23 December 2002 - 05 January 2003

No 125


The standard haste in issuing growth figures for the year may do little to alleviate long-standing doubts among foreigners about the quality of Chinese official statistics. However, here we go:

China's GDP set for 8% growth in 2002
Preliminary figures suggest that the country's GDP reached CNY 10.2 trillion (USD 1.23 trillion) in 2002, an increase of 8% from the previous year. The speedy growth was fuelled by booming exports and the central government efforts to stimulate domestic demand. In 2001, GDP growth was 7.3%. The government had aimed for 7% growth this year. But the 8% expansion began to be expected in recent months as the economy gathered steam, growing 7.6% in the 1st quarter, 8% in the 2nd and 8.1% in the 3rd. In 2003, the country will continue to carry out a proactive fiscal policy and sound monetary policy to stimulate domestic demand and boost the whole economy. (China Daily, 31 Dec)

China's GDP hit USD 1.23 trillion
China's economic growth in 2002 is expected to reach 8%, Director of the National Bureau of Statistics Zhu Zhixin said. Zhu told reporters that 2002 will see the fastest industrial growth of recent years, in which the total added value of the industrial sector will top CNY 3 trillion, an increase of 12% over last year. Both the country's total capital investment and retail sales for 2002 will top CNY 4 trillion. According to the NBS, houses and cars have become the nation's hot consumer items. In the first eleven months of 2002, sales of homes soared 37.1%, and homes sold to private individuals accounted for 90% of the total. Sales of automobiles grew 70.6%. China's total foreign trade volume for 2002 will top USD 600 billion, said Zhu, adding that actual foreign direct investment will exceed USD 50 billion. NBS figures indicate that the disposable income of urban residents in 2002 will exceed CNY 7'500 per capita, up 10% compared to last year, and the net income of farmers will reach CNY 2'470, up 4%. The savings deposits of the Chinese people also increased in 2002. By the end of November, total savings deposits had reached CNY 8.57 trillion, CNY 1.2 trillion more than that by the end of last year. Zhu predicted that in 2003, the Chinese economy will be faced with more opportunities than challenges, and the national economy will see continued growth based on this year's progress. (People's Daily, 31 Dec)

China's economy grows 8%, but signs of weakness loom
Growth in exports and investment has underpinned a manufacturing boom this year that not only spurred China's overall economy, but also reshaped global trade patterns. Chinese goods have been bursting into overseas consumer markets at an astonishing pace, competing with a range of products on price and quality. But after breaking records in trade and government spending last year, economists are saying exports and investment growth no longer appear sustainable in 2003. China's exports will be hard-pressed to match this year's base of growth, as its biggest markets, the U.S. and Japan, struggle to recover. At the same time, the government's expanding budget deficit, now at about 3.5% of total economic output, is tempering a desire for another year of supercharged growth. Worries about rising debt are expected to constrain government bond sales to finance more infrastructure and construction projects. The priority of reducing debts in different corners of the economy has become an urgent one, as Beijing contemplates another massive bank bailout and ways to fund its fledgling pension system. China is expected to reduce next year's special construction bond issuance by about 7%, analysts say, after issuing USD 80 billion of such bonds during a five-year spending spree. (WSJ, 31 Dec)

China's tax revenue hits USD 204 billion
China's tax revenue rose a year-on-year 12.1% to CNY 1.70 trillion in 2002, equivalent to 16.7% of China's GDP, which was an increase of 0.9 percentage points from 2001. According to the State Administration of Taxation, "a majority of the tax varieties achieved excellent growth, except the enterprise income tax paid by domestic companies". Revenue from value-added taxes stood at CNY 627.5 billion, up CNY 82.2 billion from 2001, while that from consumption taxes reached CNY 104.6 billion, an increase of CNY 11.5 billion. Personal income tax was CNY 120.5 billion, up CNY 20.9 billion. Enterprise income tax paid by foreign-funded firms climbed by CNY 10.5 billion last year to CNY 61.6 billion. The government's efforts to beef up tax collection also contributed to the growth. Experts predict China annually loses CNY 30 billion in tax revenue due to tax evasion by multinational firms alone. (China Daily, 3 Jan) As it happens, the article does not mention the tax revenue from domestic companies nor the estimated tax evasion by those companies.

Customs revenue hits new high despite tariff cuts
Despite tariff cuts after China's entry to the WTO, the country's revenue from customs duties and import-related taxes reached a record high CNY 259.06 billion last year, up 3.94% over last year. (People's Daily, 3 Jan)

China's GDP to grow 8% in 2003
China's GDP can rise by more than 8% over the next 12 months, economists have predicted. Their optimistic forecast, ranging from 7.9% to 8.2%, is based on a consensus among officials and experts that the nation's external and internal environment in relation to economic development is "positive". Observers insist the 16th National Congress of the CPC will give new momentum to the country's economic development this year. (People's Daily, 2 Jan)

Annual FDI in China to hit USD 100 billion by 2006
Foreign direct investment in China is expected to reach USD 100 billion in every year of the 11th Five-Year Plan period (2006-10). The Development Research Centre under the State Council based its assessment on China's entry into the WTO, rapid economic growth, western development, political stability and the prospects for the 2008 Olympics. More than USD 50 billion FDI was expected to flow into China last year. A major reason behind the big increase is that more transnational corporations are moving their manufacturing operations here, as China's WTO entry turned many potential foreign investors into actual investors. FDI is unbalanced in the three industrial sectors, with primary industries accounting for a mere 3% of China's total FDI and tertiary industries making up 25%. The 12 provinces, autonomous regions and municipality in the west make up only 5% of China's total foreign investments. (China Daily, 2 Jan)

China sets trade growth goal for 2003 at 7%
Shi Guangsheng, minister of foreign trade and economic co-operation, set a goal of 7% growth for China's total foreign trade volume next year. A number of factors will benefit China's foreign trade growth, including a rebound in international demand, a transfer of manufacturing industry to China and the positive effects of China's entry to the WTO. Shi urged trade officials to watch out for an unstable global economic recovery, a continued fall in international investment and reviving international trade protectionism. Uncertainties over a possible U.S.-led war against Iraq and its influence on the world economy and international oil prices would also have an impact. (China Daily, 24 Dec)

China to lower tariff to 11% starting January
China will lower its general tariff by one percentage point to 11% next year. The cut will affect more than 3'000 tariff items and will be in place from Jan. 1. China agreed to staged reductions in tariffs as part of its WTO accession agreement. The average tariffs for agricultural products will be cut to 16.8% from 18.1%, while the average industrial-product tariff will be reduced to 10.3% from 11.4%. By 2003, China's import tariff item list will increase by 129 items to a total of more than 7'445. (Dow Jones, 23 Dec)


China appoints Zhou chief of Central Bank
China appointed a tough-minded technocrat as governor of the nation's central bank. Zhou Xiaochuan, formerly China's top securities-market regulator, succeeds Dai Xianglong, who is slated for a leading post in the Tianjin city government. Mr. Zhou, 54 years old, is expected to begin work at the central bank immediately. Mr. Zhou's main task will be to overhaul the state-banking system without upsetting the wider financial industry. His success or failure will have important implications for the entire economy, and even for financial stability in the entire region. (WSJ, 30 Dec)

China names career banker as top securities regulator
Mr. Shang Fulin joins the CSRC after a two-year stint at one of the nation's most-troubled state banks, the Agriculture Bank of China. Mr. Shang, 51 years old, takes the reins as China's top market regulator amid one of the worst stock-market downturns. Share prices on the Shanghai and Shenzhen exchanges have fallen nearly 40% in just less than two years, a decline traders blame on a sustained campaign to clean up China's spotty corporate information disclosure and speculative trading practices. (WSJ, 30 Dec)

Citigroup takes step into China with 5% stake in Pudong Bank
Citigroup will take an initial 5% stake in Shanghai Pudong Development Bank, opening the door for the U.S. firm to enter China's growing banking sector. Pudong Development Bank, one of the four listed banks in China's stock market, said it will get support and cooperation from Citibank in areas such as credit-card business, banking services and products. (Dow Jones, 2 Jan)

China seeks foreign capital to help manage domestic NPAs
At the end of 2002, the first two joint asset management companies were approved by China's financial authority, a virtual green light for the entry of foreign capital into China's domestic non-performing asset market. The latest official statistics show that China's four state-owned asset management companies had handled CNY 232.3 billion by the end of September 2002, over 10% of which were handled with the involvement of foreign capital. (People's Daily, 1 Jan)

Taiwan cracks down on illegal transfer of capital to China
Taiwan will adopt stricter measures to prevent companies from illegally transferring capital to China. Under pressure from businesses, Taiwan has recently eased tight restrictions on investing in China. Taiwanese have invested more than USD 60 billion in China in the past decade. Some officials fear that the investment trend could weaken the island's economy and make it more dependent on China. (Dow Jones, 27 Dec)


Online trade licences to be available from January 1
The government accepts online applications for import and export licences from January 1 to streamline foreign trade. The Ministry of Foreign Trade and Economic Co-operation said that online licence applications will further improve management of import and export licences in China. (People's Daily, 31 Dec)

Chinese Court backs petition by Philips on razor patent
An appeals court in China has upheld a petition from Dutch electronics firm Philips to cancel the patent of a Chinese-designed electric razor. The court's decision strikes a further blow against piracy and counterfeiting, which remains rampant in China despite the introduction of tougher trademark, patent and copyright laws. (Dow Jones, 26 Dec)

China gives OK to 11 international law firms to open 2nd offices
China has granted approval to 11 international law firms to open a second office as the world's most populous country continues to open its legal services market to foreign players. The approval is part of the first round of second-office approvals for international law firms. As part of its commitments to the WTO to open its legal services market, China also agreed to lift a ban on foreign lawyers practicing Chinese law. However, foreign lawyers will still be unable to represent clients in local courts. (Dow Jones, 26 Dec)


Nestle brings more than tasty coffee to market
Swiss-based Nestle has placed milk, baby food, beverages, culinary products, ice cream, chocolate and water in China's market. But more than food, Nestle has brought sustainable development to China's economy, especially in West China's Yunnan Province. "We at Nestle believe our activities in China and Dongguan can only be of long-term benefit to our company, if they are at the same time beneficial to China," said J.M. Mueller, head of Nestle in the Greater China Region. "The successful development of our NESCAFE factory in Dongguan is a clear illustration." Nestle's Dongguan factory in 2001 paid CNY 195 million to the local government in taxes. In addition to payments to many local suppliers, Nestle's contribution to the Dongguan's economy topped CNY 450 million that year. Nestle not only creates jobs for workers in Dongguan, but also helps farmers in Yunnan Province escape poverty. Nestle helped pioneer the local production of high-quality Arabica coffee in Yunan Province. Nestle to date has committed more than CNY 50 million to agricultural technical assistance for China's coffee growers. Nestle purchases large quantities of coffee from Yunnan (about 3'000 tons in 2002), thus providing a steady income to local coffee farmers. Meanwhile, production of coffee has expanded in Yunnan Province and, since 1997, the NESCAFE factory in Dongguan has met local producers' Arabica coffee production needs. (Business Weekly, 24 Dec)

American cheese giant invests in China
US-based Leprino Foods Co., one of the largest cheese production enterprises, has received permission to build a cheese producing base in Shijiazhuang, capital of north China's Hebei Province. Chinese people have only begun to take a liking to cheesein recent years and the market is still in its infancy in China. The base Leprino Foods will build in Shijiazhuang will provide 60'000 tons of high quality cheese when completed. (People's Daily, 29 Dec)


New Power companies launched
China formally broke up its state power monopoly, creating revamped power firms in reforms to help bring market order to the world's second-largest power market after the United States. The cabinet approved the changes in October by splitting State Power Corp. into five generating and two transmission firms to encourage competition. The seven plus four auxiliary power companies were officially launched in Beijing. (FEER, 9 Jan)


Germany, China heads inaugurate Shanghai Maglev train
The world's first commercial magnetic-levitation train performed flawlessly on its maiden journey. The Shanghai train is being watched closely, as much for the speed and performance of its 21st century technology as for its jaw-dropping USD 1.2 billion cost. Germany has poured decades of research and billions of dollars into the train and was so keen to have a working version that it essentially offered the trains for free if China built the track. Premier Zhu said he hoped maglev trains would be "quickly localized" -produced entirely in China . The train is supposed to start carrying regular passengers sometime late next year, but a date has not been announced. (Dow Jones, 31 Dec)

Pearl River

Hong Kong, China to build new bridge
Hong Kong and China will jointly build a new cross-border bridge linking the two sides, and will soon extend the opening hours of one crossing to 24 hours a day to ease congestion. Many business groups have urged the government to open all checkpoints between Hong Kong and neighboring Shenzhen round-the-clock to boost trade and to facilitate the territory's integration with the mainland's booming Pearl River Delta region. (Dow Jones, 23 Dec)


South-North Water Transfer project started
Work began on China's largest engineering project to transfer water from the Yangtze River to arid provinces in the north. The Water Transfer scheme, first proposed by Mao Zedong in 1952, is expected to take 50 years to complete at a cost of USD 59 billion. (FEER, 9 Jan)

China plans manned space mission in 2nd half of 2003
China plans to launch its first manned spacecraft in the second half of this year. Yuan Jie, director of the Shanghai Aerospace Bureau, revealed the time frame after returning from the launch of the unmanned Shenzhou IV spacecraft. (Dow Jones, 2 Jan)

Hughes, Boeing charged with illegally giving China data
The State Department has accused Hughes Electronics Corp., and Boeing Co.'s Boeing Satellite Systems Inc. of illegally giving sensitive space technology to China in the 1990s. The department said the incidents involve 123 violations, which if upheld through the department's appeals process, could result in civil penalties of as much as USD 60 million and restrictions on technology exports. (WSJ, 2 Jan)

First export processing zone in Northwest China
Construction of the Xi'an Export-oriented Processing Zone, the first of its kind in northwest China, started recently. China has 25 export-oriented processing zones, which are exempt from tariffs in China and goods produced there are free of value-added tax. (People's Daily, 30 Dec)

China accepts Taiwan Airlines' application for flights
China has accepted applications from three Taiwanese airlines to operate indirect charter flights to the mainland for the Lunar New Year holiday. If the applications are approved, it would be the first time Taiwanese airlines would be allowed in five decades to fly chartered flights to China. (Dow Jones, 28 Dec)

Beijing bans flesh-eating piranha fish
The flesh-eating piranha has been put on the banned list of imported aquatic species in response to a recent report that piranha had arrived in the Yellow River. Piranhas were initially introduced from Brazil and Hong Kong as an attraction in Chinese ocean amusement parks. (China Daily, 28 Dec) Another blow to pet-enthusiasts…

Weekly Market update  02 January 2003  20 December 2002
Shanghai A 1380.02 1492.02
Shanghai B 112.19 121.89
Shenzhen A 401.06 432.61
Shenzhen B 184.89 197.91
Hong Kong Red Chip  1019.73 1058.37
Hong Kong H 2007.53 2048.68
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.

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