Economy

China's GDP to top CNY 10 trillion in 2002
China's GDP is expected to top CNY 10 trillion in 2002, according to the Economic Forecast Department of the State Information Center, which predicted a GDP growth of 7.9% over last year to CNY 10.217 trillion. The SIC said the per capita GDP in China should reach 961 US dollars this year, an increase of USD 50 over last year. (People's Daily, 8 Dec)

FDI to reach 10% of global total
According to the Macro-economic Research Institute under the State Council, Foreign Direct Investment to China is expected to reach USD 53 to 54 billion this year, nearly one-tenth of the world total. (China Daily, 7 Dec)
It seems fair to remind readers that 54% (USD 16.2 billion) of total FDI (Jan-Oct) came from Hong Kong, the British Virgin Islands and the Cayman Islands, all of them unlikely to be the real origin of the capital. In the case of the Virgin and the Cayman Islands, the money certainly came from somewhere else, in the case of Hong Kong, only some came from local firms. The likely sources of this capital are Taiwan and China proper. Taiwanese companies wish to avoid the restrictions on investing in the mainland imposed by their government, while mainland firms move money offshore and bring it back to benefit from tax incentives and other preferential policies offered to "foreign investors".

Key economic policies for 2003 mapped out
The Political Bureau of the CPC's Central Committee met to map out key economic policies for 2003. The nation will likely see a GDP growth of 8% in 2003. Key public policy makers said that the rural economic structure of China needs to be adjusted and a new type of industrialization needs to be promoted. They also agreed to forge ahead with the nation's "Go West'' campaign. Reform was urged to pave the way for a more amenable environment for economic growth. State officials also called for expanding China's opening-up by taking advantage of the nation's admission into the WTO. In fiscal policy, they proposed to take more measures to increase revenues while setting a frugal approach on spending. Meanwhile, the officials also advised upgrading the social security network to improve the living standards of urban and rural people to maintain social stability. (China Daily, 3 Dec)

Many Chinese economists expect China's GDP growth to slow in 2003
Several eminent Chinese economists expect their country's economic- growth rate to slow in 2003. The economists' forecasts were published by the Chinese Academy of Social Sciences in its recent "Blue Book of China's Economy 2003," which also contains the academy's official forecast that GDP will expand 7.9% in 2003 after growing 7.8% this year. The State Statistics Bureau predicted GDP will grow by around 7.5% in 2003, citing the impact of a likely U.S. war with Iraq, as well as rising unemployment and weak consumption by the rural population. The State Council Office for Restructuring Economic Systems forecast GDP growth to slow to 7.6% in 2003 Qinghua University economists Hua Ruxing and Pan Wenqing argue that the high levels of government investment are likely to taper off in 2003, while consumer spending is still constrained by low farm incomes. "China's economy in 2003 won't be able to completely shift from an investment- driven model to a consumption-driven model," they wrote. GDP growth is thus expected to slip to 7.7% next year from 7.8% this year. (Dow Jones, 2 Dec)

China, Sweden to set up investment promotion mechanism
China and Sweden signed a memorandum on the establishment of an investment promotion mechanism. The mechanism is designed to strengthen bilateral economic and technological cooperation and to encourage Chinese enterprises to invest in Sweden. (Xinhua, 8 Dec)

China signs maritime cooperation agreement with EU
China and the European Union signed a maritime cooperation agreement, which will further explore possibilities of bilateral cooperation in maritime safety and trade. (China Daily, 7 Dec)

Rising opposition in SE Asia to free trade with China
Opposition to free trade with China is mounting in Southeast Asia. Exports to China from Asean's six major economies plus Taiwan and South Korea grew 50% in the first half of this year, while exports to the U.S. and Japan are flat. However, cheap Chinese manufactured goods flood back into Southeast Asia, luring consumers away from local products. Pressure to protect Southeast Asia industries could end up derailing Asean's efforts to foster closer trade ties with China. Any footdragging on efforts to integrate more closely with China could end up marginalizing Southeast Asia's role in the global economy. Without access to China's nearly 1.3 billion consumers through a free-trade zone, foreign investors would have even less incentive to invest in Asean. (AWSJ, 2 Dec)

WTO

Taiwan and China to negotiate steel-dumping dispute in WTO
China has agreed to take a steel-dumping dispute against Taiwan to the WTO, after refusing for months to negotiate the matter under the global body's framework. If the two sides manage to sit down it would be the first time the political rivals have held negotiations at the WTO. China claims Taiwan is a part of its own territory and argues that economic disputes between the two are "domestic" affairs, unsuitable for the world trade body. (AP, 5 Dec)

Finance

Japan attacks 'undervalued' yuan
Japan's top economic ministers intensified their campaign to drive down the value of the yen, with a fresh attack on the "weak" Chinese yuan. Finance Minister Shiokawa said "Surely, the yuan is too weak, when we consider the current strength of [China's economy]". But he also denied he wanted China to revalue the yuan. Shiokawa's comments came two days after the governor of China's central bank responded to Japanese claims that the yuan's value was exporting deflation by saying there would be no changes to the country's exchange rate system. (SCMP, 7 Dec)

Foreign investors win approval on stakes in joint ventures
Mainland authorities have given the green light to foreign investors to take controlling stakes in JVs that will take over bad loans from China's asset management companies. Investment bank Morgan Stanley will take a 65% stake in one such co-operative JV while Goldman Sachs will take a 70% stake in another. China Huarong Asset Management will hold the balance in the ventures. The Morgan Stanley consortium will take over distressed assets with a book value of about CNY 10.8 billion, the Goldman JV will take over bad assets with a book value of about CNY 2.0 billion. (SCMP, 3 Dec)

Late restriction on bonds hits QFII experiment
Beijing has slapped a last-minute bond curb on a ground-breaking experiment to expand foreign access to its securities markets. Qualified foreign institutional investors rules in theory allow foreign investors to buy yuan-denominated A shares as well as state, convertible and corporate bonds traded on the Shanghai and Shenzhen stock exchanges. However, "due to technical reasons, QFIIs temporarily cannot participate in state bond repurchases and the trading of corporate bonds". The last-minute change of heart represents yet another restriction for foreign institutions. Chinese bonds, mostly state or treasury bonds, are considered a surer bet than the A-share stocks. (SCMP, 2 Dec)

China forex reserves rise to USD 274.6 billion
China's foreign exchange reserves rose to USD 274.6 billion by the end of November, an increase of USD 62.4 billion since the end of 2001. Foreign debts amounted to USD 160 billion by the end of June. (Dow Jones, 3 Dec)

Fortis and ING forays into fund management approved
Dutch ING Group and Belgium's Fortis will further expand their presence in China as they become the latest foreign firms to win approval to set up a joint-venture fund house. ING Investment Management will form a joint-venture fund company with one of the mainland's largest brokers, China Merchants Securities. Fortis Investment Management said the CSRC had approved its joint venture with leading securities firm Haitong Securities. (SCMP, 4 Dec)

Chinese bankers urge further reform of Big 4 banks
China's Big Four State-owned banks are urged to speed up their restructuring and inner reforms to build themselves into internationally competitive commercial banks over the next five years or so. China set up four asset-management companies in 1999 to take over more than CNY 1.4 trillion in NPLs from the four State-owned banks. Despite the move, the amount of NPLs at the four banks has remained roughly the same. (China Daily, 5 Dec)

China's financial system 'steady and safe'
Central bank Governor Dai Xianglong acknowledged that financial risks exist in China's financial industry largely as a result of the large number of non-performing loans its banks amassed during the planned-economy era, but "China's financial industry, now and in the future, will continue its steady and safe operations". (China Daily, 5 Dec) Thank you for making that clear!

China Merchants Bank unveils credit-card plan for masses
China Merchants Bank has announced plans for the mainland's first mass credit-card campaign - signalling the start of aggressive competition for customers in the infant market. Unlike previous card promotions, which targeted only tens of thousands of customers, the bank's latest campaign aims to issue up to one million cards in the first year. (SCMP, 4 Dec)

Legal

Freight liberalisation accelerated
China will allow foreign companies to take majority stakes in domestic freight-forwarding companies before the end of the year. The Ministry of Foreign Trade and Economic Co-operation, tasked with liberalising foreign participation in the mainland forwarding industry, is to allow foreign firms to take as much as 75% in domestic companies. Foreign firms will be able to wholly own mainland forwarding companies by the end of 2006. (SCMP, 7 Dec)

China to accept lawsuits challenging trade barriers
China's Supreme People's Court has issued a ruling allowing the court system to accept lawsuits challenging government decisions that impose trade barriers to protect domestic industry. Though there is no guarantee that the courts, which aren't independent from the government, will give the suits a fair hearing, the measure does provide for some judicial review of government actions. (Dow Jones, 4 Dec)

Business

Nestle denies GMO accusations
Swiss foodmaker Nestle denies any wrongdoing after several Chinese newspapers accused it of violating the country's rules on labeling genetically modified food products. The controversy arose after local newspapers picked up on recent charges by Greenpeace, saying that Nestle is continuing to sell products with genetically modified ingredients in Asia, even though public pressure in Europe has forced it to stop using such ingredients for products sold there. However, Nestle says its products in China are in strict compliance with the Chinese government regulations and Nestle's own very strict standards. (CRI News/People's Daily, 6 Dec)

Sony targets five-fold revenue increase in China
Sony will increase its revenues in China by five fold with the introduction of the whole range of its products. The company intends not to achieve the expansion goal through investment in new plants, but by tapping the potential of its existing six production facilities. (China Daily, 6 Dec) Increase revenue 5-fold with existing facilities? Tells you something about current productivity!

China overtaking the US as VW's No 2 market
Volkswagen's sales in China this year increased nearly 40% over last year and will exceed those in the United States for the first time. The company will sell 500'000 vehicles in China this year, accounting for 40% of the passenger-car market, and aims to double that by 2007. The company will invest at least EUR 600 million a year in China, mainly in new products. (SCMP, 6 Dec)

High growth expected in China market for jets
Brazilian aircraft maker Embraer forecasts the China market for jets under 50 seats at some 250 aircraft within 10 years and is aiming for a more than 50% market share. Boeing expects China's domestic air traffic market will grow 9% a year over the next 20 years, making it the largest commercial aviation market outside the U.S. Boeing said China will need to buy more than 1'900 aircraft by 2022 to cope with growing demand. (Reuters, 2 Dec)

IT

China blocking 10% of Internet
The Chinese government could be blocking as much as 10% of the Internet from the nation's estimated 45 million users, a comprehensive new U.S.-based study finds. Sites dealing with Taiwan, Tibet and dissidents were the most commonly blocked, along with news media, pornography and religious sites. (CNN, 4 Dec)

China puts 3G licence plan on ice
China will delay its launch of third generation (3G) mobile telephone licences until the technology is fully developed and "market demand" merits the move. Many commentators have speculated that a delay will allow domestic firms more time to develop a home-grown version of the third-generation CDMA technology but Minister of Information Industry Wu Jichuan said network operators would be free to choose their own standard. (SCMP, 4 Dec)

Chinese IT firms plan alliance to form network standards
Chinese IT enterprises will form an alliance led by Legend, China's biggest computer maker, to form a protocol on network connections to better fuel the integrated development of the country's high-tech industries. The country will also take action to form a Linux alliance to promote the operating system for PCs. (China Daily, 4 Dec)

Beijing court rules in favor of Sina in lawsuit vs Sohu
A Beijing court ruled that the Chinese-language Internet portal Sohu.com had plagiarized content from the Web site of its rival Sina.com. But the decision seems unlikely to end the long-festering legal dispute between the two Nasdaq-listed companies. Sohu immediately appealed the ruling, and also has a countersuit pending in another court. (Dow Jones, 2 Dec)

Energy

China, Russia fail to reach oil deal
China and Russia failed to finalize a multibillion-dollar oil-pipeline pact during this week's visit to Beijing by Russian President Vladimir Putin, despite official pledges of closer energy ties and a statement that affirmed new projects were on schedule. The 2'260-kilometer pipeline would carry crude from southeast Russia to refineries in northeast China. Russia and China also are discussing a natural-gas pipeline and an electricity-sharing agreement. (WSJ, 4 Dec)

Beijing 2008

Firms excited by Olympics
Enterprises from home and abroad are lining up to bid on Olympic venue construction projects. 52 companies had filed a combined 117 bids by November 18, senior officials with the Beijing Development Planning Commission said. 25 of those companies are Chinese mainland enterprises. 18 other bidders are from Japan, France, Italy, the United States and Canada. The remaining 9 firms are from the Hong Kong Special Administrative Region and Taiwan Province. (Business Weekly, 3 Dec)

Shanghai

Shanghai Expo victory boosts building boom
Shanghai estimates it will directly invest USD 3 billion in the 2010 Expo site, with spin-offs for other businesses, such as telecommunications and construction projects worth anything from USD 15 to 30 billion. The last Expo, at Hanover, Germany, attracted only 18 million visitors. Shanghai has promised to draw 70 million Chinese and foreign visitors to its world fair, which it said would "mark an unprecedented scale in the history of the event". (FT, 4 Dec)

Universal Studios signs deal to build theme park In China
Universal Studios signed a preliminary agreement to build China's first international-class theme park in Shanghai, due to open in 2006. The park would compete with a new Disneyland scheduled to open in Hong Kong in 2005. (Dow Jones, 6 Dec)

World's fastest train to debut in China
Chinese and German engineers are rushing to prepare the world's first commercial magnetic levitation train for a debut run some time around New Year's Day. The German-made "maglev" train has begun trial runs on its 31-kilometer-long track in Shanghai. The USD 1 billion train connects Pudong International Airport with Pudong financial district. (Dow Jones, 3 Dec)

Shanghai to have more flights to Europe
Four European airlines - Air France KLM, Lufthansa and Britain's Virgin Atlantic - have said that they plan to add more flights between Shanghai and four major cities in Europe next April. (ChinaOnline, 3 Dec)

Pearl River

Consumer procurement fair in South China fruitful
The first China Shenzhen Consumer Procurement Fair ended in Shenzhen with the signing of purchase contracts worth CNY 2.4 billion. As part of Shenzhen's bid to become an international buying center, the city unveiled a virtual electronic procurement platform, www.ccgpf.com, for the benefit of suppliers and retailers. (People's Daily, 4 Dec)

Building to start on road link between Shenzhen, Hong Kong
Construction will begin on a new road bridge that will connect Shenzhen and Hong Kong next year. The project requires the building of a 5'154-meter-long bridge over Shenzhen Bay, customs facilities and other related infrastructure. The project, which will cost CNY 1.57 billion, will allow the passage of 70'000 to 80'000 motor vehicles daily. (People's Daily, 2 Dec)

Various

Taiwan approves charter flights to mainland
Taiwan approved a plan that allows indirect charter flights to Shanghai during the Lunar New Year's holiday, marking the first time Taiwan airlines will fly to the mainland in five decades. However, all the flights must stop in Hong Kong or Macau before continuing on to their destinations. (ChinaOnline, 4 Dec) Meanwhile, China's approval is still pending.

Price for DVD players to soar
Mounting bills for DVD-related royalties collected by foreign DVD technology developers are expected to have a negative impact on sales of domestically made DVD players. In October, domestic DVD player manufacturers began to pay a combined royalty fee of roughly USD 10 on each exported DVD player. (China Daily, 2 Dec)

Stolen pet dogs, cats smuggled from Taiwan to China
Pet dogs and cats are being stolen in Taiwan and smuggled into China as pet ownership becomes the latest trend among China's newly rich. A dog or cat can sell for between CNY 5'000 and CNY 50'000 in a Beijing pet shop. Neither China nor Taiwan can breed the pets fast enough to meet the demand, so many smugglers steal the most popular species from pet owners. In Beijing, registering a dog costs USD 600, plus another USD 240 each year. Many owners are believed to be hiding their pets to avoid paying the registration fee. (Dow Jones, 1 Dec)