EMBASSY OF SWITZERLAND


CHINA BUSINESS
BRIEFING (*)

16 September - 22 September 2002

No 113


5 Swiss brands take top ranks in the Chinese watch market
A recent survey of the watch market in 35 Chinese cities showed that Chinese consumers have a strong preference for foreign brands. Inspite of strong Japanese competition, Chinese products still dominate the market in terms of numbers. In terms of value, however, Swiss brands clearly dominate. Omega takes first place with 13.7% of the total market value, followed by Rado (9.3%), Longines (5.34%), Rolex (3.9%) and Titoni (3.8%), the latter a Swiss brand hardly known at home. Tissot (2.9%) and Tudor (2.8%) take further important market shares. Rolex watches sell at an average price of CHF 11'500, while an Omega would be around CHF 3'500 and a Rado between CHF 1'500 and 2'900. (Le Temps, 13 September)

Nestle convenes global board meeting in Shanghai
Nestle is holding its global board meeting in Shanghai in a move to highlight the importance of the Chinese market. Since 1990, the number of Nestle-funded firms in China mainland has grown to 18, which employ about 7'000 people and have a combined direct investment of USD 700 million. (People's Daily, 21 September)

Economy

Mainland funds inflow in biggest monthly spurt
Last month, China's foreign direct investment growth accelerated 51.7% year on year to USD 4.9 billion in the biggest monthly gain this year. In the first eight months of the year, China attracted USD 34.44 billion worth of FDI, up 25.5%. Investors from Hong Kong, the United States, Japan and Taiwan continued to pour funds into manufacturing facilities to take advantage of China's cheap labour and production costs. (SCMP, 14 September)

Deflationary pressure to ease
Deflationary pressure continued to ease moderately last month. The consumer price index fell 0.7% compared with a 0.9% decline in July and June's 0.8% fall. The CPI has been in negative territory since March this year. (SCMP, 14 September)

Brisk consumption still short of target
Consumption last month was buoyed by brisk sales of cars and mobile phones and higher student spending as schools expanded enrolment, but not enough to meet the government's target. Retail sales rose a year-on-year 8.8% last month, still below the annual target of 10%, a trend analysts expected to persist. The government is targeting 10% retail sales growth this year to help achieve 7% annual economic growth, but analysts are sceptical sales will be that strong. Last year retail sales rose 10.1%. (SCMP, 17 September)

Fixed-asset investment in China continues its strong growth
Fixed-asset investment totaled RMB 1.65 trillion for January to August, up 24.2% from the same period a year ago.That growth rate is 5.3 percentage points faster than the same period in 2001, reflecting a pickup in investment spending by China's government. Economists predict that the pace of growth in this spending will ease in the latter half of this year amid concerns about a budget deficit blowout. China recorded a 18.7% increase in state spending in the first seven months of the year compared to a 10.6% boost in revenues. Some experts believe that private investment, particularly foreign direct investment, is increasing rapidly enough to fill any gap created by a decline in state sector investment. (Dow Jones Newswires, 17 September)

Smaller firms get windfall
China is to introduce a national mega fund to finance growth of the country's millions of cash-strapped small and medium-sized enterprises next year. The move will complement the country's first Law for the Promotion of Small and Medium-Sized Enterprises' (SME) Development, which will be enacted next January. Insiders said the pool of funds could be as large as billions of yuan. It will come from the central government's annual budgets. (Business Weekly, 17 September)

China's PPI declines 1.7%
China's producer price index, which tracks the factory-gate prices of industrial products, fell 1.7% on year in August, compared with a 2.3% decline in July. PPI has fallen every month since April 2001, and is now down 3% for the first eight months of 2002. Analysts say excess capacity in many industries and increasing competition from imported products are relentlessly pushing down prices in China. China's consumer price index fell 0.8%, for the January-August period. (WSJ, 18 September)

ADB to increase lending to China
The Asian Development Bank plans to increase its lending to China to an annual average of USD 1.5 billion (+50%). The increase aims to help China restructure its economy and reduce poverty by promoting sustainable and pro-poor economic growth. More than three quarters of the lending will finance projects in the central and western regions in China, with transport and social infrastructure dominating the operations. (People's Daily, 18 September)

China to invest heavily in new industries at Three Gorges
The Chinese Government will invest some RMB 5 billion in the next few years to bolster the orange and animal husbandry industries at Three Gorges to create jobs for hundreds of thousands of resettled residents. More than 100'000 workers will be laid off from over 500 technically-backward firms which have ordered to shut down by the end of this year due to serious pollution emissions and outdated production technologies in the dam area. Meanwhile, 80'000 rural residents will be moving into new resettlement townships this year, adding to the unemployment problem. (People's Daily, 18 September)

Finance

Chinese bank offers loans for individual car buyers
The Agricultural Bank of China is offering a total of RMB 10 billion in loans to individual Chinese car buyers from now to the end of the year. The ABC Shanghai Branch and Yafun Automobiles (Group) Company, the largest car dealer in China, signed a cooperation deal to promote the loan offer. (Xinhua, 15 September)

China to impose new tax system
China will put into practice a stricter system to collect taxes from companies as of October 15. The system requires that taxpayers install and use tax data equipment and send tax data to the tax departments. Multinational companies that make use of "affiliate" companies to evade taxes, will be punished. (China Daily, 18 September)

Mainland banks sector opens to private firms
Facing the prospect of fierce competition from foreign banks, the central government has decided to fling open the banking sector to the private sector - almost. According to the People's Bank of China, any private sector company with RMB 100 million in registered capital or individuals with 100 million in hand can apply to set up a new bank. There is one catch, however: they cannot be based in a city that already has an established commercial bank. (SCMP, 18 September)

New rules aim to tighten lending
China is ordering banks to improve their loan procedures to make them more competitive as the country opens the financial sector wider to foreign giants. Banks should improve loan decision-making and approval procedures, curb "relationship loans" made on personal rather than business factors, and also prevent lending to "high-risk" areas, the rules said. (SCMP, 19 September)

WTO

Beijing moves to protect trademarks
Well-known foreign trademarks can expect better protection from counterfeiters under guidelines being drafted in Beijing. It is part of moves to bring domestic intellectual property rights regulations in line with the mainland's WTO and Trade Related Aspects of Intellectual Property (Trips) commitments. (SCMP, 16 September)

Laws to soon be in line with WTO
China will waste no time establishing a system of foreign-related business laws and regulations in line with WTO principles to create a unified, transparent and non-discriminating legal system, said State Councillor Luo Gan at the opening session of the International Symposium on WTO and Legal Services. (China Daily, 19 September) Good to know.

China receives mixed grades on WTO progress
A WTO commission held a meeting to evaluate China's progress in protecting trade-related intellectual property rights and implementing commitments after the country's WTO accession. "WTO members gave a positive assessment of the results of our work on intellectual property rights, especially in carrying out our commitments after accession," MOFTEC said in a statement. "Some members hoped that we could further strengthen our enforcement of intellectual property rights." (ChinaOnline, 19 September)

Business

Up to 40 stores on horizon for Metro
Germany-based trading giant Metro Group is set to spend over USD 600 million to add at least 40 new to the existing 15 Metro outlets throughout China in the next three to five years. As one of Metro's key business models, the cash-and-carry chain mainly targets professional customers like hotels and small and medium-sized retailers by setting up warehouses based on a membership system. (China Daily, 16 September)

Listed companies post weak gains
Chinese listed firms' earnings in the year's first half were weaker than expected due to increased costs and a drop in investment gains. One hundred and sixty-six companies posted losses, accounting for 13.8% of domestic-listed firms. Analysts suggest the situation will improve in the next six months if the government stimulates the economy and enhances its opening-up. (Business Weekly, 17 September)

Ford to buy USD 1 billion worth of Chinese auto parts by '03
Ford Motor Co. will likely procure a billion dollars worth of auto motive parts a year from suppliers based in China by the middle of next year. (WSJ, 17 September)

Unicom IPO set for November
China Unicom is planning to launch its long-anticipated mainland listing around November to fund construction of its code-division multiple-access (CDMA) network. It is speculated that the company plans to raise about RMB 20 billion from the mainland capital market. The planned listing is expected to rock the dominant position held by China Mobile, the country's top cellphone operator. (Business Weekly, 17 September)

China witnesses booming information industry
China's information industry maintained its strong, steady growth in the first half of the year against the backdrop of global economic slowdown and the sluggish development of the world information industry. The added industrial value of China's electronic products manufacturing was RMB 91.9 billion for the first six months of this year, a 10.3% increase year-on-year. (Shanghai Daily, 18 September)

PetroChina seeks approval to build 760km gas link
PetroChina - the mainland's No 1 oil company - has submitted a proposal to Beijing to build a 760km natural gas pipeline between Hubei and Sichuan provinces, at an initial estimated cost of RMB 5 billion. The project underlines Beijing's policy of replacing environmentally damaging coal consumption with cleaner natural gas. PetroChina had planned to build with Enron Corp. before the U.S. energy company went bankrupt. (SCMP, 18 September)

Ford expects rise in sourcing for parts from China
Ford Motor Company expects sourcing for parts and components from China to reach USD 1 billion by the middle of next year and it could rise to more than USD 10 billion by mid-decade, as part of its overall drive to cut costs. (FT, 18 September)

Nissan agrees to invest USD 1.2 billion in mainland venture
Nissan Motor signed a deal with Dongfeng Motor Corporation, the mainland's second-biggest car group, to invest USD 1.28 billion to produce 900'000 vehicles within 10 years in a market it described as its new frontier. This will make it one of the biggest vehicle joint ventures in China. (SCMP, 20 September)

Energy

Nation to build up oil stockpile
China wants to speed up the stockpiling of strategic oil reserves as tension in the Middle East grows. China's reserves are crucial to buffer its economy against import disruptions. The nation imports one-third of its oil, 60% from the Middle East. Without a sufficient national stockpile and oil imports, experts and officials worry that the domestic supply can only last a few days. (China Daily, 18 September)

Beijing

Beijing pushes garment industry
China's capital is planning to make garment manufacturing one of its pillar industries in the coming years. Official plans for the construction of an international garment town will be released soon. (China Daily, 18 September)

Beijing, Tianjin may see magnetic connection
Chinese and German experts recently held a discussion in Tianjin on the possibilities of building a magnetic levitation train line between Beijing and Tianjin. Experts hope that the maglev train will help alleviate the expected traffic headaches in Beijing when it hosts the 2008 Olympic Games. (China Daily, 20 September)

Shanghai

Shanghai property bubble alert
Shanghai's municipal government may introduce measures to curb the city's real-estate boom following a warning by its consumer watchdog of the emergence of a ``property bubble''. In the first quarter of this year, property prices rose to RMB 4'931 per square metre - a 30% increase year on year. Although buyers queued or hired people to queue for them to buy high-end residential properties, leasing prices have declined, a sign of weakening demand. Meanwhile, supply is massive. At the end of July, developers had 100 million sq m of residential and commercial property projects under way, of which 80% was high-end residential. (The Standard, 16 September)

Shanghai to set up head-hunting offices in Germany, US
Shanghai leaders have unveiled plans to set up representative offices in German and the United States by the end of the year to attract specialists for the economic hub's development drive. Success would see the recruitment network being expanded to France, Japan, Canada and Australia next year. (China Daily, 17 September)

More flights to Taiwan offered from Shanghai
More flights will open from Shanghai to Taiwan via Hong Kong due to a new co-operation between Shanghai-based China Eastern Airlines and Hong Kong-based Cathay Pacific. Shanghai now has about 350'000 Taiwan people and local airports handled 470,000 tourists from the island province last year. (China Daily, 18 September)

Various

China food poisoning kills 41, hundreds ill
A food poisoning outbreak at a fast food restaurant killed 41 people and left hundreds needing hospital treatment in Nanjing. More than 400 people, many construction workers and middle school students, were rushed to hospitals. Many city officials, local reporters and hospitals said they were not allowed to comment on the incident. (Reuters, 14 September)

Business world urged to improve integrity
Officials and researchers have called on China's business world to improve its creditability to ensure sound economic and social development. China is in much need of a system to reflect and supervise personal, company and governmental credibility. The lack of such a system has resulted in an epidemic of fraudulent activities, which in turn have caused varying degrees of disruption to the country's burgeoning market economy. (China Daily, 19 September)

Severe drought hits Shandong, causing huge losses
Shandong Province is experiencing its worst drought in 100 years. The drought has affected over 80% farmland of the whole province, causing temporary drinking difficulties for 3.66 million people and 1.04 million head of livestock and forcing more than 800'000 people to buy water or carry it from far away. (People's Daily, 20 September)

EU eases controls on Chinese fish
EU veterinary experts decided to ease import controls on Chinese fish imposed due to health concerns. The EU in January had banned imports of Chinese fish and animal products after traces of a powerful antibiotic, chloramphenicol, were found in the Chinese imports. The antibiotic was outlawed in Europe in 1994 and in China in 2000. (China Daily, 21 September)

Weekly Market update  20 September 2002  13 September 2002
Shanghai A 1674.87 1696.66
Shanghai B 146.35 148.09
Shenzhen A 496.16 503.56
Shenzhen B 231.69 234.87
Hong Kong Red Chip  991.62 1053.24
Hong Kong H 1914.07 1924.71
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 
23.9.2002

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