17 February - 23 February 2003

No 129


China's economy to register 8.3% growth rate - CSFB
Dong Tao, chief regional economist at Credit Suisse First Boston, predicts China's economy will continue its strong momentum to grow an even faster 8.3% this year despite a possible consolidation in the booming property market. The quality of growth is improving, Tao said. Growth generated by non-government investment accounted for a far larger 85% of total growth last year than in previous years. Exports are expected to slow down in the first half of the year but pick up in the second half, he said, while FDI will grow to USD 56 billion. The CSFB forecast is one of the rosiest among publicized predictions. (China Daily, 22 Feb)

US trade deficit with China breaks USD 100 billion barrier
According to the U.S. Department of Commerce, the US trade deficit with China last year was USD 103 billion. This accounted for almost one-fourth of America's total trade deficit for 2002 - the largest imbalance in history. The Chinese government routinely reports much smaller figures than its US counterpart. It does not include exports routed to the US through Hong Kong. (SCMP, 21 Feb)

China 2003 GDP seen up about 7% - PBOC
The People's Bank of China expects China's GDP to rise by about 7% for 2003. China's central bank also expects CPI to rise about 1% in 2003. The bank said China's broad M2 money supply and narrow M1 money supply are both expected to grow about 16% this year, and various loans of its financial institutions are expected to grow by about CNY 1.8 trillion. Foreign trade volume will rise more than 7% while the urban unemployment rate will be below 4.5%. (AFX, 20 Feb)

Farm produce set for huge trade surplus
China's foreign trade of agricultural products totalled USD 30.59 billion in 2002, up 9.6% year-on-year. Exports rose to USD 18.14 billion, up 12.9%, while imports were USD 12.44 billion, up 5%. People used to worry that China's agricultural products would be hurt by lower tariff rates and larger import quotas after the country entered the WTO. Last year, however, the price of most agricultural products on the global market climbed between 10 to 40%, due to reduced yields caused by natural disasters in the major export countries. Meanwhile supply exceeded demand on China's domestic grain market and farmers had to sell their grain products at the lowest price of the past eight years. (Business Weekly, 19 Feb) See the US farmer's view on this below.

China consumer prices post 1st rise in 15 months
China's consumer prices rose for the first time in over a year last month, as rising sales ahead of the Chinese Lunar New Year holiday allowed retailers to charge more for their products. (Bloomberg, 19 Feb)

China's economy challenged by oil prices rises
Should the US-led war against Iraq go ahead, China's economy would suffer. Concerns that higher oil prices could damp activity and erode profits are realistic, as China has become one of the world's major oil importing countries. (ChinaBiz, 19 Feb)

China sees 14.8% industrial growth in January
China reported year-on-year industrial growth of 14.8% in the first month of this year with CNY 266.2 billion in added value. (People's Daily, 19 Feb)

China the leading exporter to Japan
2002 saw Sino-Japanese trade exceed USD 100 billion for the first time, up 13.8% year-on-year. China's share of Japan's global trade rose to 13.5%. Japanese exports to China increased by 28.2% to USD 39.9 billion, while imports from China stood at USD 61.7 billion surpassing USD 57.5 billion imports from the U.S. This is the first time for China to become the world's leading exporter to Japan. (People's Daily, 19 Feb)

Changes considered to jobless figures
China is considering changing the way it measures its unemployment rate. The present figures only include city residents who register for unemployment subsidies, leaving millions of people who are not working out of the statistical picture. The official unemployment rate last year was 4%, while the estimate for this year is 4.5%. These figures have long been criticised by scholars as seriously understating the jobless total in China. (SCMP, 18 Feb)

Investment in service sector sees FDI surge
Foreign direct investment in China surged last month to USD 3.59 billion (up 48%) after a two-month dip as money began to flow into service industries such as banking and insurance. Up to 70% of FDI was still ploughed into the heavy manufacturing sector. Economists said FDI in manufacturing had been too aggressive in some sectors and may dry up. Still, contracted foreign investment, a sign of future investment, rose 65% to USD 9.24 billion. (Bloomberg, 18 Feb)

Price falls not to hinder China's economic growth
Persistent price falls will not hinder fast economic growth in the nation, according to Chinese economists. They said the decreases were the fruits of increased investment in manufacturing, lower production costs brought by improved technology and recent reductions in tariffs following China's accession to the WTO. (People's Daily, 17 Feb)


China to form agency to oversee banking
Ending heated debate, China has decided to spin off the central bank's role of regulating banks to an independent agency, in a move that could help bolster efforts to overhaul the country's debt-ridden banking sector. The plan is expected to be approved soon by CPC leaders, but still will require a change in the law before being implemented. (WSJ, 21 Feb)

Nation to continue prudent monetary policy
The central bank announced that China will continue a prudent monetary policy, maintaining the stability of the renminbi and interest rates this year, but fine-tuning will be enhanced to absorb negative impacts from uncertainties over the world economy. (China Daily, 21 Feb)

State banks cut NPL ratios by a surprise margin
China's big four state banks last year reduced their bad loan ratios by a larger-than-expected 4.92 percentage points, according to the People's Bank of China. PBOC has asked the big four banks, which hold more than three-fifths of China's total banking assets, to reduce their bad-loan ratios by an average of two to three percentage points every year. The average ratio must be reduced to 15% by 2005. The big four banks are laden with more than CNY 1.8 trillion in problem loans, even after shifting more than CNY 1.4 trillion of bad loans to asset management companies. Goldman Sachs Group has estimated that the top four banks need CNY 2.4 trillion in asset transfers and new capital to become competitive with foreign rivals and attract investors. (SCMP, 21 Feb)

Carmakers concerned at China finance delays
Carmakers are growing increasingly concerned about bureaucratic delays to the start of their auto finance businesses in China, 18 months after they expected to be granted lending licences. But almost two years after China began consulting on regulations for the industry, it has yet to issue a single licence to a foreign automaker. GMAC, along with Ford Credit and VW Bank have been involved in helping authorities draw up lending rules and all expect licences. (FT, 17 Feb)

China's bank savings still favourite
A recent survey among 1'059 adults in four major cities found that bank savings accounts are still the preferred option when it comes to holding money. Only 10% of the respondents have investments in the stock market, while nearly 64% choose to stash their money in bank accounts. 27.5% of respondents admitted they have no plans to save regularly. (People's Daily, 17 Feb)

ICBC going on offensive in Singapore and region
China's biggest lender, Industrial and Commercial Bank of China, is upgrading its Singapore branch and planning to acquire a bank in Indonesia. It also wants to establish a full-licence branch in Thailand. The moves are taking place against a backdrop of deepening economic and business links between South-east Asia and China. (Business Times, 17 Feb)

China's regulator raises fees for stock sales, mutual funds
The China Securities Regulatory Commission has raised its fees for approving sales of stocks and mutual funds. Companies that plan to sell stocks and convertible bonds will have to pay the regulator CNY 200'000, up from CNY 30'000 previously. CSRC has also raised an annual administration fee it levies on brokerage companies and mutual funds. It will charge 0.5% of a company's registered capital, or a maximum of CNY 300'000 yuan. (Bloomberg, 14 Feb)


China's efforts to keep up with WTO appreciated
After three days of meetings in Beijing, Chongqing and Shanghai, US trade representative Robert Zoellick said that China had been lowering tariffs, making its regulations more understandable and granting more licenses to foreign insurers and other financial services companies. American and Chinese officials still have differences regarding some agricultural products and the protection of intellectual property, Zoellick said. (Chinabiz, 20 Feb)

U.S. farmers in feud with China
U.S. farmers backed China's entry to the WTO, expecting greater access to a market of 1.3 billion people. Instead, they say China is keeping U.S. corn, soybeans and cotton out of its market and elbowing the U.S. farm goods out of markets they used to dominate, such as South Korea. The U.S. is considering filing a WTO complaint against China, Agriculture Secretary Ann Veneman said. A WTO ruling in favor of the U.S. would allow Washington to impose sanctions on China to compensate for its losses. (Bloomberg, 17 Feb)


Roche accused of exploiting virus scare
Pharmaceutical giant Roche came under investigation for allegedly stirring up fears about a mystery flu virus in southern China to boost the sales of one of its drugs. The Swiss company said allegations that it had engaged in profiteering were irresponsible and unfounded and it reserved the right to take legal action. The Guangdong provincial government's public-security department said it was investigating Roche following a report which quoted Roche executives as telling a press conference that the virus resembled the deadly bird flu, and promoting an anti-viral medication that Roche sells as an effective treatment. These claims were repeated in mobile-phone text messages and on the Internet, leading to panic buying of the drug, the report said. (FEER, 27 Feb)

A Chinese court agreed to hear a lawsuit filed on behalf of 381 shareholders alleging fraud at listed Daqing Lianyi Petrochemical Co. Lawyers said the CNY 10.2 million suit, accepted by the Harbin intermediate court, paves the way for future class-action lawsuits. The plaintiffs accuse Daqing Lianyi of falsifying its books during its initial public offering in 1996 and bribing regulators to look the other way. (FEER, 27 Feb)

Ministry acts to prevent land abuses
The Ministry of Land and Resources launched a half-year special investigation aimed at improving conditions in the country's property market, which has been described as "chaotic'' by senior officials. Any officials or other persons found to be involved in the illicit trade of land or the illegal use of State-owned land during the investigation will be punished according to the law. (China Daily, 21 Feb)


China court hands victory to nike over trademark
Nike Inc. has won a court order in China to prevent a Spanish company from manufacturing and exporting clothing from the mainland using the "Nike" name. The Spanish company, Cidesport, owns the right to use the Nike name in Spain, and had been planning to sell the goods made in China solely in its home country. However, the court ruled that the simple manufacturing of the goods in China had breached Nike's China-registered trademark. (Dow Jones, 20 Feb)


China's 1st overseas-funded top hotel turns State-owned
The ownership of the White Swan, China's first modern hotel funded by overseas capital, has been taken over by Guangdong Province, after the hotel celebrated its 20th anniversary. Its 20-year management contract with a Hong Kong investor expired. (People's Daily, 17 Feb)


Beijing encourages more investment in convenience stores
The Beijing municipal government is striving to create a retail chain network in residential communities. About 400 convenience stores are due to open their doors by the end of 2003. Seven-Eleven, the world's largest convenience store enterprise, a Spanish discount store operator and France's Champion Convenience Store chain have all been approved to open outlets in the capital's residential communities. (People's Daily, 17 Feb)


Shanghai gets new mayor
Han Zheng, the city's vice mayor since 1988, was officially elected mayor of Shanghai by the 12th Shanghai Municipal People's Congress. He replaces Chen Liangyu, who was promoted to the post of Communist Party secretary for Shanghai. Han, who was born in 1954, is the youngest mayor Shanghai has had since 1949.He has a master's degree in economics and has worked in the chemical industry and for the Shanghai No. 6 Rubber Shoes Factory. (AP, 20 Feb)

Shanghai to merge its rural credit co-ops
Shanghai will merge 232 rural credit co-operatives to form a new commercial bank, setting an important precedent for China's troubled co-operative sector. The latest move mirrors the 1995 merger of urban credit co-operatives in the city, creating the Bank of Shanghai. Many rural credit co-operatives, which take peasant savings and lend money to township enterprises, have been wracking up an alarming level of bad debt over recent years. (SCMP, 20 Feb)

Shanghai mayor predicts slower growth
Shanghai's economy is likely to slow this year and top city officials have called for massive spending on infrastructure to keep development on track. [Outgoing] Mayor Chen Liangyu predicted the city's economy would grow between 9 and 10% this year. Although better than expectations for the nation as a whole, that forecast is lower than the 10.9% figure recorded in 2002. (SCMP, 17 Feb)

Weekly Market update  21 February 2003  14 February 2003
Shanghai A 1545.75 1579.38
Shanghai B 123.90 126.14
Shenzhen A 446.09 455.34
Shenzhen B 204.24 208.58
Hong Kong Red Chip  1011.66 1006.43
Hong Kong H 2184.72 2180.73
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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