Economy

China's Dalian port clogged by record unsold auto imports
China's port of Dalian has become clogged with more than 5'500 imported autos, due to a shortage of import licenses and a high exchange rate. Expectations of imported cars making inroads into the local market due to significant reductions on import tariffs don't appear to have materialized. Instead, a discount war and introduction of economy models by local automakers has helped to fend off the threat from imported vehicles. China will usher in more foreign cars next year by lowering import tariffs and raising quotas in line with its WTO commitments. (Dow Jones, 22 Nov)

East Asia trade bloc to emerge
On the heels of the announced free trade zone with ASEAN member economies, Xu Changwen, from the China Academy of International Trade and Economic Co-operation says "it is inevitable China will take another step towards closer economic relations with Japan and South Korea". Premier Zhu Rongji proposed earlier this month a free trade zone with Japan and South Korea when he met his counterparts on the sidelines of ASEAN's meeting in Cambodia. (Business Weekly, 26 Nov)

TV exports to EU resume
The first batch of Chinese TV sets left for the European market after the lifting of a ban on their exports by the European Union. In August, the EU dropped a ban imposed two years earlier following charges of dumping. However, some industry officials said the opening of the EU market does not signal the end of business disputes and trade restrictions. From this year European rivals shifted their attention to royalty and other issues. (Shanghai Daily, 27 Nov)

Australian study: China's growth to take 'middle road'
China's economy is likely to grow about 7% a year for the rest of this decade, a new study by the Australian government says. But the study warns that continued high growth is "not inevitable", citing potential social, economic and political problems, and the mountain of bad debt held by China's big banks and asset-management corporations. The study identifies three reform-related growth scenarios: one delivering 8% growth from 2005 onwards, a middle course of 7%, and one that sees growth slow to just 5 or 6%. It predicts China will take the middle path, opting for "solid progress" rather than either an aggressive restructuring of banks and state-owned enterprises, or slow, stop-start reforms. It says this approach would minimize potential social instability, which either rapid restructuring or slow output and job growth could exacerbate. (CNN, 27 Nov)
http://www.dfat.gov.au/publications/catalogue/china_embraces_world_market.html

China's export growth rate may slow by half next year
China's export growth rate may slow by half next year because the government can't sustain tax breaks that favor exporters, the State Council Information Center said. The Chinese government gives exporters tax breaks of as much as 15%. At least half of this year's applications for tax breaks can't be processed until 2003, which will "squeeze out'' new applicants and hurt exports. (Bloomberg, 28 Nov)

China plans policy package to upgrade vehicle industry
According to the State Development Planning Commission, a package of long-awaited new policies will include a program to accelerate the automobile industry's development and others concerning vehicle consumption, fund management and financing. The auto industry is expected to play a leading role among China's industrial sectors to help China realize its target of quadrupling the level of its GDP in 2000 by 2020. (China Daily, 29 Nov)

High rate of property vacancies worries mainland real estate officials
According to the China Property Industry Association, China's ratio of vacant real estate to occupied property is 19%, compared with the internationally-recognised warning line of 10% to 15%. The country has 125 million square metres of vacant property. (SCMP, 29 Nov)

China fights deflation charges
Responding to suggestions that its cheap exports might fuel global deflation, China defended its role. Stephen Roach, chief economist at Morgan Stanley, added to the debate by suggesting that China had emerged as an important ingredient of prospective United States deflation. The chief economist at the National Bureau of Statistics dismissed the idea that deflation was a factor in China, let alone threatening the rest of the world. (FEER, 5 Dec)

WTO

China warns US over quotas on textiles
China has warned the US against imposing new restrictions on textile imports when the present quotas end in 2005, saying such measures would undermine Beijing's co-operation in the new round of global trade talks. The American Textile Manufacturers Institute filed a petition with the US government in September asking for new quotas under the special safeguard provisions in China's WTO accession agreement. The end of quotas, imposed under the Multi-Fibre Arrangement, was a major incentive for China to enter the WTO this year. (FT, 23 Nov)

Finance

Shi kills last revaluation rumors
China has never considered a revaluation of the Renminbi, trade Minister Shi Guangsheng said in an interview in the Financial Times. A week ago Minister of Finance Xiang Huaicheng said that he "personally feels a lot of pressure" to give the currency more room to maneuver. Bankers right away dismissed the speculation the statement triggered off as nonsense. (Chinabiz, 26 Nov)

Interest in QFII scheme low
A survey by UBS Warburg shows foreign investors have little interest in the mainland's plan to allow outsiders to trade domestic A shares. Cited as major concerns were corporate governance standards, high valuations and accounting practices. UBS surveyed 26 institutional investors and found potential foreign investors were worried that the minimum investment to enter the market was too high and there would be too much difficulty in repatriating foreign exchange. Just 11.5% of those surveyed said their interest was high. China's securities regulators said a number of overseas institutional investors had expressed interest in the scheme due to confidence in the prospects for the mainland economy and stock market. (SCMP, 27 Nov) (see below)

New rules complicate foreign investment in SOE's
The State Economic and Trade Commission published new rules on investing in unlisted State-owned enterprises. Under new rules the SOE has to apply with the local SETC for approval of all reorganization projects. It is however not clear if this means that the SETC approval replaces the MOFTEC approval that is currently required. It is clear that SETC stresses protection of SOE's and MOFTEC focuses more on encouraging foreign investment. These two goals may be diverging under the new rules. People close to MOFTEC say officials at the ministry are enraged by the new SETC-rules, who go directly against the MOFTEC policy of economic openness. (Chinabiz, 28 Nov)

China issues regulation to govern foreign investment
China released a detailed regulation on forex issues related to the Qualified Foreign Institutional Investors scheme. Under the new rule, each qualified foreign investor can only open one special renminbi account to facilitate securities trading in China. The investor can apply for an investment quota that equals something between USD 50 million and USD 800 million. Risk control is crucial to the programme, so the Chinese Government has to work out a detailed scheme to avoid the inflow of international hot money that would hurt the financial soundness of the country. (China Daily, 29 Nov)

PBOC cracks whip as deposits battle gets out of control
China's central bank launched a crackdown on banks that have been competing for customers by offering illegal inducements to attract deposits. Interest rates on yuan deposits are fixed by the PBOC. But some banks were disregarding the government-set benchmark in "blind pursuit" of building their deposits, the PBOC said. (SCMP, 29 Nov)

Wen Jiabao heads new financial taskforce
China has set up a top-level taskforce charged with ensuring the safety and soundness of the mainland's finance sector, with Wen Jiabao at the helm. The development underscores the view that financial reforms will be a priority for Mr Wen, who is expected to succeed Premier Zhu Rongji in March. China's ability to maintain the safety and soundness of its financial sector has become a top policy issue for Beijing. Beijing is aware that incompetent and corrupt senior financial executives could trigger a financial implosion. Philip Strause of Deloitte Consulting said: "The major issues [the top leaders] should be concerned about are the safety, soundness and performance of the banking system. That just absolutely has to be the highest priority. Secondly and more broadly would be the development of a capital market over time as an alternative to the heavy reliance on banking as the basic mechanism for allocating capital." (SCMP, 30 Nov)

Legal

Court awards small investors victory
Chengdu Intermediate People's Court awarded compensation to 11 small investors in a battle against a Shanghai-listed electronic vacuum component maker. The court awarded the plaintiffs CNY 225'000 in compensation from the company. The CSRC found the company had fudged its listing prospectus by reporting a net profit of CNY 54 million for 1996, when it actually lost CNY 103 million. In January the Supreme People's Court in Beijing published a regulation that permits defrauded investors to sue domestically listed companies for fraudulent corporate disclosure. (Shanghai Daily, 27 Nov)

China further opens construction market
According to new regulations issued by the Ministry of Construction and the Ministry of Foreign Trade and Economic Cooperation, overseas investors are allowed to set up Sino-foreign joint ventures, cooperative businesses and exclusively foreign-owned enterprises in China in the construction sector. They are also allowed to invest in construction project designing. (People's Daily, 30 Nov)

Business

Leading global jeweller eyes mainland market
The world's third-largest jeweller Bulgari Group is seeking partners to enter China's luxury goods market and plans to open stores in major cities next year. Hong Kong's Bulgari sales to mainlanders showed double-digit growth in the past 12 months. Asia, including Hong Kong, accounted for 38% of the group's revenue last year. (SCMP, 25 Nov)

Swiss Watchmaker sees good prospect for China market
Vacheron Constantin, one of the biggest Swiss watchmaker has seen a good business prospect in China. The Swiss watch maker launched a massive four-week exhibition in six major cities in northern and northeastern China in August this year. Vacheron Constantin has 19 shops in China's mainland and a total of 26 shops in Hong Kong and will gradually expand their business in China. (People's Daily, 26 Nov)

Customer support - Leica's secret of success
Leica Geosystems, based in Heerbrugg, Switzerland, is a globally active surveying and geomatics technology group. Since its introduction to the Chinese market 50 years ago, the Swiss company has provided technical solutions and high-precision instruments for key projects - including the Three Gorges reservoir construction on the Yangtze River and the Xiaolangdi water-control project on the Yellow River. The company's sales in China are worth about CHF 40 million Swiss Francs (USD 27.8 million), up 30% annually since 1997. Leica Geosystems has 26 service centres and seven repair centres in China. The company built an R&D centre in Shanghai earlier this year. (Business Weekly, 26 Nov)

BMW cars to be produced in China
The luxury German automobile brand BMW will see some of its cars made in China soon. Negotiations between Chinese car-maker Brilliance Auto and BMW are going smoothly, and the formation of a joint venture is being examined by Chinese authorities. The joint venture, which will be set up in Shenyang in northeastern China, will to produce BMW's 3-series products. (People's Daily, 26 Nov)

IT

China has world's third largest Internet user base
China had 54.35 million Internet users by the end of September this year, the third largest number in the world after the United States and Japan. However, this only represents 4% of China's 1.3 billion population. The country also has 20.56 million computers connected to the Internet, and 81'907 www websites. (People's Daily, 28 Nov)

Shanghai

China Putian plans USD 600 million industrial park in Shanghai
Despite weak demand, China Putian Corporation, the country's largest telecom equipment vendor, plans to build a CNY 5 billion industrial park in Shanghai in the next five years. The project is located in the Shanghai Comprehensive Industrial Development Zone in the city's southwest Fengxian County. Putian, an industry arm of the former Ministry of Posts and Telecommunications, is now directly under the leadership of the central government. (China Daily, 25 Nov)

Pearl River

Hong Kong economy grows 3.3% on strong exports and tourism
The Hong Kong economy grew by 3.3% in the third quarter from its year-earlier level, picking up visibly after turning around to modest growth in the second quarter. The government revised its measure of year-on-year GDP growth in the second quarter to 0.8% from 0.5% and the quarter-on-quarter growth figure for the second quarter to 0.7% from 0.4%. Those revisions and the strength of the third-quarter GDP increase led the government to revise its forecast for full-year growth to 2% from its earlier forecast of 1.5%. Exports were a key driver in the government's new optimism over the economy, while the domestic sector remained weak. (Dow Jones, 29 Nov)

Guangdong to build bridge to Hainan
Guangdong will invest CNY 50 billion to build a bridge linking the province with Hainan island. The 30km structure is part of a national project to build five bridges starting in Tongjiang, part of northernmost Heilongjiang province, and ending in the Hainan resort town of Sanya. The cost of the entire scheme is CNY 570 billion. (SCMP, 30 Nov)

Various

Curbs stop movie, TV industry
An international academic forum on visual arts at Fudan University in Shanghai has slammed "Sowjet-style" censorship on movies and TV, preventing it from developing into a real industry. "It is easier to get a bomb into China than a movie," said Venice Film Festival director Moritz de Hadeln. (chinabiz, 24 Nov)

China builds first global standards database for farm products
China's first database for farm products in accordance with international standards will be in use soon. The State Committee for Standardization builds the database in a bid to facilitate exports of farm products and raise national awareness of international standards. The database also lists standards in China's key markets, including the US, EU and Japan. (People's Daily, 26 Nov)

EU urges China to abandon TD-SCDMA
The European Union urges China should not adopt a home-grown third-generation mobile standard that breaks up a world market already dominated by two technologies. China, the world's largest mobile market, has championed TD-SCDMA, a wireless service being developed by Datang Mobile and Siemens of Germany. TD-SCDMA is seen as a possible rival to popular next-generation standards CDMA2000 and WCDMA. (SCMP, 27 Nov)

China makes formal the arrest of Yang Bin
Chinese police formally arrested flower and property magnate Yang Bin on charges of bribery and fraud. Last year, Forbes magazine ranked Mr. Yang as China's second-wealthiest man, with holdings valued at USD 900 million. In another bizarre twist, Mr. Yang's troubles also have complicated the reform plans of North Korea, which chose Mr. Yang to run an ambitious free-trade zone to be set up in the border city of Sinuiju. (WSJ, 28 Nov)