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INVESTMENT OPPORTUNITY
Due to the enormous growth recently in
China's environmental markets, and the amplified interest
and use of U.S. environmental technologies, DC Consulting
is currently seeking partners who are interested in
investing in DC Consulting to support their current
expansion plans to tap into these dynamic markets.
DC Consulting is already strategically positioned
to take key shares of these markets.
In China over the past two years there
has been a surge in the importation and use of U.S.
environmental technologies in various sectors including;
air, water, solid/hazardous/medical wastes, recycling,
and others. This has partially been brought about
by the Chinese government's commitment to spend over
U.S. $87 billion on environmentally projects from
2001-2005. Also, and maybe more importantly, many
larger Chinese companies with the necessary capital
and resources are now establishing new environmental
companies to tap into these markets. Often they want,
or require, the use of U.S. environmental equipment
or technologies for their projects.
DC Consulting is advantageously positioned
to effectively and efficiently determine; which U.S.
environmental technologies are appropriate, who are
the end-users and key decision makers, proper marketing
techniques, and the necessary distribution and sales
channels in China. DC Consulting has this crucial
knowledge for successfully representing, selling,
marketing, licensing, manufacturing and distribution
of various U.S. environmental equipment and technologies
into the Chinese market. We also have the necessary
technical, legal, and business expertise necessary
to accomplish these tasks in a straightforward and
professional manner.
Interested parties please contact
us by e-mail for more details at; info@dckonsult.com
WTO Membership Help China¡¯s Foreign
Trade
December 21, 2002
China's foreign trade is expected
to exceed US$620 billion this year, while foreign
investment will reach US$50 billion. In the first
11 months, China saw a US$28 billion trade surplus,
far outstripping last year's US$22.5 billion figure.
China attracted US$46.8 billion of FDI last year,
a 14.6% year-on-year increase. The World Bank has
estimated that half of FDI attracted by China may
in fact originate from mainland companies. The phenomenon
is due to firms taking advantage of loopholes in tax,
foreign exchange and investment laws and recycling
funds through places like Hong Kong.
This as does other misleading figures, leads to FDI
flows which are often used as an indicator.
(Source: AGENCY FRANCE-PRESS and ASSOCIATED PRESS)
More Power Tariff Cuts
December 19, 2000
Cuts in residential electricity tariffs
in Guangdong resulted in savings of US$ 1.9 billion
for the first 11 months of the year but increased
demand, with consumption up 14% - almost doubling
the 7.2% target. Power rates had been reduced from
US$ 8 cents kWh at the end of last year to US$ 7 cents
kWh, while tariffs have been cut by US$ 1.32 cents
on average.
The cuts are part of measures implemented by the Guangdong
government over the past two years to improve the
investment environment, expand domestic demand and
reduce the financial burden of farmers. Since 1999,
power tariffs have fallen by 26.6%, bringing savings
of US$ 3.4 billion, still Guangdong's rates are still
higher than the national average, of US 5 cent/ kWh
at the end of last year. Any further cuts would take
into account the capital outlay of power firms, their
profits, the need to further develop the electricity
grid and consumers' interests. Still, there was been
no mention of the effect on foreign companies involved
in China¡¯s power industry in Guangdong.
Guangdong's high tariffs can be traced back to the
development plans between 1991 and 2000, when the
government offered high rates of return to power developers
to meet a huge demand. As China's export stronghold,
Guangdong still uses a lot of electricity. Last year,
total consumption rose 19% to 146 billion kWh, exceeding
the 140 billion kWh output.
China Justifies its Massive Foreign Exchange
Reserves
December 18, 2002
By the end of last year China had
a record US$300 billion in foreign exchange reserves.
Many Critics claim China has been miserly in order
to lend money to Americans, who pay interest of less
than 2% which is lower than that China is paying on
its foreign debt.
In 1980 there was a deficit of US$1.3 billion, 1990,
there were reserves of US$11 billion and at the end
of 2000, reserves stood at US$165.5 billion.The current
level is equal to nearly a year of exports and 15
times China's short-term debt of US$17 billion. Because
of its surplus reserves China has lost the right to
receive low-interest loans from the International
Monetary Fund. Several foreign countries, especially
Japan, are suggesting to revalue the renminbi.
About US$150 billion is in Treasury Bonds so in theory
it becomes a loan to the US. There are other Chinese
that feel that the money should be invested in providing
universal education and medical care, an improved
social welfare system and better protection for the
environment.
Japan Snubs China on WTO Commitments
December 18, 2002
After China first year as a member
of the WTO Japanese companies assert that China does
a poor job of protecting intellectual property rights
(IPR), its laws and policies are not transparent and
serious contradictions persist between central and
local government. This view has also been shared by
others countries.
The most serious problem is with counterfeiting and
piracy which constitute major obstacles to the development
of doing business in China. A large number of patent
applications were denied in China, even though they
were granted in Japan, the United States and Europe.
Stronger criminal and administrative sanctions on
IPR, strict enforcement of court decisions, strengthening
of customs controls and elimination of local protectionism,
especially prevalent in Fujian, Guangdong and Jiangsu
are needed.
China fulfilled its pledge to cut tariffs on January
1 this year, but to offset tariff reductions, it had
imposed specific taxes on certain types of photosensitive
materials, such as photographic film, which led to
very high tariffs on these goods. It called for more
transparency and fairness in the implementation of
import quotas for cars and motorcycles.
Even with China wanting and welcoming of foreign capital,
there is no standard time for the review of projects
and approval of projects.
There is a high incidence of discretionary provisions
concerning approval procedures and a lack of transparency
on the conditions for obtaining it. Unpublished internal
regulations continue to form the basis for substantive
review and a high degree of discretionary powers is
still exercised by governmental authorities. There
are ongoing contradictions between central and local
government policies.
China Has a Record Trading
Year
December 12, 2002
Chinese authorities were upbeat on the
first anniversary of their membership into the WTO
despite complaints by foreign partners that they have
been slower than promised in opening its markets.
Economic planners expected total foreign trade to
hit US$600 billion for the year, with foreign investment
hitting a record US$50 billion.
The impact of WTO membership on Chinese industry,
jobs and agriculture had yet to be felt but will be
noticeable in the future according some Chinese officials.
Many believe that China's service, tourism and information
technology sectors would reach new levels with the
continuing influx of foreign capital.
Workers from the state sector have complained that
foreign competition has cost millions of jobs and
many of those laid-off can now only make a basic living
with help from the government. This problem was present
even before China¡¯s entry into WTO. The world is watching
to see if Beijing will keep its promise to cap spending
on subsidies at 8.5% of the value of domestic farm
production.
Workers Protest Blocking Railway
December 12, 2002
More than 2,000 workers in the northeast
blocked a railway, linking the city of Jiamusi with
Beijing, during a day-long anti-corruption protest
that led to clashes riot police and the paramilitary
People's Armed Police ending up in several arrests.
The protesters, employees at a
textile factory, waved banners with slogans such as,
''We want to live, we want to work, we want to eat''.
The workers were protesting because government funds
earmarked for worker benefits had allegedly been embezzled
by the company's management,. They clashed with hundreds
of, and more than 10 were arrested, the group said.
The workers remained determined to continue their
appeals to the government to help them with their
difficulties.
(Source: AGENCY FRANCE-PRESS)
Patents Filed by Foreign Firms
Seen as a Threat
December 12, 2002
Applications by foreign companies
to register patents in China have increased greatly
in the past year. China officials are some what worried
by the increase since it has been the foreign companies
that have applied for the largest number of patents
since WTO entry and are fearful that they are marking
out their territory which others may not enter and
from which they will attack the market. China will
be faced the challenge of higher costs of buying foreign
patents and of how to protect their own IPR. The patents
brought new technologies; they presented obstacles
to Chinese companies trying to develop technology
especially in the pharmaceuticals, software, petrochemicals
and domestic appliances areas.
The enforcement of IPR protection has still remained
weak and ineffective in most parts of China. Compensation
is invariably low, and often does not even cover the
legal costs especially those awards to foreign litigants.
Also the burden of proof for the plaintiff is high.
The court system has a shortage of adequately trained
or unbiased judges, lack of the resources and impartiality
of the police, prosecutors and relevant administrative
agencies are insufficient. Basically local protectionism
and corruption continues to favor IPR violators.
It is ironic, as it often is in China, that China
wants foreign investment and high technology from
advanced countries but now the want to assert that
too many patents awarded to foreign firms is a potential
threat to domestic companies. They don¡¯t only want
their cake and eat too, but they want someone else
to bake it and pay for it.
According to official figures, in the first 10 months
of this year China attracted US$44.72 billion in foreign
investment, a year-on-year increase of 20.05 per cent,
and is likely to attract more than US$50 billion for
the full year.
Foreign Telecom Firms Cautious
about China Despite WTO
December 10, 2002
Still after one year of China opening up one of the
world's most enticing markets, no one has followed
the lead of the country's first telecommunications
service joint venture between AT&T and Shanghai
Symphony. Hopefully the venture goes smoother than
the contract negotiations which took seven years.
Under WTO China agreed to allow foreign operators
to take a 25% stake in mobile telecom firms but the
takers are slim. Many foreign firms have found that
the current guidelines don't allow for profit making
business. The AT&T venture was negotiated on more
favorable terms, before China entered WTO. Still,
AT&T is restricted to operating only in Pudong.
Many experts expected a charge of foreign companies
into China¡¯s telecom market, but they seemed to have
forgotten, about transparency, arbitrary government
intervention, and a proper legal system.
One good example is during China Telecom¡¯s initial
public offering (IPO) campaign, when it got the Ministry
of Information Industry agreed to a massive increase
on interconnection charges to connect overseas calls
hoping to increase the IPO. Just the opposite happened,
making many businesses mad and ultimately to scale
back the offering at the last minute. This interference
or local protectionism often happens one only needs
to think about the foreign express carrier issue last
year.
Often foreign firms try to get around the laws that
may ban or severely restrict them in a certain sector.
Often local and provincial government agencies give
approvals for projects that they don¡¯t have the authority
to. Later after the business is up an running the
central government or provincial governments often
declare the business entity illegal which the foreign
company losing most if not all of its investment.
Carrefour¡¯s expansions are a good example of this.
(Source: Reuters)
US Gives Mixed Report on China¡¯s
WTO Progress
December 7, 2002
China's efforts to open its markets to
foreign goods since joining the WTO last year have
had been mixed under an annual assessment the US is
required by law to issue. The US has criticized China
for delays in opening its markets in agriculture and
other sectors, while praising its overall effort to
issue the necessary regulations to meet its first-year
commitments.
The US Chamber of Commerce own 2002 report found problems
with China's compliance in the six areas it examined:
agriculture, distribution, information technology,
intellectual property rights, services and transportation
and asserts that China must do a much better job in
2003 of meeting its WTO obligations. Although China
has adopted laws and regulations to implement its
commitments there had been signs of discrimination
against foreign goods and services.
The government had to work hard to protect a US$1
billion export market for US soya beans after China
issued a set of interim regulations regarding the
use of biotechnology since about 70% of US soya beans
are genetically modified.
China was also late establishing tariff-rate quotas
for imports of wheat, cotton and other commodities.
Contrary to what had been widely predicted, China's
imports of many farm goods fell this year.
In the first 10 months, imports of grain were 2.39
million tons, down from 2.52 million in the same period
of 2001, imports of soyabean fell from 12.06 million
tons to 8.71 million, and those of wool fell from
193,000 tons to 145,000. But imports of cotton rose
from 50,000 tons to 120,000.
(Source: REUTERS in Washington)
China Market Entry Needs Thought and
Planning
December 2, 2002
China has been the death or many a corporate
dreams. The car market maybe next. For years, foreign
companies have anticipated and waited for when tens
of millions of middle-class Chinese would become car
owners. By 1994, foreign carmakers had laid plans
for 13 joint ventures with a combined capacity of
more than 2.7 million vehicles a year even thought
the most optimistic estimate was for about 1.3 million
units by 2000.
By the end of the decade, only seven
of the joint ventures were in business and they produced
totally, just 540,000 vehicles. The only foreign manufacturer
to ¡°make¡± any money was Volkswagen. It appears to
be happening again since car sales were up more than
55% on last year with sales for the year reaching
1.02 million. Foreign carmakers are rushing in, promising
far more capacity than the market can absorb which
will only lead a price war that will destroy car manufactures
profits, if any at all.
China finally does have a genuine car market. The
growth in 2002 was some what artificial as many individuals
had waited to buy since tariffs and taxes where reduced
under China¡¯s WTO admittance terms. With China¡¯s increased
urban wealth, car loans, and lower prices should help
to maintain a 10-15% annual growth in car sales equating
to three million cars a year by 2010. Still, foreign
carmakers are optimistic and together plan to build
well over four million cars a year by then. Simple
economic laws apply, supply and demand means overcapacity
and more price wars. Even this year's growth was triggered
by 20% price cuts at the low end of the market.
Honda business approach seems right when in 1998 it
took over the failed Guangzhou Peugeot plant for a
low price and has made large profits selling luxury
sedans were demand exceeds supply. This year, while
competitors were busy signing ill-fated 50-50 joint-venture
deals targeting the domestic market, Guangzhou Honda
broke new ground by getting approval for an export-only
car factory in which it will have a controlling 65%
stake.
China First Anti-dumping Case
November 27, 2002
After years of anti-dumping actions against its products,
China is initiating its first such case since joining
the WTO, against US, Japanese and South Korean paper
exporters. Beijing is demanding that domestic companies
importing paper used in copperplate printing from
the three countries must pay deposits to Customs to
ensure that the shipments are not sold too cheaply.
More than 16 companies from the three exporting countries
could be affected as the mainland importers of their
products will have to pay the deposit based on the
value of the paper they receive. The Ministry of Foreign
Trade and Economic Co-operation said there was evidence
that the domestic industry had been hurt by cheap
paper imports. The four domestic companies which initiated
the anti-dumping case had reportedly lost more than
US $25 million.
China¡¯s Bank Ratings Mixed
November 23, 2002
Moody's Investors Service upgraded
the ratings of China¡¯s government and the country's
big banks. The up-grade seemed unusual as action was
the opposite of Standard & Poor's as well as an
Organization for Economic Co-operation and Development
(OECD) report. Both warned that slow reforms may stop
China's economic growth. S&P left its outlook
rating for the mainland banking sector at stable.
Moody based their decision on rapid growth in foreign
exchange reserves, positive prospects for exports
and hence the current account, and a WTO-led boost
to investment. Moody's changed its rating on the A3-rated
long-term foreign currency bonds of the government
from stable to positive. The A3 rating is six levels
below top-rated AAA. Now China now shares the rankings
of Hong Kong and South Korea.
S&P has expressed doubts about the ability of
China's banks to increase financial health on a strongly
performing economy at the same time since the banks
would need US$518 billion of capital injection to
bring bad loans down to acceptable levels.
China¡¯s Continues Currency Controls
November 21, 2002
China is not ready to relax its
rigid foreign exchange regime, despite a landmark
stock market reform next month that allows qualified
foreign institutional investors (QFII) to buy yuan-denominated
A shares.
But restrictions slapped on foreign investors - such
as a minimum one to three-year investment period -
showed China's wariness in allowing the yuan to be
freely convertible on the capital account. The launch
of QFII is faster than expected, but the high requirements
show the government still holds a careful attitude
towards opening the capital market. The QFII scheme
has specific requirements on how long capital has
to stay in China and how funds can flow out of the
country.
"The central bank keeps the yuan in a thin range
of 8.27 to 8.28 to the dollar. China likes exchange
rate stability and says it is a pillar of macro-economic
policy. The launch of the QFII scheme would not greatly
influence the exchange rate, analysts said.
(Source: REUTERS)
China Considers New Team of Anti-graft
Inspectors
November 20, 2002
China is considering the establishment
of a nationwide network of anti-corruption investigators
that are only accountable to Beijing and not to local
or provincial bodies.
The committee for discipline inspection (CDI) is subject
to the authority of the local governments. Under the
current system, local governments are able to quash
investigations of favored officials and business people
and prevent their wrongdoings becoming known to Beijing.
Beijing to Build Domestic Chain Store
Image
November 18, 2002
The State Economic and Trade Commission
(SETC) has a blueprint to change China's image as
a chain store owner planning for the emergence of
five to 10 large domestic chain stores that can compete
internationally by 2005. It also sets a target to
expand chain store contribution to mainland retail
sales and catering turnover more than fourfold to
20 per cent in 2005.
Overall the plan will focus on the stimulating the
development of chain store operations in underdeveloped
areas, expanding the business scopes of chain businesses,
accelerating the restructuring of chain stores, cultivating
a crop of large chain stores, building brand names
and increasing the utilization of foreign capital.
The plan also refers to foreign competitors, for "planned
control of the blind development of hypermarkets and
warehouse stores. It asked cities to adopt clear rules
in urban planning on the location, size and number
of such outlets allowed. Basically another move by
the Chinese government to hinder foreign chain stores
expansions and more protectionism measures for domestic
chain stores.
Chain stores are a relatively new development spurred
by the arrival of foreign giants, such as fast-food
chain McDonald's and the French Carrefour. The SETC
plan envisions 100,000 chain store outlets by 2005,
with a combined turnover of US$ 82 billion. Chain
store operations will be encouraged in running petrol
stations, distributing tobacco, books and medicine,
as well as in the telecommunications sector. Industrial
firms will be encouraged to use or consolidate their
sales channels and outlets, or team up with distribution
firms for chain businesses.
Unlike its eagerness to attract foreign capital to
industrial production, Beijing still heavily restricts
foreign investment in commercial firms. Foreign stakes
in retail chain joint ventures are capped at 65 per
cent. A few foreign chains have prospered in China
since a 1992 rule paved the way for a pilot program
of Sino-foreign retail joint ventures to be set up
in 11 mainland cities and provinces. Of the 356 foreign-invested
retail businesses in China by mid-year, only 40 were
sanctioned by Beijing.
Carrefour had been illegally signing contracts with
local governments to set up joint ventures since entering
the mainland in 1995, bypassing the SETC. Earlier
this year, it was forced to reorganize the shareholding
structure of its 28 stores on the mainland to reduce
its holdings in them to below 65 per cent.
Ningbo's Port to Open Up
November 15, 2002
The Daxie harbor area of Ningbo, an open
coastal city in the eastern province of Zhejiang,
has permission from the State Council to open up to
the outside world. Situated in the eastern port of
Ningbo, across the sea from Shanghai, the Daxie harbor
has a 10.7km deep-water coastline that is silt free
and surrounded by sheltered water.
The harbor has room for another 30 berths, of which
some could accommodate vessels of 300,000 deadweight
tons (dwt). There are six oil and liquefied gas wharves
in the eastern part of Daxie harbor, and four container
and bulk cargo wharves in the western part.
Work is scheduled to start soon on another four wharves
to accommodate ships of 250,000 dwt, 50,000 dwt and
20,000 dwt. When completed, the harbor's annual handling
capacity will top 40 million tons. To prepare for
the opening, Daxie Island, a nearby state-level industrial
development zone, has launched a special customs office
directly under Ningbo customs.
China Starts JV to Produce Jets
November 4, 2002
A joint venture between China Aviation
Industry Corp II (AVIC II) and Embraer of Brazil to
produce regional jets for the mainland and overseas
markets will start operations by the end of the year.
The venture is expected to begin delivering 30 to
50-seat turbofan jets by late next year with an annual
capacity of 24 aircraft.
The co-operative agreement will should upgrade the
manufacturing capability of China's national aviation
industry to meet the urgent demands of air transport".
It is estimated that China would need up to 140 regional
aircraft by 2005, and 110 of these would be 30 to
60-seaters. AVIC II and Embraer hope to meet domestic
demand as soon as possible and then start exporting
jets. Production will be based on domestic manufacturing
of components and final assembly at the joint venture
factory based in Harbin.
China is keen to make its own aircraft to meet air-travel
demand within the country, which has soared despite
the global industry slump following September 11 last
year.
In September, mainland media reported Beijing had
approved a rival project by AVIC I, another major
Chinese aircraft maker, to make a jet with room for
up to 79 passengers. Although production of the ARJ21
appears not to involve foreign participants directly,
AVIC I officials have said engines, avionics and other
equipment will be procured globally.
(Source: AGENCE FRANCE-PRESS)
Shell and China CNOOC Enter US$4 billion
Deal
November 1, 2002
After 10 years of talks between Shell
and CNOO (China National Offshore Oil Corporation),
a deal to build a US$4.3 billion chemicals plant and
plans to award US$1 billion in construction contracts
have been finalized.
The plant is due to start production in the third
quarter 2005 and to supply 800,000 tons of ethylene
and 430,000 tons of propylene per year with annual
expected sales of US$1.7 billion. Also major contracts
for plants, automation and project management would
be worth more than US$1 billion and would be awarded
before the end of the year.
REUTERS in Singapore
100,000 Die in Work Accidents
October 30, 2002
In China,
almost 100,000 people were killed in work-related accidents
during the first nine months of this year, about five
per cent more than in the same period of 2001. Part
of the reason for the high figure - which many consider
an underestimate - is that it includes people who die
in work-related road accidents.
Work safety officials said the number of especially
serious accidents was falling, indicating safety campaigns
were having an impact, but acknowledged the situation
was still "severe" especially in the areas
of mines and road safety." 4,498 miners died in
the first nine months of the year.
According to foreign experts and other official statistics,
about 10,000 miners - the great majority coal miners
- die in China each year.
A new national law on work safety will go into effect
on Friday, aimed at holding businesses and government
departments more accountable for preventing accidents.
Companies need to set up offices to improve work safety
and assign employees to be in charge of preventing accidents,
and could be shut down if proper safety measures are
not taken, officials warned.
(Source: AGENCE FRANCE-PRESS)
Couriers Ask China Post to Withdraw
Rules
October 30, 2002
International express operators have appealed to China Post to
withdraw new regulations the couriers say will damage
the development of an efficient logistics industry.
China Post wants entrustment basically
making it the regulator of companies. This contradicts
the "economic liberalization and fair competition"
enshrined in World Trade Organization principles.
Failure to file, China Post insists, will result in
the foreign express operators being banned. Deadlines
have come and gone in the long-running dispute which
first emerged in December, but China Post last month
reminded all operators they must file this time.
In February, China Post informed foreign express operators
they would be restricted from carrying packages over
500 grams unless they charged more than China Post.
But the restriction was not mentioned in the last
directive and deadline issued on September 5.
Still the new directive is rather vague. Many couriers
don¡¯t know what they are being asked to sign. It had
twice in the past three months asked China Post for
clarification on the issue but had received no response,
the spokesman said.
At stake is a piece of China's burgeoning international
express parcel and document industry, which Capec
estimates has grown at 25 to 35 per cent per annum
in the past five years.
While market data is sketchy, China Post subsidiary
Express Mail Service (EMS) registered sales of 1.04
billion yuan (about HK$974.8 million) in 2000, a sum
thought to represent roughly 40 per cent of the market.
The entrustment process is seen by outsiders as China
Post's bid to hive off the lucrative international
express market for EMS, one of its few profit centres.
According to the China International Freight Forwarding
Association, EMS has been losing 4 per cent of the
market a year to foreign companies since 1995.
It now controls just 33 per cent of the
market compared with 97 per cent a few years ago.
China Post, which will see government
subsidies removed within a year, is also under pressure
to correct its loss-making ways before hiving off
its six most profitable regions for a Hong Kong listing.
Capec, whose members traditionally have
been regulated by the Ministry of Foreign Trade and
Economic Co-operation (Moftec), favours a return to
that system.
"We have been regulated by
Moftec for a long time, they do a good job and we
are comfortable with them," said the spokesman.
"Why change now?"
.CN Opens Up
October 30, 2002
China's Internet development is
expected to receive a boost in December when the .CN
domain name will be made available to businesses outside
China under a new liberalized policy. A deal between
the US registry NeuStar and the China Internet Network
Information Center (CNNIC) will allow businesses outside
China to acquire URLs (universal resource locators)
with the .CN extension, which is the geographical
top-level domain name for China.
Previously, CNNIC allowed only companies with either
Chinese ownership or physical business addresses in
China to use the .CN domain name. Until recently,
personal domain names were not allowed in China.
Neustar and CNNIC plan to accept .CN domain name registrations
through accredited registrars outside China beginning
in December.
China tops WTO Complaints List
October 25, 2002
China was the most frequent target of
anti-dumping investigations in the first half of the
year, according to the World Trade Organization with
16 investigations into its exports.
The United States and India were the two importers
that initiated most investigations on Chinese exports,
four from the former and three from the latter in
the first half.
Exports from China were also the subject of the largest
number of final anti-dumping measures imposed during
the first half of this year. The number surged to
19, a significant increase from the nine measures
imposed against Chinese exports during the same period
last year.
Taiwan, which joined the trade body after China's
entry, was a distant second, with nine anti-dumping
measures imposed on its exports in the first half.
China to Overtake US in FDI
October 25, 2002
China is poised to overtake the United
States as the largest recipient of foreign direct
investment (FDI) in the world this year, according
to the United Nations. FDI in China is expected to
reach a record US$50 billion this year, up from US$46.8
billion last year, while inflows to the US are expected
to slump by two-thirds to US$44 billion.
Industrial restructuring and economic liberalization,
further accelerated by China's World Trade Organization
are helping FDI growth in the mainland's medium and
hi-tech manufacturing and services industries.
Tsingtao to use Anheuser
To Expand in US
October 24, 2002
Tsingtao Brewery, which purchased
45 smaller Chinese rivals in the past three years,
may use some of a planned US$182 million investment
by Anheuser-Busch to buy breweries in the United States.
Tsingtao, China's largest brewer, will build plants,
create new advertisements and buy rivals at home and
abroad with the money.
Missouri-based Anheuser-Busch will help Tsingtao find
smaller breweries in the US to acquire. US companies
can expect more competition in the US markets for
Chinese goods once the Chinese companies are armed
with the technology and management skills. Most of
technology has been provided by foreign companies
either through legal methods or IP thefts.
Beijing
Seeks No 2 Trade Position
October 24, 2002
China will become the world's second-largest
trading power within the next few years if it keeps
up its rapid growth.
In 1989 China was No 15 in world trade, but by last
year had become the sixth-largest importer and exporter.
China already ranks as the No 1 exporter of many labor-intensive
products such as garments, shoes, clocks and bicycles.
The mainland economy grew 7.9 per cent in the first
nine months of this year.
(Source: AGENCE FRANCE-PRESS)
China Leads Multinationals
to Traps
October 24, 2002
More than half the multinationals in
China's consumer products and retail sectors are suffering
persistent and significant losses. Despite its vast
market and strong headline economic growth, multinationals
have found it difficult to make money in China. Few
of these companies are willing to admit publicly they
are not making a profit after many years of investing
in China. I recently spoke to major US engineering
firm who had spoke to one of their competitors CEO.
The competitor claimed their business in China was
outstanding. I know the company has been having financial
difficulties in China for some time. As the saying
goes ¡°misery loves company¡±.
The China value trap is real. Once companies invest
substantial capital here, often they are trapped and
still disillusioned by the market potential. Often
they dump more money and other resources into the
China operations. Many companies are caught in it
today and have seen significant shareholder value
destroyed.
Many continued losses of multinationals were triggered
by initial success in large cities which led them
to expand into new locations and categories. However,
they typically ran into a wall of new problems, including
fragmented markets; low prices in areas beyond the
large urban centers; different competitors in different
regions, each employing different market approaches;
immature distribution infrastructures and players;
and extraordinary strains on organizational capabilities
and infrastructure.
In the beer industry, for example, international brewers
had experienced annual losses that ran into tens of
millions of US dollars, on top of hundreds of millions
in failed investments that had been written off.
Guangdong Court Chief Faces Graft
Charges
October 24, 2002
The former head of Guangdong's highest
court is to be handed over to state prosecutors to
face corruption charges of accepting bribes totaling
US$1.5 million.
He is also accused of using his influence to help
his son secure bank loans to support his business.
Mai served in Guangdong's highest court for more than
nine years, from January 1989 to February 1998, making
him one of the highest-ranking judicial officers to
be arrested for corruption on the mainland. In addition
to his position in the court, Mai also served as vice-party
secretary of the Guangdong Party Committee's Judicial
Committee.
In the run-up the 16th Communist Party Congress, the
government wants to appease popular anger about corruption,
which remains widespread on the mainland.
Allegations of corruption have recently been leveled
against many high-profile officials, including the
missing Gao Yan, director of China's giant State Power
Corporation.
China Closes 90,000 Internet Bars
October 17, 2002
China has closed nearly half of the Internet
cafes around the country in the past five months,
Since a fire at an Internet cafe in Beijing killed
24 young people in June, as it toughens regulations
on the operation of the popular businesses.
There are more than 200,000 Internet bars in China,
of which only 46,000 are legally registered, according
to the Ministry of Culture. The closures, as well
as new regulations tightening rules on cafes' operations,
are meant to ensure (disguised as to) public safety,
but authorities have also used the clampdown to curtail
access to information on the Web.
Last week, China passed a set of new laws regarding
cyberspace, further restricting freedom of access
to the Internet and the operation of Internet cafes
by requiring online cafe owners to put in place mechanisms
that prevent users from creating, downloading, copying,
browsing, sending or spreading content considered
"anti-constitutional" and which may harm
national unity, sovereignty and territorial integrity,
the regulations state.
The government hopes the massive interest in the Internet
will help spread technological know-how and boost
economic growth in the longer run, but is wary of
the Internet's capability of spreading news and opinions
in a society where the Communist Party has traditionally
controlled all information.
The cafes are not permitted software that blocks monitoring
and computers must keep a record of all content for
more than 60 days and filter "unhealthy"
content. For every 50 computers, the cafes must reserve
one for a security officer with a license issued by
the Public Security Bureau.
China's Exports and
Production Still Up
October 16, 2002
China's economy is still moving forward.
Exports rose 33.1 per cent last month compared with
a year earlier, according to the Ministry of Foreign
Trade and Economic Co-operation, while industrial
production rose 13.8 per cent.
The value of goods and commodities
made in China and sold abroad reached US$31.9 billion
last month, while imports rose 36.4 per cent to US$29.8
billion. Mainland exports have risen 19.4 per cent
this year, sharply above official estimates of a seven
per cent increase.
Foreign Investment Increases in
Shanghai
October 8, 2002
Shanghai's contracted foreign investment
hit a record high for the first nine months of this
year, surpassing last year's total. Contracted foreign
investment - an indicator of the future trends - surged
37.6 per cent year on year in the first nine months
to US$8.03 billion, Shanghai media reported. Contracted
foreign investment was US$7.37 billion last year.
The local government approved 2,245 new projects with
foreign investment during the first nine months of
this year, up 21.7 per cent, the reports said.
Investment in property was among the most popular
sectors, rising nearly twofold to US$1.1 billion -
about 14 per cent of total contracted foreign investment.
Overseas Chinese investors have bought into the Shanghai
property in hopes of speculative gains from the booming
mainland economy.
BASF Get Green Light for New JV
in Shanghai
September 28, 2002
China has approved a US$1.12 billion joint venture
led by Shanghai Chlor Alkali Chemical and Germany's
BASF to build a chemical plant near Shanghai. Chinas
domestic chemical demands continue to increase due
to stellar economic growth and its position as a
low-cost production base.
The plant will produce 160,000 tons of crude methylene
diisocyanate (MDI) and 130,000 tons of toluene diisocyanate
(TDI) a year. TDI and MDI are the major components
of polyurethane, which is used in the vehicle and
construction industries and in products such as
refrigerators, upholstery and mattresses.
Chinese partners would provide 30 per cent of the
investment and BASF and Huntsman the rest. The companies
are expecting to complete the project in 2005.
(Source: REUTERS)
Foreign Express Companies Refuse
to Comply
September 27, 2002
International mail express companies,
led by United Parcel Service (UPS), have rejected
a registration deadline to carry parcels on the
mainland. The move defies mainland authorities,
who this month gave foreign operators 60 days to
register for "entrustment" with the State
Post Bureau, the express companies' competitor.
Failure to register by November 5, 2002 will result
in a ban of the foreign express carriers' operations.
The bureau later restricted them to carrying parcels
over 500 grams - or to charging more for delivering
shipments under that weight - in a bid to carve
out a valuable sector of the market for China Post's
Express Mail Service (EMS). The notice also restricted
the couriers from carrying "private letters
and official documents" of the party, government
and military "above county level".
Last December, the State Post Bureau required all
forwarders and couriers to be certified to operate
in the US$2 billion mainland express industry. The
move by China seriously questions it's commitment
to the WTO. It appears to a another form or market
protectionism as China's EMS has seen its express
market share in China drop to about 30 per cent
from a monopoly five years ago.
China the World's Best Investment Area
September 24, 2002
China is the world's most attractive
place for foreign direct investment (FDI), topping
the United States for the first time, according
to AT Kearney's annual FDI confidence survey. The
study, dated this month, said nearly one in three
corporate executives cited China as their preferred
first-time destination for investment, more often
than any other market.
China's WTO entry, its successful bid for the 2008
Olympics, steady economic growth and stable politics
outweighed negative factors such as huge non-performing
loans at state banks and a murky regulatory environment.
China attracted US$29.54 billion in foreign direct
investment during the first seven months of 2002,
a 22 per cent year on year. The United States, Britain,
Germany and France rounded out the top five, with
Brazil falling to 13th place this year from third
last year.
(Source: REUTERS)
China's Anti-Piracy Efforts Still
Lacking
September 20, 2002
United States entertainment companies,
software developers, book publishers and drug manufacturers
have told the Bush administration that China's poor
enforcement of laws against copying their products
is costing them billions of dollars a year.
The International Intellectual Property Alliance
asserts that Chinese penalties were too weak to
discourage widespread piracy of music CDs, movie
DVDs and other copyrighted goods. Piracy levels
in most of the copyright sectors in China were about
90 per cent, costing foreign firms US$1.9 billion
in losses annually, he said.
The Assistant US Trade Representative for North
Asian affairs, stated that China had made progress
in a number of areas, such as reducing tariffs on
industrial and agricultural goods and increasing
opportunities for foreign firms to compete in its
services sector.
While China has adopted many laws and regulations
to implement its commitments, there are been signs
of continuing discrimination against foreign goods
and services, such as the express mail issue that
has been going on for almost one year.
The Pharmaceutical Research and Manufacturers Association,
said the industry conservatively estimated counterfeit
drugs cost US firms about 10 per cent to 15 per
cent of annual revenue in China.
(Source: REUTERS)
WTO praises China, Taiwan
September 19, 2002
World Trade Organization members
have praised China and Taiwan's efforts to bring
commercial laws into line with norms of the global
body, but said more should be done to fight counterfeiting
and piracy.
In their first report on Beijing and Taipei's progress
since joining last December and January, respectively,
their partners said both had made progress in complying
with the WTO's trade-related intellectual property
agreement on protecting intellectual property and
patent rights.
(Source: AGENCE FRANCE-PRESSE and REUTERS )
China's Foreign Reserves Exceed US$87b
September 14, 2002
China's personal foreign exchange savings
exceeded hit US$87.47 billion at the end of last
month. The central bank stated that savings were
up 11.3 per cent year on year at the end of the
month, weaker than the 12.3 per cent rise at the
end of July. Overall foreign exchange deposits,
including those by firms, were US$145.54 billion,
up 3.7 per cent.
(Source: REUTERS)
China Rebuked for Failing WTO
Promises
September 13, 2002
The United States Chamber of Commerce
has criticized China for failing to live up to its
pledges to the World Trade Organization. The most
detailed criticism was in the agricultural sector,
where it said the mainland had used delaying tactics
and other means to avoid opening its market to more
foreign wheat, corn, cotton and soya bean oil.
The report, also faulted China for
the continued use of agricultural export subsidies,
which it promised to ban, and for jeopardizing more
than US$1 billion in US soya bean exports through
its clumsy implementation of a new law requiring
safety certificates for imports of genetically modified
crops.
The report also said violations of copyright and
trademark protections for intellectual property
products ranging from software to pharmaceuticals
remained "rampant" in China due mainly
to poor enforcement of existing laws.
In the services sector, it cited problems with China's
implementation of promises to open its insurance
and commercial banking sectors to more foreign participation.
The report praised Beijing for moving with "speed
and seriousness" to develop regulations to
put many of its WTO commitments into effect. But
in many cases, the process had moved so swiftly
that companies had not had adequate time to express
their concerns.
To eliminate bureaucratic in fighting, the report
also called for a central government authority to
oversee the implementation of all of China's WTO
commitments. That responsibility at present rests
mainly with the Ministry of Foreign Trade and Economic
Co-operation, but other ministries have some jurisdiction.
(Source: REUTERS)
China Wont Float Yuan
September 11, 2002
Beijing has ruled out freely floating
the yuan following a meeting in Washington with
United States policymakers. China's policy is to
maintain a managed, market-oriented currency based
on supply and demand. China has had a managed exchange-rate
regime since 1994.
The yuan is virtually pegged to the US dollar and
foreign exchange is tightly controlled. China received
praise for its refusal to devalue its currency during
the Asian financial crisis.
(Source: AGENCE FRANCE-PRESS)
China Urged to End Protectionism
September 5, 2002
According the WTO chief China
has made progress after being a member of the WTO
for almost one year. Still China must discard protectionist
measures and be more transparent.
In anticipation of more competition from foreign
entities, China is has been coming up with certain
regulations that are not in accordance with their
commitments to the WTO,'' Mr Supachai said.
For instance, new rules were imposed on imports
of certain food products, with Chinese authorities
reportedly scrutinising imports of genetically modified
food. Foreign banks were also facing tight regulations
in setting up branches.
Such laws must be ''harmonised'' in accordance with
China's WTO commitments, he said, as failure to
do so could lead to disputes with its trading partners
in the global body.
Mr Supachai, who took over as WTO director-general
on Monday, said China must also be more transparent
in providing reliable statistics as present methods
of collating data lagged behind international standards.
(Source: AGENCE FRANCE-PRESS)
China: A Good Deal?
September 5, 2002
Multinational corporations' torrid
but often painful love affair with China has blossomed.
Analysts say fierce domestic rivalry, alien markets
and copy-cats mean it could be some time before
they reap substantial profits in a country of 1.3
billion people.
Beyond targeting wealthy Beijing, Shanghai and Guangzhou,
few firms have a concrete strategy to tackle China,
one of the largest markets for computers, mobile
phones and electronic devices. And fewer are making
money, analysts said.
Many are not making any progress in China. Still
many companies are in China for the long haul. Firms
need to sacrifice immediate profits and even market
share to ensure long-term earnings, analysts said.
Chinese firms can now make the same products, or
better ones, at lower prices and if not now surely
later.
Legend chief executive Yang Yuanqing summed it up
best in a ringing challenge to his foreign rivals.
"We're not afraid of competition, not even
with foreign brands. I don't see that they have
increased their market share at all in the past
few years," he said earlier this year.
Industry experts said Chinese firms had better contacts
and wider distribution, and often won lucrative
government contracts. Just look what has happened
in refrigerators and washing machines.
Few foreign firms reveal earnings for their China
operations. Domestic firms, armed with technology
acquired from foreign counterparts, are expected
to prevail in virtually every area of consumer electronics
and other areas in the near future. The first handsets
from the likes of TCL International Holdings and
Haier Group appeared in 1999. Domestic brands now
own a 17.7 per cent market share, an alarming figure
to Nokia and other foreign mobile phone makers.
Corruption Study
August 29, 2002
Over two-thirds of the world's countries are rife
with corruption.
The survey revealed high levels of bribery by firms
from Russia, China, Taiwan and South Korea, closely
followed by Hong Kong, Italy, Malaysia, Japan, the
United States and France.
Singapore did well,
in fifth place with 9.3, and Hong Kong in 14th with
8.2. In contrast, China was way back in joint 59th
place with 3.5.
Foreign Invested Enterprises in
Shanghai
August 28, 2002
During the first six months of this
year, 1,978 foreign-invested enterprises were set
up in Shanghai, a 52.74 per cent increase from last
year. Foreign investors setting up wholly owned
foreign enterprises had become a trend. According
to the latest statistics, 81.5 per cent of newly
set-up foreign-invested enterprises this year were
wholly owned foreign companies.
Personalized License Plates Suspended
August 27, 2002
A recent experiment with personalized
car license plates shows that many Chinese are reserved,
shy and subtle in expressing their feelings as many
foriegns are lead to believe.
SEX001, MAN001, IAM007, GOD001, WIN001,
WIN100 and VIP001 are among the bold personal statements
owners have chosen to put on their vehicles. Some
plates also carried names of official businesses
or agencies, such as CIA and FBI, and even offensive
words such as TMD001 - the acronym of China's national
curse.
Earlier this month, people in Shenzhen,
Beijing, Tianjin and Hangzhou were allowed to choose
their car number plates. They were able to take
any six letter-number sequence that someone in the
same city had not claimed and pay only the usual
US$12 license fee.
But the new-found freedom of expression
was short-lived. After 10 days the program was introduced
the Public Security Bureau suspended the practice,
citing technical problems. Controversial words on
the plates may have led to the cancellation, based
on official media reports and public speculation.
Some reports, more likely and excuse
as IP infringe a the real problem is rampant in
China, indicated that choices such as BMW001 and
TCL001 could cause concern about infringements of
trademarks and intellectual property rights.
Allowing more freedom to choose personal
licence plates is also considered to be in line
with international standards and can help curb corruption.
China has about five years before the industry is
entirely opened to foreign players, and in that
time needs to give the industry a push.
The Mayor is Who?
August 22, 2002
In China it is difficult to find out
some times who your City¡¯s current Mayor is. In
a survey of more than 3,400 residents of major Chinese
cities showed that not a few had trouble identifying
the mayor.
The survey asked whether residents
knew the mayor's name, and were familiar with the
mayor's policies and achievements as well as personal
image. It also asked whether the mayor was perceived
as honest and whether respondents approved of the
performance on the job. The published results of
the survey covered the cities of Beijing, Shanghai,
Guangzhou, Chengdu, Shenyang, Xiamen, Zhengzhou
and Wuhan.
Of the eight cities left, Wuhan was
at the bottom of the list. Only 52.8 per cent of
the respondents in Wuhan said they knew who the
mayor was. Far more had trouble describing the personality
of the mayor or figuring out what he did while on
the job.
Residents certainly get a chance to
see the mayor's smiling face on television or plastered
over the pages of the local newspaper.
Usually they see the mayor at a ribbon-cutting ceremony,
so it would not be surprising if a few mainland
viewers concluded that the mayor started out his
or her career as a tailor or seamstress. Of course,
a few of them have had problems now and then, like
Beijing's former mayor, Chen Xitong, who is still
serving out his prison sentence. Shenyang's ex-mayor
Mu Suixin was jailed for life while the city's vice-mayor
Ma Xiangdong was executed.
Overall, about 20 per cent of
those people covered in the survey said they did
not know the name of their mayor and about 40 per
cent said they did not have a clue what the mayor
had achieved or what policies had been pursued.
Now I also might point out that mainland mayors
do a lot of good work.
Suzhou Reels in More Chip Factories
August 17, 2002
National Semiconductor, promising US$200
million in investments during the next five years,
has signed a pact to build its first mainland plant
in Suzhou. Rivals Fairchild Semiconductor, computer
processor-maker Advanced Micro Devices, contract
manufacturer Solectron and other large United States-based
enterprises have all set up shop at the Suzhou Industrial
Park.
Construction of the new plant is scheduled
to start in November, with commercial operations
beginning in 2004. It will employ about 500 people.
National's US$200-million investment plan comprises
costs for construction, equipment, facilities and
personnel during the next five years.
Chinese Bottler May Sue Pepsi
August 17, 2002
A Sichuan bottling company is threatening
to sue United States soft drinks giant Pepsi-Cola
for "stealing commercial secrets" in an
escalating dispute over a soured joint venture.
The threat came after Pepsi earlier
this month turned to the Arbitration Institute of
the Stockholm Chamber of Commerce to terminate its
ties with the Sichuan bottling plant and its Chinese
partner in the venture. While joint-venture disputes
are common in China, such claims against a foreign
multinational are rare and usually made against
the Chinese partner.
In its arbitration request, Pepsi said it had lost
management control, though both partners could name
three appointees to the joint venture's board. The
Sichuan bottler's managers had ignored the expiration
of their tenure on January 31 and Pepsi's intention
for new appointments. Pepsi asserts that they had
been operating illegally and the firm had large
financial irregularities.
In addition to Pepsi requesting an
unspecified amount of damages from the Chinese side,
Pepsi has asked to terminate the joint venture contract
with its Chinese partner, ban the Sichuan bottler
from using its brand name and stop supply of soft
drink syrup to the Sichuan bottler.
Analysts said the dispute harked
back to an earlier China investment spree
Pepsi set up the Sichuan bottling plant with Sichuan
Broadcasting Industrial Development in January 1994
when multinationals often valued their mainland
partners' close government ties more than their
business merits and value synergy.
China Market not Right for all Foreign
Companies
August 17, 2002
Cable & Wireless (C&W) is just
one foreign company that is in no hurry to return
to China after bailing out of Hong Kong Telecom
two years ago. The SAR communications carrier, now
called PCCW, never delivered on its promise as a
portal into the mainland.
Unlike most global network operators
who rave about the potential of the world's largest
telecommunications market, C&W says China is
a myth - a big but carefully guarded market just
beginning to open up to foreign investment.
C&W has since emerged as the world's
leading Web-hosting firm. In the 1990s, C&W
discussed a number of mainland ventures, such as
a Beijing mobile-phone project, as majority shareholder
of Hong Kong Telecom, the crown jewel of its overseas
assets.
C&W even promised to slash its
prized 54 per cent stake to 30 per cent in return
for a piece of a much-desired mainland project.
But nothing came of talks and C&W eventually
unloaded its stake to PCCW.
Many believe that even with China¡¯s
entry into the WTO it's still five years before
any real significant changes. Under China's commitments
on joining the WTO, foreign firms can take up to
25 per cent of mobile telecoms firms, rising to
49 per cent in three years. Without controlling
states it is difficult to manage an efficient business
operations in China.
Joint-venture Regulations Confusing
August 2, 2002
China's trade ministry has issued rules
on joint ventures in logistics, capping foreign
ownership and confining them to a handful of geographic
areas. It is not clear how the rules fit with its
promises to the World Trade Organization. They appear
to be more restrictive than expected. Logistics
joint ventures would be limited to four cities -
Beijing, Tianjin, Shanghai and Chongqing - and the
coastal provinces of Zhejiang, Jiangsu and Guangdong.The
ventures had to have at least US$5 million in registered
capital and would be given permission to operate
for 20 years with an option to renew, said the statement.
Logistics ventures included transport,
storage, loading and unloading, processing, packaging,
delivery and information management. The Chinese-language
WTO accession document does not contain the word
"logistics", but does include promises
to open areas such as shipping, storage and maritime
agencies to foreign involvement over four years.
Geographic restrictions in those areas
are mentioned only in vague terms. China's WTO protocol
said foreigners could conduct freight transport
only in "ports open to foreign vessels",
but did not elaborate on which ones those were.
It was unclear whether the rules would affect foreign
companies already operating in China, some of which
had licenses for cities not on the list. Maersk
Logistics, the world's largest logistics firm, announced
in early July it had obtained five new operating
licences in China, including one in Dalian and one
in Chengdu.
The WTO accession document also promises
to allow full foreign ownership in storage businesses
three years after WTO entry, but caps foreign investment
in shipping and maritime agency joint ventures at
49 per cent.
Foreign and Chinese companies have been announcing
logistics tie-ups at a steady pace over the past
year, hoping to provide transport, warehousing and
delivery of products from information technology
equipment to steel to cars.
(Source: REUTERS in Shanghai)
China Replaces America as Taiwan's
Largest Market
July 30, 2002
China has surpassed America as Taiwan's
largest export market, taking up a record 25 per
cent of the island's exports in May. Taiwanese exports
to China totaled NT$94.6 billion (about US$2.8 billion)
in May, a 44.5 per cent increase from the same month
last year.
In the first five months this year, Taiwan exported
to China 23.5 per cent of the island's total exports,
the report said. The United States, which for decades
had been the island's largest market, took up 20.6
per cent of Taiwanese exports.
The island's ''export reliance'' on China, or the
share of goods exported to China, has increased
from 9 per cent in 1991 to 16.5 per cent in 1996
and to 25 per cent in May 2002.
Taiwan has been cautious about relying too much
on the market of its biggest rival, fearing that
close economic ties might give China more political
control over the island.
However, facing pressure from Taiwanese businesses,
the government has been gradually relaxing restrictions
on trade and investment in China.
(Source: ASSOCIATED PRESS)
Shanghai Opens Up for Lawyers
July 30, 2002
Shanghai has taken steps to open up
the legal profession by allowing lawyers to set
up one-person shops which could extend legal help
to those who might otherwise be unable to afford
it.
It is hoped that the change will create smaller
law firms that are able to meet the needs of people
requiring less costly and less complicated legal
assistance.
The so-called one-person shops will actually require
three lawyers, although two can be employees hired
by a principal lawyer. Lawyers need at least three
years' experience and must be 60 or under, while
the firm needs registered capital of US$ 12,000.
WTO Entry Prompts New Laws
July 27, 2002
Legislation required under the
mainland's entry to the World Trade Organization
is expected to be passed this year in stages according
to legislators. The National People's Congress is
expected to debate laws on government licensing
and enforcement as well as the revision of laws
on administrative procedure and compensation.
Last month the NPC passed the Government Procurement
Law, aimed at regulating government purchasing activities
and stemming corruption. Government departments
at various levels have been among the biggest buyers
on the mainland, with purchases amounting to US$
4.2 billion in 2000, up from US$ 1.5 billion in
1999 and US$ 390,000 million in 1998. The government's
purchasing power is expected to reach US$ 12 billion
a year within the next few years
The drafting and revision of administrative laws
comes about because the government is trying to
honor its commitments made in entering the WTO.
Although the objective is to establish a transparent,
responsible, legal and honest government China still
has a long way to go.
Visa Sweep on Foreigners Nets
525
July 17, 2002
Shanghai has cracked down on foreigners
working and living illegally in Shanghai, netting
525 people during a three-month sweep of the city.
The crackdown was launched as part of a nationwide
campaign that started in April, Shanghai had given
the matter special attention because of the rising
number of foreigners in the city.
Shanghai has more than 50,000 long-term foreign
residents, officials say. A long-term downturn in
Asian and other economies and heightened expectations
of opportunities from China's entry last year to
the World Trade Organization have brought a flood
of economic refugees to the city.
Police found 485 cases, including 30 of foreigners
working without permits and 18 cases of people entering
the city illegally. The remaining 437 cases involved
foreigners living illegally in Shanghai or failing
to process the required residence permits.
China in WTO Compliance?
June 7, 2002
Six months after China joined the World
Trade Organization US officials have said it is
too early to tell how well it will honor its commitment
to open its market to more foreign goods.
Since joining the WTO last December,
China has substantially cut tariffs on agricultural
and industrial goods, removed other obstacles to
imports and repealed hundreds of trade-related laws
and regulations that conflict with its new obligations.
Still there has been delayed and flawed allocation
of tariff-rate quotas' for agricultural imports
and further delays in opening its insurance sector
to more foreign competition.
Chinese restrictions on imports
of genetically-modified soybeans and 'restrictive
measures in the area of express delivery services
are some more recent issues that go against China¡¯s
Wto commitments. Senior Chinese leaders appear committed
to making the needed reforms, but there often is
disagreement between different ministries about
complying with WTO rules. Many provincial and municipal
authorities also question the benefit of making
changes 'or simply do not yet understand WTO rules..
China No. 1 for Pirated CDs
June 13, 2002
Two out of every five music recordings
sold worldwide last year were illegal copies, up
from the one out every five for 2000. China tops
the list of illegal sales, with 90 per cent of all
music sales being fake, followed by Indonesia (85
per cent), Russia (65 per cent), Mexico (60 per
cent) and Brazil (55 per cent).
Pirated CD sales rose to 950 million
copies last year from 640 million a year earlier.
With CDs and cassettes combined, 1.9 billion bogus
recordings flooded global markets last year. In
2000, the ratio of pirated music to genuine recordings
was one out of every five, the group reported.
(Source: AGENCE FRANCE-PRESSE)
Foreign Safety Experts advise China
Factories
May 30, 2002
Foreign experts have conducted training
programs in factories producing shoes for Adidas,
Nike and Reebok to help protect workers from hazards
that can result in limb amputations, poisonings
and other industrial accidents.
Independent labor organizations are
banned, leaving workers with little legal protection
or understanding of their rights or the risks they
face.
Nobody in China really enforces labor
laws according to one expert. The project brought
industrial health and safety experts from the United
States, Hong Kong and the mainland into three factories
employing tens of thousands of workers who make
shoes.
Participants said they hoped the project
might serve as a model, and discussions were under
way for a similar training project at a toy factory.
The program set up plant-wide health and safety
committees, including workers, which will be responsible
for helping to identify and remove safety hazards
that kill or injure tens of thousands of labors
each year.
As an incentive to implement the training and prevention,
the factories plan to give awards to departments
which can operate with the best safety records,
it said.
(Source ASSOCIATED PRESS)
Express Mail Dispute Continues
May 16, 2002
The State Council-directed deadline
for two of China's most powerful ministries to settle
their differences over the mail imbroglio came and
went yesterday without a resolution but both sides
remain at the negotiating table.
The Ministry of Foreign Trade and Economic
Co-operation (Moftec) and the Ministry of Information
Industry (MII), which governs the State Post Bureau,
were last month given until yesterday to settle
differences over restrictions imposed by document
No 64, which restricted forwarders and express operators
to carrying packages weighing 500 grams or more.
If carriers elected to handle packages
lighter than 500 grams they would have to charge
more than China Post. Carriers in March were given
until May 6 to comply or face the consequences of
operating an "illegal" enterprise. The
deadline has since been extended to June 15.
The China International Freight Forwarders
Association, which has about 540 member companies,
said the restriction would eliminate about 60 per
cent of its revenue base. The international express
operators, represented by the Conference for Asia-Pacific
Express Carriers in the dispute, claim the restrictions
run contrary to provisions for acceptance into the
World Trade Organization, which emphasize liberalization
of markets.
The dispute started last December when
Moftec and the MII issued document No 629, telling
express operators they would have to undergo a "security
entrustment procedure", couched as necessary
to ward off the threat of bio-terrorism. Many saw
the move as an attempt by China Post to protect
the lucrative market for its Express Mail Service.
China Attracts More Foreign Investors
May 16, 2002
Foreign direct investment (FDI) increased
29%, at US$14.13 billion, in the first four months
as China extended its role as a global manufacturing
powerhouse after joining the World Trade Organization.
Foreign firms have been rushing into China in the
hope of unprecedented market openings after WTO
entry. That pushed up growth in contracted FDI -
where deals have been signed - to a breakneck 42.29
per cent in the first half of last year.
Today, 388,945 foreign firms are approved to operate
in China.
FDI represents just less than 5 per
cent of China's gross domestic product but it is
the best part of the country's production and economic
activity as it brings in modern technology and management.
FDI churns out about half the mainland's exports,
playing an important role in driving job creation,
domestic demand and export growth. In recent months,
foreign firms, including those from Japan, have
diverted FDI flows to China to take advantage of
cheap labor and a large market.
China posted a 12.1 per cent
jump to US$ 32.1 billion in industrial output last
month as the economy built up momentum alongside
the recovery global economy.
BP to Spend over US$300m/yr on China
Projects
May 16, 2002
International oil giant BP will steadily
increase investment in China in the next couple
of years, spending US$300 million to US$500 million
a year on top of US$4 billion it has already committed.
BP is China's biggest investor in the energy sector
and is involved in oil and gas exploration and production
in the South China Sea, petrochemical projects,
liquefied petroleum gas supply and lubricants.
The company plans to expand in 2005 its acetic acid
plant in the southwest city of Chong Qing to 350,000
tons per year (tpy) from 150,000 tpy. Acetic acid
is used in the production of paints, dyes and textiles.
Part of the extra acetic acid production will feed
BP's 350,000 tpy plant for purified terephthalic
acid (PTA) in south China's Zhuhai. PTA is the feedstock
for polyester.
BP is also the equal partner with Sinopec
in China's largest ethylene plant, which will have
a capacity of 900,000 tpy and will be built in Shanghai
around 2005 at a cost of US$2.7 billion. BP paid
US$1 billion to buy shares in China's top two oil
companies, PetroChina and Sinopec, when they were
partly sold off and listed in 2000. As part of the
share acquisition, BP was given a strategic alliance
to build 500 service stations each in Guangdong
and Zhejiang provinces.
(Source: REUTERS in Beijing)
Foreign Companies Gouged
for Natural Gas
May 11, 2002
German chemical giant BASF still has
no agreement with China on plans to buy natural
gas for a US$2.9 billion petrochemical base in Nanjing,
and called initial prices uncompetitive. BASF's
integrated petrochemical site, a joint venture with
state-run China Petroleum & Chemical (Sinopec),
is already under construction and is scheduled to
begin trial operations in 2005.
BASF plans to generate power for the petrochemical
site with natural gas from the east-west pipe line.
Officials said price guidelines for the Shanghai
area called for sales of natural gas at 1.35 yuan
(about HK$1.26) per cubic meter, which was 50 per
cent higher than natural gas in Europe.
China Increases Environment Protection
with WTO Accession
May 10, 2002
China will step up international environmental
cooperation following its accession into the World
Trade Organization (WTO), according to Xie Zhenhua,
Minister of the State Environmental Protection Administration.
The minister made the pledge at the
PRC-Day Seminar Thursday in Shanghai, a key event
of the 35th annual meeting of the board of governors
of Asian Development Bank (ADB).
To achieve a "win-win" result in environment
protection and trade growth, China planned to adopt
the "clean production" method in primary
and secondary industries, launch labeling and authentication
for organic and green food production in line with
the ISO14000 environmental management system, accelerate
the formulation of environmental standards for market
access, and improve environmental inspection and
supervision and the management of imports and exports,
Xie explained.
The minister also pointed out that
China planned to improve pollutant discharge registration,
push forward the reform of taxation and mobilize
enterprises to participate in environment protection.
The demand for investment in environment protection
was estimated to reach US$84 billion during China's
10th Five-year Plan Period (2001-2005).
He invited overseas investors and financial institutions
to explore the massive market, promising that "China
will strictly fulfill its commitments on opening
the environment service industry". China was
putting great importance on the sustainable development
strategy and the environment protection drive. It
had formulated 36 environmental laws and regulations
in recent years.
(Source: Xinhua)
Customs Seize Fake Goods
May 6, 2002
Customs officers on Monday seized $440,000
worth of electric blenders bearing false labels
of origin and ftrade marks in a container on board
a mainland cargo vessel at Kwun Tong public cargo
working area.
Officers said the consignment was picked up for
inspection after arriving from Jiangmen, Guangdong
on Sunday. A spokesman said the goods were destined
for a port in West Africa. The consignment bore
''Made in France'' labels and forged trade marks
but they were made on the mainland. No one was arrested.
China's New OSHA Law takes Effect
April 13, 2002
An alarming rise in job-related injuries
on the mainland have initiated the passing of China's
Vocational Disease Prevention Law will take effect
on May 1, International Labour Day. The law requires
employers to establish proper occupational health
facilities and provide employees with insurance
against workplace accidents. It requires employees'
contracts to mention potential occupational hazards
and forces employers to provide regular medical
examinations and pre-work training.
The move comes after a series of major
industrial accidents, including the deaths of six
teenage girls from exposure to benzene fumes at
leather bag factories in Hebei province. After the
accidents, central government officials conducted
a national inspection of businesses, with emphasis
on small workshops where benzene-based glue is used
to produce shoes, handbags, toys, and furniture.
There were 13,218 cases of vocational
injury or occupational disease reported in China
last year, a rise of 13 per cent from the previous
year. Nearly 80 per cent of the problems were related
to lung disease, according to ministry statistics.
And 2,365 people died as a result of on-the-job
poisoning or other illnesses. The rate of acute
poisoning accidents in work places in Beijing has
doubled since 1994.
China's Hard and Some times Dangerous
Road for Investors
April 13, 2002
During President Jiang Zemin recent
trip to Germany, motor industry executives there
are fearful plans to secure a firm grip on China's
apparently booming market are beginning to run into
difficulties. Problems with mainland partners, reports
of interference by gangsters, and disappointment
at a lower than expected level of sales have dampened
their hopes.
The feeling now, is very different
to the euphoria of Mr Jiang's ground-breaking visit
to Germany in 1995, when multibillion-dollar projects
were signed. While Volkswagen has been successful
in gaining a dominant share of the market, industry
sources say the company will have complained about
the actions of its partner, the Shanghai Automotive
Industry Corporation (SAIC), in helping a manufacturer
in Wuhu to build a model, the Charade, that will
compete with its own Jetta and that SAIC formed
a partnership with General Motors to build a rival
factory in Shanghai.
In 1995, the German company Daimler
agreed to open up a bus factory with a Chinese partner,
Yaxing Bus Company, in President Jiang's hometown
in Yanzhou, Jiangsu. This is where according to
a report, gangsters recently forced their way into
the hotel room of Daimler's manager, put a gun to
his head and demanded the company stop buying tires
directly from Pirelli, insisting instead they went
through Chinese middlemen.
These recent allegations follow the killing last
year of previous Daimler manager Juergen Pfrang,
50, his wife and their two teenage children. They
were found stabbed in their villa in Nanjing. Pfrang
was said to be about to expose corruption, but this
was never proved.
Later, three unemployed peasants were arrested,
sentenced to death and executed, but many remain
unconvinced by the official account of how they
entered a well-guarded compound and why they committed
the crime.
After merging with United States firm
Chrysler, Daimler also acquired the Beijing Jeep
Company, the first Sino-US joint motor venture.
The factory is going from bad to worse. No one is
buying its products. With an annual capacity of
80,000 jeeps, it made just 210 in the first two
months of the year. Last month, crowds of workers,
fearing for jobs and pensions, protested outside
the factory gates, near Beijing's embassy quarter.
Behind the problems
of the German companies in China lies general disappointment
with the market potential. Passenger car sales have
not doubled to 1.2 million, as was predicted in
the mid-1990s. They remain stuck at around 550,000.
Industry experts say that behind the miscalculations
and alleged violence in Yanzhou lie some unpalatable
facts about the fragmented Chinese car industry.
It costs up to a third more to produce a car in
China than it does in Germany, a country that has
the highest-paid automobile workforce in the world.
Even so the quality is often poorer. Many reported
profits by big motor industry investors are suspected
by analysts of being the result of misleading accounting
practices.
The frustrations of Volkswagen and DaimlerChrysler's
management also stem from a suspicion that China
may be seeking to develop an indigenous industry
at the expense of foreign investors, who are all
asked to spend heavily on training and on research
and design centers that are inappropriate for a
market of this size. Some foreign investors have
also been pushed into investing in inappropriate
locations. Daimler was sent to Baotou to make trucks
in an old tank factory. Ford was sent to Chongqing
to build a production base far from either the marketplace
in the east or its suppliers.
Many believe the Government has used the industry
as diplomatic bait. Now there are far too many fighting
over a modest market. Volkswagen's sales and profits
in China have already slumped, partly because it,
like others, overestimated the market's size. Most
of Daimler's ambitious plans for China have been
shelved amid problems.
Foreign BOT Power Firms Fined US$30M
April 5, 2002
Electricite de France (EdF) and Alstom
have paid a fine of US$30 million for a delay in
construction of what was supposed to be a model
power project in Guangxi province. In 1997, the
two firms signed a contract for a coal-fired plant
at Laibin in Guangxi with two 360-megawatt generators
worth more than US$600 million. This was the first
build-operate-transfer project in the power sector.
Under the contract the two firms signed with the
Guangxi provincial Government, construction would
be completed at the end of 1999 and they would operate
it for 15 years before handing it to Guangxi. Representatives
of the two firms had paid the fine due to building
delays since the varieties and sources of coal in
China had to be taken into account by the suppliers
of equipment. But the plant has been producing electricity
for more than a year and selling it to the Guangxi
power company at the price agreed in the contract.
.
The Chinese power market has changed dramatically
since 1995, when Chinese and foreign specialists
predicted a long-term power shortage, interest rates
were high and the Government was eager to attract
foreign investment in this sector. But after 1997,
with a slowing of economic growth and the coming
on stream of new generating plants, that situation
changed which resulted in a power surplus in some
provinces. The Government became less interested
in foreign investment in power.
The risk for foreign companies is that
a build-operate-transfer plant sells its power to
only one or a few state firms, which often have
monopoly opportunities to lower the price, giving
the foreign investors no alternative customer.
Chinese Law Delivers Shipping Controversy
April 4, 2002
U.S.-based giants FedEx, UPS and DHL, are facing
a May 6 deadline to turn over the bulk of their
business in China to the government-run postal service
under a new order, where private services may not
deliver any letters or packages under 1.1 pounds,
may not charge prices below those of China Post
and may not deliver to private homes or major government
offices. The restrictions would apply to shipments
within China and those to or from other countries.
They new law could eliminate up to
60% of the business private express shippers do
in China and could disrupt and possibly close down
the air freight industry. Furthermore it seems it
would violate commitments China made when it entered
the World Trade Organization in December. State
media accounts that said the new rule was required
by a Chinese law guaranteeing the post office a
monopoly in delivery of "private letters."
One rationale (excuse) is that China
Post is required to provide service to all locations
in the country, even places where it cannot make
a profit. Private carriers face no such requirement.
Another is that Chinese officials also have invoked
an anti-terrorism rationale for the restrictions,
saying they are needed to make sure all deliveries
are subjected to screening for anthrax and other
poisons.
As businesses enlarge their China operations,
demand for express shipping is booming. UPS reported
that volume in its China operation grew 45% in 2000
and China-related revenue was up 35% in the first
half of 2001.
( Source: USA TODAY)
China's Media Claims World Bank
not Paying
April 3, 2002
Recently a Chinese newspaper implied
the World Bank had failed to provide the US$165
million loan, the World Bank's largest to combat
air pollution by subsidizing the conversion of 2,200
small-scale (defined as 10 tones) coal boilers,
which had contributed the most to polluting Beijing's
environment, and promote the conversion of 3,500
burners.
In 1998, Beijing mandated everyone
within the third ring road to convert all scattered
coal boilers and burners either into natural gas
or larger district heating boilers by 2003. Beijing
Gas Group, the only government-appointed enterprise
eligible to use World Bank funds and procure low-cost,
compliant natural-gas burners, has been frustrated
since no one was using its services. Therefore,
they can't access the World Bank funds for reimbursement
us for the alleged US$7 million they have spent
to procure boilers.
Well that is there side, the real problem
is that Beijing Gas forked spent US$7 million in
a one-size-fits-all approach to buy 231 of the same
burners that turned out did not fit consumers' needs.
The World Bank stipulated the company had to sell
the burners to get reimbursed, and the market's
needs were far more diverse than Beijing Gas anticipated.
China's WTO Accession Terms
March 4, 2002
Under China's WTO accession terms within
three years foreign companies will be able to conduct
distribution and trading activities. China's access
commitments are contained in the Protocol of Accession
(POA) including the legal framework, market access
schedules, and specific commitments on goods and
services.
Currently it is almost impossible for
foreign companies to establish distribution and
trading operations as China maintains a foreign
trade system that strictly controls goods imported
from abroad. Current laws require the importing
of foreign goods only by authorized Chinese foreign
trade corporations (FTCs) and the imported products
must be sold to Chinese import/export companies
or customers with foreign trade authority. Foreign-invested
enterprises (FIEs) and wholly foreign-owned enterprises
(WFOEs) that have production facilities can only
import goods for their own use and can only sell
what they produce.
The Ministry of Foreign Trade and Economic
Co-operation (Moftec) has issued a notice permitting
production FIEs to purchase export items which are
not subject to quota or license control. Sino-foreign
joint-ventures dealing in foreign and domestic trade
and retail ventures are the exception to the rule
but require approved by the central government and
may have numerous restrictions such as the qualifications
of the investors, the percentage of foreign ownership,
the number of joint ventures, venture and branch
location(s).
Larger foreign companies who need to
provide distribution and sales support to their
subsidiaries located in China can set up holding
companies which may act as the sales agent and distributor
for products manufactured members. They can not
engage in domestic trade of third party products
and must have registered capital of at least US$30
million. Holding companies can to import parent
company products under certain circumstances (market
promotion or product development purposes) so long
as they are not subject to import quotas and the
goods are identical or similar to the products to
be produced by the investee enterprise.
China under its WTO entry terms, all
companies in the PRC including FIEs, will be permitted
to engage in trading activities three years after
China's accession, except goods which are subject
to state trading rules. Foreign companies will be
permitted to establish joint ventures and WFOEs
to engage in the following supply chain activities:
retailing, wholesaling, franchising, storage and
warehousing, packaging, maintenance and repair,
rental and leasing. Additional restrictions on the
establishment of distribution joint ventures and
WFOEs will be lifted within the end of 2004. Still
special provisions will apply to chain stores based
on the number of stores and the types of goods being
sold.
Still one will need to see if, or how,
China implements and interprets these commitments.
The government still can impose other new restrictions
on a particular sector so long as it is not arbitrary.
US Factory in China with 50-year
Lease Forced to Close
February 22, 2002
SureBlock a US company that produces
building materials is being forced to move out of
its Tianjin factory it built five years ago. The
company has invested US$6.5 million (80% ownership)
in the plant which has been operating since 1997
to manufacture concrete products. Sureblock had
a signed lease for 50 years.
The Chinese government has condemned
the plant for a university project that is being
built on the site. Even though Sureblock may have
to move out by May of this year they still have
not received any formal notice or offers of compensation
from the government. Sureblock representatives became
aware the situation from reading the local newspapers.
This action Government's decision illustrates
one of the risks in doing business in China, where
regulations can suddenly change or often lack clarity
on how they should be applied. Under Chinese law
there is no private ownership of land, only land
use rights that vary depending on the location and
the land use classification.
(Source: SCMP)
China New Anti-Corruption Legislation
May Help Foreign Companies
February 18, 2002
Foreign companies that want to do business,
ethically and legally, still have many hurdles to
overcome in China as illustrated by the current
events of several of China¡¯s more prominent banks.
Even though bribing public officials, is illegal
under various Chinese laws, making it a crime to
offer cash, or property, to state functionaries
with the intention of obtaining an illegitimate
benefit it is still prevalent throughout China.
Public Officials are broadly defined as the staff
of government agencies, institutional organizations
of the state, managers of state-owned enterprises
(SOEs), and those managers who were appointed by
a government department. Basically, one should presume
that any Chinese national doing business on a large
scale in China is a state functionary until proven
otherwise.
Even obtaining a receipt with a government
chop for a debatable payment will not guarantee
the payment was not a bribe. If a bribe is demanded,
the payer will not be guilty of bribery unless it
receives an "illegitimate benefit", typically
as a preferential treatment that violates laws,
regulations, or state policies. Therefore, one can
assume that the only legitimate purpose for making
a payment to a state functionary it to insure they
perform their lawful duties.
Penalties for giving bribes are imprisonment
up to life for serious offenses. Companies who give
bribes puts both the persons responsible, and directly
in charge, subject to imprisonment or detention.
Penalties for bribe recipients range from administrative
to sanctions to the death penalty. In the past,
the law was more concerned with the bribe takers
that the payers. Now, the law concerns both payers
and taker of bribes.
China also prohibits bribery and kickbacks
in private commercial transactions by individuals
or entities for the purchase or sale of goods or
in the trade of goods or services. A person who
bribes an employee of a company or enterprise is
subject to imprisonment for up to 10 years, depending
on the size of the bribe.
Recent penalties for those caught in
corrupt operations cost them their life as the death
sentence was handed down and carried out. For foreign
companies this is a both a good reason and example,
for have a strict company policy against making
bribes or kickbacks.
Free Consulting Services in Beijing
for Foreign-invested Projects
December 26, 2001
As of this year Beijing Foreign Investment
Service Center (BFISC) has been offering free, one-stop,
services to help overseas investors establish companies
in Beijing more conveniently. The services include:
investment consultation, listing of investment projects
and business partners, assistance with application
and registration procedures with relevant departments.
The center claims that foreign-investments
from 1,033 companies amounted to 3.54 billion U.S.
dollars, up 63.2 percent over the same period of
last year. Still, one should be mindful when using
their services for other than administrative tasks.
Surely their investment consulting, and partner
locator services, will be bias to helping the Chinese
side, and surely not the foreign side. This is an
important detail that one must pay attention when
using these services at the center. It is the old
adage ¡°you get what you pay for¡±. This is especially
true in China.
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