-trade area will help them benefit from the opening up of China instead of just being witness to an investment drain into the vast country. (Dow Jones Newswires, 13 September)

Asean and Japan agree to create FTA within 10 years
Asean and Japan agreed to form a free trade zone within 10 years. Japan's move puts it back in the running with China for North East Asia's first free trade agreement with the 10 Asean-member countries. A study estimates that closer economic relations with Japan could pump up Asean's exports to Japan by 44.2% and Japan's exports to Asean by 27.5%. (Dow Jones Newswires, 13 September)

Weekly Market update  13 September 2002  06 September 2002
Shanghai A 1696.66 1702.59
Shanghai B 148.09 148.33
Shenzhen A 503.56 508.51
Shenzhen B 234.87 237.24
Hong Kong Red Chip  1053.24 1068.55
Hong Kong H 1924.71 1915.49
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 
16.9.2002

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