EMBASSY OF SWITZERLAND


CHINA BUSINESS
BRIEFING (*)

16 June - 22 June 2003

No 145


SARS

Economic Impact: Summary of latest developments

  • Official economic figures indicate the growth rate for the first half of this year will be no less than 8%, which - if accurate - would be considerably less than Q 1 growth (9.9%), but better than feared by some.
  • In a general "after-the-crisis-mood", sectors start counting their losses. Intense media attention notwithstanding, reliable data is hardly available at this point in time.
  • Official figures for retail sales in May confirm expected slow down of growth to 4.3%, the lowest in five years.
  • Am estimated CNY20 billion will be wiped off China's total tax revenues for this year as a result of SARS. The fiscal deficit will grow accordingly.
  • Travel and tourism resume activities around the country.

Tibet to resume tourism activities from July
Tibet Autonomous Region will resume tourism activities from July 1, and begin to receive domestic and overseas tourists. Tibet tourism bureau halted tourism activities from April 25 due to SARS. (Xinhua, 22 Jun)

Sars outbreak cuts 10.5% off China phone revenues
China's telecommunications operators earned 10.5% less revenue last month as the SARS outbreak raged. The six carriers generated CNY34.69 billion in revenue last month, down from CNY38.8 billion yuan in April. (SCMP, 21 Jun)

SARS slows down China's retail sales
Retail sales in May stood at CNY346.3 billion, an increase of only 4.3% compared with May 2002, the lowest growth in five years. Previous growth rates were 7.7% in April, 9.3% in March and 9.2% for the first three months of 2003. Retail sales in urban areas grew a year-on-year 4.9% in May, down 5.9% from April, while those in rural areas rose a year-on-year 3.2%, down 3.6%. (China Daily, 17 June)

SARS to lead to tax drop of CNY20 billion
The State Taxation Administration estimates that over CNY20 billion will be wiped off China's total tax revenues for this year as a result of SARS. The latest report indicates that tax revenue saw a 25% increase during the first five months of this year compared with the same period last year, but this increase will be halted in the wake of SARS. (People's Daily, 16 June)

Economy

Taiwanese investment on mainland up 43%
Taiwanese investment on the Chinese mainland totaled USD1.734 billion during the first five months this year, up 43.69% year on year, according to figures released by Taiwan authorities. (Xinhua, 22 Jun)

China's GDP growth target still attainable
China's GDP is expected to grow by 7% this year, a target set in the first quarter of this year. Investment on the Chinese mainland grew by 31.6% during the first quarter, and 34.5% in May, with foreign trade up 30%. China used a total of USD27 billion worth of FDI in the first five months, up 48.2% year on year. Fiscal revenue during the five months jumped by 28% while the CPI went up by 0.7 %. The economic figures indicate the Chinese economy is still on the fast track, and that growth for the first half is set to be no less than 8%. (People's Daily, 19 Jun)

China to invest CNY157.8 billion in affordable housing
The Chinese government will step up construction of affordable housing for middle and low-income earners this year by investing CNY157.8 billion this year and CNY166.3 billion in 2004. The floor space of low-cost housing under construction will be 200.23 million square meters in 2003. (People's Daily, 19 Jun)

China, Thailand agree on zero tariff
China and Thailand accelerated the establishment of the Sino-ASEAN free trade zone by pushing forward the mutual exemption of tariffs on 188 imported goods. As a first step, the two countries will impose a zero tariff on imported fruit and vegetables. The tariff exemption scheme with Thailand is also open to all other ASEAN member states (China Daily, 19 June)

China's fixed asset investments rise 31.7% in Jan-May
China's fixed asset investments amounted to CNY1'057.8 billion during the January-May period, up 31.7% year-on-year. The growth rate was 1.2 percentage points faster than for the first four months. Of the total investment, CNY535.3 billion was spent on infrastructure projects, up 28.7%. Spending on renovations and upgrades rose 37% to CNY199.4 billion, while investment in real estate development rose a year-on-year 32.9% to CNY280.1 billion. (CBnet, 18 June)

EU to cancel China's trade GSP benefits
The EU will raise tariffs on Chinese commodities from the current 3.5% to 5% in October and plans to exclude Chinese commodities completely from the Generalised System of Preferences in the first half of next year. The cancellation will affect almost all Chinese exports to the EU. China had a trade surplus of USD9.7 billion with the EU last year. (PTI, 14 June)

Government

CBRC prepares inspection
The powerful China Banking Regulatory Commission is planning an inspection in the near future of the non-credit assets of the four State-owned commercial banks. The CBRC's goal is to achieve a "comprehensive understanding" of the overall levels of bad assets at the banks. (Business Weekly, 17 Jun)

China to cut throat of software piracy
China has launched a series of new campaigns against widespread software piracy to support the fledgling domestic software industry. For the first time the government has taken aim at system integrators providing unlicensed software to their users, as well as illegal online software swapping and downloading. Microsoft, the world's No 1 software maker and the biggest victim of rampant software piracy in China, welcomed the move by the Chinese Government. (Business Weekly, 17 Jun)

Legal

Foreign book firms mark new chapter
China allowed foreign investors to retail newspapers, magazines and books in the local market from May 1 this year, and will allow foreign wholesalers to enter this sectors in December 2004. China has so far not permitted foreign capital into the publishing sector. (People's Daily, 16 June)

Finance

Banking crisis imperils China
A new loan scandal shows that China's dominant state banks are getting sicker, not stronger. At the center of the controversy is a USD227 million loan, now in default, from the Hong Kong unit of the Bank of China to the Shanghai entrepreneur Zhou Zhengyi. Almost a dozen Chinese banks are believed to have extended loans amounting to several billion dollars to Zhou's companies for real estate development. A substantial portion of the money may never be recovered. (IHT, 19 Jun) The original article is longer. The writer, Gordon Chang, is the author of "The Coming Collapse of China."

China to increase tax-rebate quota
China is likely to increase its tax-rebate quota by between CNY20 billion and CNY30 billion this year to encourage exports. The country's tax-rebate quota for this year is about CNY129 billion, which would be about CYN100 billion less than the real demand if exports grow by only 10%. (China Daily, 17 June)

Business

Film sector monopoly broken up
China's booming movie industry is set for expansion when a second distribution company specializing in importing films is launched later this month. It is terrific news for large film companies overseas. Income generated from imported films accounts for more than half the country's annual revenue of CNY1 billion. (Business Weekly, 17 Jun)

China advertising market the world's third largest
China's market for advertising is estimated to have grown about 20% in 2002 to USD10 billion, which would make China the world's third-largest advertising market after the U.S. and Japan. China's ad spending in the first quarter of 2003 totaled about USD4 billion, setting a pace that points to continued double-digit growth. (WSJ, 17 June)

China's car output surges nearly 90% in May
China produced 158'600 cars in May, an increase of 89.9% over the same month last year. The car output for the period from January to May was 724'200, more than double that of the same period last year. Due to the increased production of the past few months, end of May stockpiles had risen 30% over the beginning of the year. For each of the past two months, supply exceeded demand by an average of 10'000 cars. (China Daily, 16 June)

Energy

Power pinch may stall economy
Electricity shortages are likely to continue to stall the economic development of nearly half of China's provinces in the near future. The insufficient supply of power will continue in 2004. Regional shortages since last year mainly resulted from inefficient construction of electrical generators during previous years along with a rapid increase in power demands. During 1996 and 1997, the supply of electricity had greatly exceeded demand in most parts of China, leading the government to cancel plans to construct more power plants. The demand for electricity is expected to rise by 9 to 10% this year with power shortages emerging in China's economically booming southern and eastern areas. A supply gap of 10 million kilowatts of generating capacity is expected this summer. The Chinese Government recently approved the construction of 13 large-scale power plants, with a total investment of CNY51.2 billion. (China Daily, 19 Jun)

Beijing

Beijing plans new international exhibition center
Beijing will build a new international exhibition center in Shunyi District which would replace the existing China International Exhibition Center in the city proper. The first-stage project of the new center sill cost a total of CNY2 billion. (CBnet, 19 June)

Beijing's economy slowed down by 1.8%age points
SARS may have slowed down the economy of the national capital of Beijing by 1.8% in the first five months. GDP in the city rose by 10.4% from the same time last year to CNY120.37 billion, 1.8%age points lower than that for the same period of last year. However, SARS did not fundamentally change the momentum of the economy, and commerce, retailing and transportation rebounded in May. Despite SARS, the retail trade volume grew 15.2% to CNY75.06 billion with a consumer price index of 100.9% in the five months. (Xinhua, 22 Jun)

Beijing 2008

Beijing 2008 Olympics stadium construction budget cut by USD180 million
According to the Beijing Organizing Committee for the Olympic Games the initial budget of USD2.6 billlion to construct the 35 stadiums and gymnasiums, to be used for the 2008 Olympics, have been cut back to less than CNY20 billlion (USD2.42 billion), following the cancellation of two stadiums. The cancellation of the stadiums is in line with adjustments made by the IOC on the number of sports to be included in the 2008 Games. The National Stadium will be the main stadium for the 2008 Games. The design has already been chosen, won by a Sino-Swiss joint venture, while the choice of builder/operator for the project will be announced by the end of July. All stadium projects have the same 30-year lease and operator parameters. (Interfax, 18 Jun)

Shanghai

City takes SARS-recovery measures to boost economy
The Shanghai government is taking measures to boost the city's trade and economy to counteract damage caused by the SARS epidemic, including a series of trade promotions in Japan, Saudi Arabia and Indonesia, tourism presentations in Japan and Korea, and a week-long business promotion in Romania. The more than 250 overseas offices of Shanghai-based foreign trade companies and groups will also play a part in establishing business relations, acquiring information and providing business services. The city will host about 20 multinational exhibitions from August to December. (Shanghai Daily, 19 Jun)

Shanghai sees fast economic growth despite SARS
Shanghai has maintained sustained, healthy and relatively fast economic growth in May, despite the negative impact of SARS. Shanghai recorded CNY47.56 billion in GDP in May, up 10.3% year on year, but 1.7%age points lower than April. The sectors of transportation and logistics suffered a 10% drop in added value, while hotels and restaurants in the city reported a 53% slump in added value. The overall retail volume totaled CNY17.9 billion in May, but the growth was 4.2 percentage points lower than April. But rapid industrial growth, exports and investment in fixed assets had counteracted the negative impact of SARS. The city exported USD4.095 billion worth of products, up 74.4% year on year. Actual foreign investment was USD667 million, up 60% over the same period of last year. (Xinhua, 18 Jun)

Pearl River

China unveils urbanization plan for Pearl River Delta
South China's Guangdong Province has formulated plans to build six economically powerful cities in the Pearl River Delta, expanding the urban population of the province to 70% by 2010. Each of the cities will house more than one million people. The province set an export target for the delta region of USD200 billion by 2010, which represents an annual average growth rate of 8% (Xinhua, 22 Jun)

Most industrial firms unaffected by SARS in Guangdong
A survey of 551 industrial companies in Guangdong Province indicate SARS had affected industrial production in Guangdong somewhat during April and May, but the impact was not very serious. About half of the firms who claimed they were affected said their output, sales and orders and profits dropped by less than 10%, while only 20% said their output or sales contracted by 30% or more. Nearly 40% of the firms surveyed said the outbreak of SARS had caused a negative impact on their exports. (People's Daily, 19 Jun)

Chinese mainland, HK to sign Free Trade Agreement
The Hong Kong SAR will sign an agreement on the Closer Economic Partnership Arrangement (CEPA) with the mainland on June 30. The agreement will involve trade in goods and services, and trade and investment facilitation. Service trade will involve sectors including management consultant services, exhibitions and conventions, advertising, legal services, accountancy, medical services, real estate, construction engineering. (People's Daily, 17 Jun)

Weekly Market update  20 June 2003  13 June 2003
Shanghai A 1611.31 1640.79
Shanghai B 115.39 116.80
Shenzhen A 446.19 454.61
Shenzhen B 219.97 222.84
Hong Kong Red Chip  1100.78 1077.04
Hong Kong H 2717.08 2692.81
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.
23.6.2003

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