07 July - 13 July 2003

No 148


SARS virus hits textile exports
Textile and apparel exports in May dropped by 3.53% to USD6.05 billion, compared with April. It is the first negative growth rate this year. Buyers should have been in China in April, ordering apparel for the autumn and holiday seasons, but most of them called off their trips. Many overseas orders are shifting to rising competitors including Bangladesh, Pakistan, India, Turkey and Cambodia. (China Daily, 12 Jul)

SARS-blighted countryside gets billions plus favourable policies
In a new effort, designed to counter the negative impact of SARS, China will increase the number of treasury bonds by CNY3.25 billion in a move to boost investment of infrastructure construction in rural areas over the next six months. The treasury bonds will be used to bolster funding for construction of electric power, roads, drinking water projects and rebuilding of dilapidated school buildings in rural areas, particularly those the poorest regions. (China Daily, 9 Jul)


Number of China's extremely poor down by 50% since 1990
According to the UNDP 2003 report, the percentage of Chinese people living on less than USD1 a day dropped from 33% in 1990 to 16% in 2000. (China Daily, 11 Jul)

China trade up 39% in first half of 2003 to USD376 billion
China maintained robust growth in foreign trade during the first half of the year, with imports skyrocketing by 44.5% to USD185.8 billion and exports up 34% to USD190.3 billion, giving China a USD4.49 billion trade surplus. Total trade for the first half was valued at USD376 billion, up 39% over the same period last year. (China Daily, 11 Jul)

Industrial output in China climbed by 16.9% in June
China bucked expectations of an economic slump, reporting a surge in factory output and strong exports in June. China's industrial production rose 16.9% in June from a year earlier, a pace that was 3.2 percentage points faster than in May. For the first half, industrial output increased 16.2% from the same period in 2002, amid accelerating production of passenger cars, garments and information-technology products. The faster factory production has fed China's booming foreign trade. Exports rose 32.6% in June from a year ago. But imports were up even more, at 40.1%, narrowing China's trade surplus in the month to USD2.14 billion. (WSJ, 10 Jul)

Chinese consumers optimistic about global economic future
Although barely recovered from the SARS crisis, consumers in China are confident that the global economy will regain its vitality within a year, according to a recent survey by A C Nielsen. According to the survey, 47% of the respondents from the Chinese mainland have postponed purchases of luxuries such as houses, cars, mobile phones and digital cameras during the past half year due to SARS disease. (People's Daily, 9 Jul)

Mainland is the lone economic bright spot
After conquering SARS, the mainland has once again become the lone bright spot in the world economy, Morgan Stanley chief economist Stephen Roach said. Morgan Stanley revised their forecast to 7.5%, half a percentage point higher than the pre-SARS forecast. (SCMP, 8 Jul) Mr. Roach was received by Vice-Premier Zeng Peiyan that day at Zhongnanhai.

Foreign investment soaring? We've seen nothing yet
A new OECD study of China's investment policy suggests that not only is China still attracting far less FDI than it can absorb but the quantity of the investment to date has not yet been matched by its quality. "Much FDI in China still takes the form of short-term, labour-intensive manufacturing, while investment in hi-tech activities, particularly in services sectors, lags behind," said the report. In 2000, China attracted USD30.1 in FDI for each of its 1.3 billion people, compared with USD195.4 per capita in Brazil and USD241.6 in Chile. The OECD raised a question mark about the consistency of China's FDI data. "Both in China and the rest of the world there has been a tendency to exaggerate China's success in attracting FDI". (SCMP, 8 Jul)


China's top 196 SOEs will stay publicly owned
China's planned restructuring of its state sector won't involve privatizing the country's 196 major state-owned enterprises. State companies will remain publicly owned, though the shareholdings will be diversified., according to Assets Supervision and Administration Commission Director Li Rongrong. The commission will seek to diversify shareholders by encouraging them to sell and transfer shares both domestically and overseas. (Dow Jones, 8 Jul)

CEPA - text available on the internet
The Trade and Industry Department of Hongkong has published an English translation of the "Mainland and Hong Kong Closer Economic Partnership Arrangement" (CEPA). With regard to the important rule of origin, Annexe 2 of the Arrangement has nothing more to offer than: "Both sides will continue consultations on the rules of origin under 'CEPA', and seek to reach a consensus as early as possible with a view to signing Annex 2 of 'CEPA' before 1 January 2004."


Sony to sue battery maker for infringement
Sony is to sue China's largest rechargeable battery maker BYD Co. for patent rights infringement and will ask a Japanese court to ban sales of some BYD batteries in Japan. (SCMP, 9 Jul)


Bad loans
U.S. investment bank Morgan Stanley and China Construction Bank finalized an agreement to set up an asset-management joint venture to handle CNY4.3 billion of the Chinese bank's nonperforming loans. The agreement was delayed for months by regulatory barriers because authorities preferred that foreign investors work through asset-management companies set up in 1999 to dispose of CNY1.4 trillion in NPLs. (FEER, 17 Jul)

State coffers to swell by 13%
A senior researcher with the Taxation Research Institute said the country's tax revenue is expected to grow 13%, in spite of SARS and the US-led war on Iraq. China's tax revenue rose a year-on-year 12.1% to CNY1.70 trillion in 2002. During the first half of this year, tax revenue rose 22.4% compared with the same period last year to CNY1.03 trillion, accounting for 54.4% of the year's revenue target. But in June, revenue growth dropped to 8.5%. (China Daily, 11 Jul)

China's money supply growth at high level
In the first half of this year, the growth of China's money supply remained at a comparatively high level. By the end of June, the outstanding broad money was CNY20.5 trillion, up 20.8% from the same period last year, whereas narrow money was CNY7.6 trillion, up 20.2%. Money in circulation was CNY1.7 trillion, up 12.3%. In the first six months of the year China's foreign exchange reserves increased USD60.1 billion to USD346.5 billion. (People's Daily, 11 Jul)

UBS makes history in China with execution of trade
Swiss financial group UBS AG became the first foreign company to execute a share trade denominated in Chinese currency, a transaction that marks the opening of China's previously off-limits A-share market. The yuan-denominated shares of Baoshan Iron & Steel Co., Shanghai Port Container Co., Sinotrans Air Transportation Development Co. and ZTE Corp. were the first to be traded under China's new QFII scheme. (Dow Jones, 10 Jul)

Munich Re receives Chinese reinsurance license
Munich Re has become the first international reinsurer to receive a country-wide composite reinsurance operating license in the People's Republic of China. With its license Munich Re will be eligible to participate in the Renminbi Yuan denominated reinsurance business which was previously reserved for local companies only. (Dow Jones, 10 Jul)

Economists urge China Central Bank not to tighten credit
Eight mainland economists used state media to urge China's central bank to refrain from tightening credit too fast. They cited a variety of factors that cast doubt on the need for tighter credit. These range from a delayed impact on businesses from SARS, to the delicate balance between inflation and deflation, to the possibility that adopting a stance that is too aggressive might be counterproductive and actually slow growth. (Dow Jones, 10 Jul)

Less credit to avoid overheating economy
Very high investment rates in property development, automobile and steal production sectors have triggered off concern at the central government in Beijing. Economists say that "bubble symptoms" are visible, according to Cong Ming, deputy head of the macro-economy research office affiliated to the State Council. (chinabiz, 9 Jul)

Foreign insurers show good form
In the first five months of the year, foreign insurance firms operating in China garnered CNY2.33 billion in premiums, up 37.5% year-on-year. So far, 36 foreign insurance firms have set up 57 operational entities in China, including 20 life insurers, 14 property insurers and 2 reinsurers. (China Daily, 8 Jul)


Boeing takes off in China
Boeing Co. pledged to expand its investment and procurement in China, hoping to cash in on the world's fastest-growing market in the next two decades. The company plans to set up a USD100 million airplane repair, modification and maintenance joint venture with local partners in Shanghai late this year. Boeing has forecast China's aviation market will increase by 7.6% annually in the next 20 years to become the second largest after the United States. (China Daily, 12 Jul)


Billions poured into Shanghai Volkswagen
Volkswagen AG and Shanghai Automotive Industry Corp will jointly pump EUR3 billion into their local joint venture - Shanghai Volkswagen - over the next five years. The massive investment plan is expected to strongly boost SVW's output capacity in order to help its parent companies better weather the growing domestic market competition. The German company said it aims to increase its annual sales in China to 1 million units by 2007. (China Daily 12 Jul)

Hyundai set to expand venture
Hyundai Motor Co plans to build its joint venture in Beijing into its biggest overseas manufacturing base. The joint venture's annual production capacity will increase to 200'000 units by 2006 and to 550'000 units by 2010. (China Daily, 8 Jul)

World's largest generator connected to power grids in China
The first power generator of China's Three Gorges Project, the largest of its kind in the world, was connected to the power grid to begin generating electricity at 01:31 a.m. on Thursday morning, 20 days ahead of schedule. (People's Daily, 10 Jul)


Wal-Mart opens first Beijing store
Wal-Mart, the world's biggest retailer, opened its first outlet in China's capital, making its inaugural foray into Beijing after setting up 22 stores elsewhere in the country. (AP, 11 Jul)

Beijing 2008

Beijing pledges best-ever games
Beijing's Olympics committee promised the best-ever games when meeting with visiting IOC Life President Antonio Samaranch. (China Daily, 9 Jul) We don't expect anything less…


Shanghai real estate investment tops CNY40 billion
Investment in real estate in Shanghai surpassed CNY40 billion in the first half of this year. By the end of June, the area of residential projects left vacant for more than one year was 1.06 million square meters, down 20.9% from the beginning of the year. (People's Daily, 11 Jul)

Global consulting giant moves China regional headquarters to Shanghai
Cap Gemini Ernst and Young has moved its China regional headquarters from Hong Kong to Shanghai. The company's client portfolio consists of roughly equal numbers of multinationals and local companies, each accounting for half of its business volume on the mainland. However, local clients are expected to expand to 60% of the total by the end of this year. (AFP, 11 Jul)

Shanghai's economy up more than 11%
Shanghai's GDP from January to June totalled CNY282.57 billion, up11.4% year-on-year. The secondary industry contributed 74.4% of the city's GDP. In the second quarter, tourism revenue plummeted by 90%. The city's foreign trade was robust in the first half of the year as exports hit USD21.77 billion, up 50% year-on-year. However, as most of the goods were made last year or earlier this year, a negative trend is likely to show in the coming months. (China Daily, 9 Jul)

Shanghai reports fast wage growth, stable prices
The average monthly salary in Shanghai rose by 10.8% to CNY1'677 during the first six months of this year. The per-capita disposable income of urban residents in the city stood at CNY7'409 during the six-month period, up 8%. The per-capita income of rural residents was CNY4'340, an increase of 7%. CPI dropped by 0.4% as the growth in food price index was offset by decreases in clothes, telecommunication products and transport fares. (People's Daily, 9 Jul)


Taiwanese movers witness expat exodus to China
International moving companies in Taiwan are witnessing an exodus of expatriates from the island to China, especially to Shanghai. (Taipei Times, 11 Jul)

Boss sacked over bad loans
Zhou Lu, general manager of Bank of China's Shanghai Branch, was dismissed from his position due to "huge amount of troublesome loans'' to a local real estate business. The BoC's Shanghai branch has the highest non-performing loan rate among commercial banks in Shanghai. But the Shanghai branch's rate remains below the bank's national level. (China Daily, 10 Jul)


Shares end down; profit-taking in most UBS picks
China shares ended lower by the end of the week, with most shares bought by the Swiss investment bank UBS AG falling. Investors took profit after the market's sharp gains Thursday, when sentiment was lifted by UBS' investment. (Dow Jones, 11 Jul)

Weekly Market update  11 July 2003  04 July 2003
Shanghai A 1601.23 1573.22
Shanghai B 113.32 112.50
Shenzhen A 437.94 430.94
Shenzhen B 227.46 219.02
Hong Kong Red Chip  1132.80 1073.67
Hong Kong H 2895.19 2683.76
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.

Reminder: The last issue of the China Business Briefing coming from this author (No 149 on 21 July) will go to the respondents of the questionnaire only, which had been sent out on 5 June 2003 and can be found on


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