10 March - 16 March 2003

No 132


China's CPI rises slightly in February
China's consumer price index rose 0.2% year-on-year in February. The prices of consumer goods dropped 0.2%. Meanwhile, the prices of service and foodstuffs rose 1.5% and 1.8% respectively. The CPI for the first two months of the year was 0.3% higher than in the same period of last year. (People's Daily, 13 Mar)

Industrial growth strongest for years
As fears grow that a U.S.-led war on Iraq will cut demand for Chinese-made goods, China's industrial output rose by 19.8% in February from a year earlier - the fastest growth for years. The sharp rise in industrial output was propelled by telecommunications equipment, computing and electronics equipment and transportation equipment industries. Vehicle output rose 62% in the first two months of this year to 627'000. Of those, 242'000 were cars, a jump of 140%. Output of mobile phones was up 86% and computers by 92%. (FEER, 20 Mar)

China posts trade deficit as looming war threatens to hit exports
China posted a trade deficit of USD570 million for January and February combined. Exports rose 32.8% to USD54.23 billion. China's exports for the month of February alone were USD24.43 billion. Imports rose 57.1% from a year earlier to USD54.8 billion in January and February combined. China's imports last month totalled USD23.8 billion. (SCMP, 12 Mar)

More overseas small businesses eye China market
An increasing number of overseas small to medium-sized businesses are eyeing the lucrative Chinese market against the backdrop of economic stagnation worldwide. The 13th east China export commodities trade fair recently held in Shanghai attracted 15'700 business people from 175 countries and regions, more than 90% of whom were from small to medium-sized companies. (People's Daily, 10 Mar)

China adjusted again its GDP figures - downwards
A new index launched by investment bank Goldman Sachs estimates that China's GDP grew last year close to 10%, in stead of the official obtained target of 8%. According to the new index China has been inflating its national GDP figure during the Asian economic crisis, but is now deflating it. The new index largely ignores production data from big companies. Instead, it looks at official numbers on external trade, tons of freight hauled, passenger traffic on planes and trains, construction, and energy consumption. (Chinabiz, 7 Mar)


China gives QFII custodian licenses to 3 foreign banks
The China Securities Regulatory Commission approved licenses for three foreign banks to act as custodians for qualified foreign institutional investors. The approved banks are the Shanghai branches of Citibank, HSBC and Standard Chartered Bank. Under QFII, foreigners will be allowed to invest in China's A shares and to buy local bonds. So far no institution has received approval to become a QFII. (Dow Jones, 14 Mar)

Banking deposits in China exceed CNY10 trillion
Individual banking deposits had topped CNY10 trillion by the end of February, almost equivalent to the country's GDP in 2002. While reflecting increasing incomes and living standards, the huge deposits also revealed problems with China's economic development, such as shortage of products to meet consumers' current consumption levels, lack of satisfactory investment opportunities and concentrattion of risks on the banking industry. (People's Daily, 14 Mar)

China's citizens may buy stock abroad
China's State Administration of Foreign Exchange said that it may allow domestic investors access to the nation's USD 249 billion of foreign reserves to buy stocks overseas. This new "disposition" would start first in Hong Kong. Allowing domestic investors to buy shares abroad would legalize a black market channel that funneled an estimated USD 2 billion of mainland funds into Hong Kong shares in 2001. (Chinabiz, 11 Mar)

China to allow Yuan for use as trade settlement currency
China-based companies can now use the yuan as a settlement currency for their import and export contracts to lower their foreign exchange risks. Previously export and import contracts had to be denominated in hard currency. While the yuan can be used as the settlement currency for export and import contracts, actual payments will still be made in hard currency at the exchange rate on the settlement date. Since payments will be made in hard currency and not in yuan, traders said the impact on China's currency market will be minimal. (Dow Jones, 10 Mar)


Rule on foreign-funded M&As
A new rule on foreign-backed mergers and acquisitions in China is to come into effect on April 12. It aims to promote and regulate foreign investments in China, introduce advanced foreign technologies and management expertise, upgrade the level of China's use of foreign investments, improve the allocation of resources, protect fair competition and safeguard national economic security. (China Daily, 12 Mar)


More Chinese K-8 aircraft to enter overseas market
The K-8 aircraft is designed for both training missions, involving take off, landing, stunt-flying, night and spin flights, and armament operation training. It has already been exported to several countries such as Pakistan, Myanmar and Zambia. Several Middle Eastern countries as well as Southeast Asian and South American countries have shown strong interest in purchasing the aircraft. (People's Daily, 13 Mar)

China to expand packaging industry
China is drafting a long-term development plan to build the country into one of the world's packaging giants. The packaging industry currently employs three million people. However, its development has been plagued by such factors as limited scale, backward technology, shortage of capital and low productivity. (People's Daily, 13 Mar)


CNPC wins oil exploration deal in Syria
China National Petroleum Corp has struck a USD108 million oil exploration and production deal in Syria. China's oil majors are tapping into overseas resources to supplement the country's modest domestic reserves which will not be able to satisfy its fast-growing energy needs. (SCMP, 12 Mar)

Pressure grows to create oil reserves as war looms
Pressure is mounting on China to secure its oil reserves as the likelihood of a U.S.-led war with Iraq grows. If war breaks out in the Middle East, the world's primary source of oil and gas reserves, it will take a heavy toll on energy-hungry China, which imports about a third of its oil requirements. About 60% of these imports come from Middle Eastern countries, including 3% from Iraq. (SCMP, 10 Mar)

Beijing 2008

Construction of 2008 Main Stadium begins in December
The construction of the National Stadium, the main stadium of the Beijing 2008 Olympic Games, will begin on December 24, Beijing State-owned Assets Management Co. Ltd., the official operator of the National Stadium, told a press conference. The 80'000-seat National Stadium, the site of many of the Olympic events will be located in the Olympic Green. (Xinhua, 15 Mar)


CNY 113 million plan to preserve old Beijing
Beijing officials will invest CNY120 million over the next five years to protect the historical area around the Forbidden City. Sceptics fear preservation plans are kept vague to give influential city leaders and developers options to do as they wish. (SCMP, 15 Mar)

Wal-Mart adds link to the chain in Beijing
Wal-Mart is to open a speciality bulk outlet, the members-only warehouse Sam's Club, in Beijing. It will operate by selling high volumes of merchandise at low prices, offering exceptional value on name-brand products for business and individual members. (China Daily, 14 Mar)

Beijing to loosen control over smaller foreign-funded projects
The governments at district- and county-level in the Chinese capital will be authorized to examine and approve contracts, constitutions and their changes for foreign-funded enterprises involving an investment of USD30 million or less, as well as to issue permits for the enterprises. This is an important measure the city will take to further improve its investment environment and its service efficiency. (People's Daily, 14 Mar)


Asia's leading auto center takes shape in Shanghai
The Shanghai international automobile center, expected to be one of the Asia's largest, is taking shape after 18 months construction work on 66 projects covering 989'300 square meters. The center is planned to cover 68 square kilometers and will be a multi-functional center for auto design, production, trade and fairs, as well as racing and tourism. (People's Daily, 12 Mar)

Pearl River

Call to expand the Pearl River Delta region
Guangdong Governor Huang Huahua has called for the creation of a Greater Pearl River Delta taking in Hong Kong and Macau that would rival the Yangtze River Delta. The existing delta region has a GDP of CNY100 billion which when combined with the two special administrative regions would be equivalent to the Yangtze River Delta's GDP of CNY200 billion. Hong Kong Chief Executive Tung Chee-hwa earlier said greater co-operation with the Pearl River Delta would lead Hong Kong out of its economic woes. (SCMP, 11 Mar)


Factory workers in central China stage sit-in
In another labor protest, textile workers in Hubei province have staged a sit-in at their mill to protest unpaid pensions and corruption among managers. (AP, 15 Mar)

Hostage drama in Beijing ends with man's arrest
Beijing police yesterday arrested a man claiming to have a bomb who held several foreign journalists hostage in a four-hour standoff to protest against corruption in the government. Police later issued a statement saying the man "wanted to talk to the media about a dispute that he had with other people", but did not make references to the man's complaints about corruption. (SCMP, 13 Mar)

China investment in Iraq under threat
As a U.S.-led attack on Iraq looks imminent, mainland firms are counting the cost of a war on two decades of investment and trading with Iraq, driven by a government strategy that has sought stable sources of foreign oil and opportunities in a market shunned by the West. Iraq owes Chinese firms USD1.35 billion, of which USD880 million is for construction contracts and USD466 million for imports. The biggest creditor is China Construction & Engineering, which has been the most active of more than 60 state-owned companies in Iraq. The other firm with much to lose is China National Petroleum Corp. which, with UN approval, signed a contract in June 1997 with the Iraqi government to develop the Al-Ahdab field, with daily output of 90'000 barrels and investment of USD500 million. (SCMP, 11 Mar)

Murdoch's Star rising over mainland
Star Group, a wholly owned subsidiary of the Murdoch's flagship News Corp, confirmed its Mandarin television channel Xingkong Weishi can now legally be broadcast to three-star or higher-rated hotels, foreign compounds and other select areas on the mainland, bringing the total number of authorised foreign TV channels to 30. In fact, Star TV is really targeting the giant group of unauthorised viewers. The pool of an estimated 80 million unauthorised cable TV homes is where the big money comes from. Advertisers usually assumed they could reach the general public, even if there was just one hotel in the province with the right to receive the transmission. (SCMP, 10 Mar)

China's largest waste recycling project launched
Construction of the country's largest waste recycling project has started in Guangdong. The USD3 billion National Demonstration Eco-Industrial Park and South China Environmental Protection Industry Park in Nanhai will be home to a variety of green industries, such as environmental protection consultancies, research and design units, green products manufacturers and waste recyclers. (SCMP, 10 Mar)

China textile workers protest for back pay, benefits
Hundreds of workers at a state-owned textile factory in China's far northeast took to the streets to demand back pay and unemployment insurance. Labor discontent is strong across China's northeast, where millions have lost their jobs due to the closure of state factories. (AP, 10 Mar)

Dangerous roads obstruct China GDP growth
A new report by the Asian Development Bank says the China's chaotic traffic conditions may be a hazardous risk to the economy. China's staggering road accident rate could be shaving 1% to 3% off the country's annual GDP. In 2001, about 755'000 road accidents led to the deaths of 106'000 people and maimed a further 546'000. For a pedestrian, driver, rider or vehicle passenger, there is no more dangerous place to be than Asia and China in particular. The carnage on the streets comes at a time when China's auto ownership is only just beginning to take off. (WSJ, 9 Mar)

Weekly Market update  14 March 2003  07 March 2003
Shanghai A 1532.70 1561.02
Shanghai B 121.20 123.28
Shenzhen A 440.15 448.23
Shenzhen B 198.52 202.75
Hong Kong Red Chip  936.51 914.54
Hong Kong H 2136.96 2069.69
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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