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CIEC ECONOMIC BRIEF
NO.17 (VOL.89)
Aug. 17, 1998
C a t a l o g
Firms prohibited from shirking debts
Government bodies denied to act as guarantors
Lottery saving banned
Standards for energy_saving lights to take effect
Actions to stop violations of financial laws
Tianjin's new regulations to encourage investment
China steps up opening drive
Foreign investment guide for food industries
Ningxia aims to narrow economic gap
Foreign capital to complete Hebei's harbors
Guangdong's power sector woos foreign input
Shanghai opens more areas to foreign investors
Shaoxing tries to attract investors(continued)
China's telecom market to open
Overseas firms urged to help coalbed methane industry
Reform pays off for Pingdingshan
China to boost coal exports
French elbows into China's power project
Motorola redials with ¡ç1.5b stake in Tianjin
Siemens launches telecom JV in Sichuan
Sino_Japanese JV farm opened
Swedish firm to expand investment
The State Council has issued a circular prohibiting State_owned and
collective enterprises from shirking their debts when their operating
mechanisms are reformed. The circular states that the evasion of debts by
some medium_sized and small State_owned and collective enterprises has
seriously undermined credit relations, resulting in nominal creditors¬ð
rights in financial institutions and the loss of State assets. Local
governments are urged to act in the overall national interest and intensify
guidance and supervision on the shifting of operating mechanisms in such
enterprises. If there is no overseer of the debts, governments cannot
approve reforms in the enterprises or give them new business licenses.
Reformed enterprises which have evaded paying their debts must once again
establish a correct creditor_debtor relationship.
Financial institutions should take an active part in supervising asset
assessment in enterprises which undergo reform. And the institutions should
regularly report matters concerning creditors¬ð rights to the People's Bank
of China (PBOC). The reform of enterprises must entail strict assessment of
their assets, and the outcome of that assessment must be confirmed by the
government departments in charge of the management of State assets. The PBOC
should also work with local governments to take effective measures to
supervise creditors¬ð rights.
Government bodies are not allowed to act as guarantors for business
activities, announced the Director of the State Council's Legal Affairs
Office, Yang Jingyu, recently in Beijing. The ban came against the backdrop
of frequent guarantees of government bodies to business activities of
enterprises in violation of relevant laws and regulations and even some
forced guarantees of the kind, which have actually resulted in many civil
disputes to a great concern from various circles.
According to the law of guarantee, only those corporations, citizens and
other organizations such as financial institutions and enterprises which
have the ability to settle debts for borrowers but not government bodies,
can act as guarantors. There are three reasons to deny government bodies as
guarantors for business activities: First, according to the principle of
separating the functions of government from those of enterprises, government
bodies should not interfere with the business activities of enterprises,
nor should they undertake business activities themselves and so provision of
guarantees is actually out of their legal responsibilities. Second, finance
of government bodies should only be used for the fulfillment of their
official tasks but not for settlement of debts. Third, funds from the State
coffer should belong to the public and then not be used to settle debts for
any debtors.
It is learnt that some government bodies are still providing guarantees and
such so_called guarantees are not valid as they are actually provided by
responsible or financial personnel of the bodies only in the name of such
bodies. In such cases, whenever a creditor suffers losses because the debtor
fails to pay back corresponding debts in time, the official who provides the
guarantee should have to share the losses and receive administrative
punishment and shoulder criminal responsibilities according to the
seriousness of the case.
In a bid to further help separate government functions from business issues
and ensure that officials concentrate on their duties, party and government
officials at and above county level will be barred from holding other posts
in non_government organizations. The new restriction covers as well
officials in people's congresses, government departments, courts and
prosecutor's offices. Officials holding posts in non_governmental
organizations without appropriate authorization must resign within six
months
The People's Bank of China (PBOC) issued a circular on July 7 demanding all
commercial bank and postal savings banks stop lottery savings business, a
saving business attached with a lottery. According to sources from the PBOC,
this move is aimed to standardize the operations of commercial banks,
eliminate the phenomenon of attracting savings with high interest, protect
depositors¬ð legal rights and interests, and promote the service quality of
commercial banks.
This type of saving was first initiated in the 1950's but was stopped by
the PBOC in the 60's. Some financial institutions renewed this practice in
the 80's and the PBOC has since formulated some relative rules. The PBOC
noted that the lottery_attached savings have had some positive impact on the
banking industry. However, with the deposit business becoming increasingly
competitive, various problems have arisen from rewarded deposits, leading to
the decision to stop the business.
Two sets of national standards on the quality of energy_saving lights will
go into effect on September 1 to regulate the currently chaotic
energy_saving light market, a report from the State Economic and Trade
Commission (SETC) said. These standards will impose strict requirements on
energy_saving light manufacturers in terms of the shape, size, capacity,
luminous flux and life span of their products. The enforcement of these
standards will raise the quality of energy_saving lights and thus propel the
development of the Green Lighting Program, related sources said.
The Green Lighting Program, which has experienced steady progress in the
past two years, aims to save energy and protect the environment through
promoting the use of high_efficiency, energy_saving lights. In a bid to
conserve vital energy resources, the Chinese Government is striving to
popularize energy_saving electrical appliances with the program, begun in
May 1996. The domestic market will demand a minimum of 300 million
energy_saving compact and thin_tube fluorescent tubes and other
high_efficiency lamps during the Ninth Five_Year Plan (1996_2000). But due
to the lack of unified standards, the program has been frustrated by the
influx of low_grade products.
Under the new quality standards, energy_saving lights with below_78£¥ lumen
maintenance and shorter_than_5,000_hour life spans will be regarded as
bad_quality products. The Green Lighting Program Office of SETC has
announced that the State is determined to crack down on products that fall
short of standards. Five ·quality_committed counters" have been initiated
at the Green Lighting Program's Beijing demonstration center and four
big stores in Shanghai, Nanjing and Zhengzhou. Energy_saving lights sold
there will be marked with the seal of ·China Green Lighting Program Quality
Commitment." Backed up by manufacturers¬ð commitments, these stores will
guarantee to their customers the quality of their energy_saving lights.
Individual consumers can return the defective lights to the stores and
exchange them for new ones within one year of their purchase. The period is
set at eight months for group customers.
A series of down_to_earth actions have been taken by China's financial
authorities recently to deal with rumbling law_and rulebreaking cases in
the financial sector. In June, the People's Bank of China (PBOC)
promulgated the Regulations on Administrative Penalties on Persons Violating
Laws and Rules. Since 1993, PBOC has always been putting a premium on
financial control time and again to fend off all kinds of off_the_book
business in financial bodies; check on an overall way the forex business in
part of the financial institutions so as to crack down on tax_evasion and
illegal acts in exportation; put off the illegal buy back of treasury bills;
sort out non_banking financial institutions to a realization of the complete
discrimination roles of banks and trust and security firms; and promulgate
more than 300 of regulations and rules. So far, regulations have been
stipulated against acts running counter to rules and discipline. All these
have played a positive part in enhancing the self_control of the financial
persons.
However, as assorted acts against the law and regulations are prone to
happen during a transition and a take_off of the economy, the incomplete
managerial system cannot keep pace with the fast financial development; and
counter_acts of some unqualified staff members against government policies;
there have been frequent violations of financial actions on laws and
regulations with the following features. 1. Quite serious off_the_book
operations. 2. Nonstop attractions of deposits by high_interest after
repeated prohibitions. 3. Public funds in private accounts. 4. Loopholes in
cash control. 5. A weakening control on acceptance and deferred L/Cs. 6.
No_ending speculations of stocks by banking funds. 7. Some violations of
forex control by designated banks for such deals. These business operations
against the law and regulations have brought about serious damage to the
monetary undertakings in China, therefore, it is absolutely necessary to
firmly stop the law_and regulations_breaking acts in the financial circles.
The Tianjin municipal government recently formulated two regulations to
further encourage foreign investment in the city and regularize the
management of charges imposed on foreign_funded enterprises. According to
the Provision on Further Encouraging Foreign Investment, foreign
businesses investing in key sectors determined by Tianjin will enjoy a
series of preferential policies, such as tax exemption, reduction or refunds
to high_tech enterprises, agricultural projects introducing improved seeds
or strains or advanced technology, and transportation and urban construction
projects.
Foreign_funded projects belonging to the category encouraged by the state as
listed in the Industrial Catalog Guiding Foreign Investment may set up and
readjust the proportion of products to be sold on domestic and overseas
markets on their own upon approval by relevant authorities. In addition,
prior to formally starting production, foreign_funded enterprises, after
going through necessary formalities at the customs house, are permitted to
import samples of products to be manufactured by themselves for display in
the free trade area. According to the new regulations, foreign_funded
enterprises to be established in the Tianjin Economic and Technological
Development Zone, free trade area and high_tech parks will enjoy up to a
50£¥ reduction of the land transfer fee.
The new regulations also encourage foreign businesses to purchase
existing enterprises¬ð property rights or equity, or acquire the right to
manage local enterprises through contract or leasing. The new regulations
also apply to companies and enterprises based in Hong Kong, Macao and
Taiwan.
China has decided to open wider some business sectors, including internal
trade and telecommunications, to foreign investment in a bid to counter the
impacts of Asia's financial turmoil. China needs to adapt its strategy for
using foreign capital to changes both inside and outside the country, He Ju,
Vice_Minister of the State Development Planning Commission, told a
conference on China's foreign investment policies for development zones. He
is in charge of the commission's foreign capital utilization department.
The government will develop measures to encourage foreign investment in the
following areas:
1. The service sector, which is expected to be a new attraction to foreign
investors in internal trade, tourism, accounting, legal affairs, air
transportation, finance, and telecommunications;
2. Large and medium_sized State enterprises and private businesses;
3. Large State enterprises for investment by multinationals and projects
involving advanced technology while offering a large market to foreign
partners;
4. Central and western parts of China, where the central government will
adopt policies to direct foreign capitals to local backbone industries and
State projects. For some projects, the proportion of foreign ownership can
be larger than in the coastal areas.
According to the Ministry of Foreign Trade and Economic Cooperation, by the
end of May, China had approved 312,174 foreign_funded businesses, with
¡ç236.7 billion worth of actual foreign investment. Most of the 100,000
foreign_funded enterprises in the countries that have started doing business
are in good shape and showing a profit.
The State Administration of Light Industry promulgated recently the
stipulations concerning foreign investment in China's food industry. The
main contents of the stipulations are as follows:
Projects for the development of sugar cane and beet of good strains; sugar
refineries using furnace of high pressure and high efficiency; and special
power generating units; import of new manufacturing technology and equipment
for processing crisp fruit chips, soybean protein and olive oil; the import
of the technology for fresh packaging high_grade pastry; the import of new
technology and equipment for bio_packaging; the development of condensed
fruit juice, fruit and vegetable juice, soft drinks with high content of
fruit juice, and mineral water; the technology for making dry wine, foamed
grape wine, and fruit wine; the technology for making distilled wine with
fruit, brandy and whisky; the technology for producing alcohol over 90£¥ in
concentration are encouraged for foreign investments.
Projects restricting foreign investment include those of candies, chocolates
and biscuits (Northwestern China not included); frozen drinks (ice cream,
Northwestern China not included); and peanut products. Foreign investment
is strictly restricted for the development of carbonic acid drinks of
foreign trade marks; and xylitol, xylose and citric acid.
Projects banned for foreign investment include solely_foreign_owned ventures
for processing dairy products; joint ventures set up with foreign
enterprises making brand wine for producing the wine of their famous
brands.
Ningxia, known for its remoteness and lack of advertising, is trying to
manage economic growth higher than the national average so that it can catch
up with prosperous eastern coastal areas. Traveling there now, one can
recognize a building momentum which heralds an economic take_off, similar to
what has occurred in China's coastal eastern areas. Newly_unleashed market
forces and profit motives are now shaping the development of the region, and
a quickening pace in deregulation makes the region an exciting place for
investment. Against the country's set growth target of 8£¥, Ningxia is
attempting to grow by 10£¥ for the next 12 years to bring a relatively
decent standard of living for its 5.3 million people (one_third are Hui
people) and consolidate its foundation for an economic takeoff in the 21st
century. Experts predict that Ningxia, rich in agricultural and energy
resources, is likely to eradicate poverty and enter an economic fast lane
ahead of other western provinces and autonomous regions.
The per capita production of electricity and per capita coal reserves in the
region rank first amongst all of China's provinces, autonomous regions and
municipalities. The Yellow River winds through Ningxia, nourishing the
fertile 17,000_square_kilometer Yinchuan Plain in the region's northern
part. To make better use of the resources to beef up their contribution to
GDP growth, the region will expand the irrigation system to reach another
270,000 hectares. The system covers 400,000 hectares at present.
Ningxia produced 2.6 million tons of grain last year, representing a per
capita amount of 500 kilograms, the biggest among provinces and autonomous
regions in the northwest and fifth nationwide. Export account for 12£¥ of
GDP in the region. Ningxia's exports increased by 18£¥ between 1992 and
1997. In spite of the Asian crisis, exports growth this year is still
expected to surpass 10£¥.
To match freed production forces, the region's authorities have recently
decided to: 1. Double the investment amount for fixed assets for the next
five years. 2. Achieve a GDP growth of 10£¥, two percentage points higher
than the national average, for the next 12 years. 3. Introduce a strategy
shift from caring for southern poverty_ridden areas to promoting the
relatively more prosperous cities and counties to pursue fast economic
growth. 4. Foster the industries in the fields of petrochemicals,
metallurgy, machinery, building materials, medicines and agricultural
product processing to develop these industries into economic pillars.
Hebei Province will introduce foreign capital to build a cluster of ports
along the Bohai Bay, according to the Hebei Merchants Bureau. A major outlet
to the sea for north and northwest China, Hebei has a coastline of more than
460 km suitable for building large ports. So far, it has established
Shanhaiguan, Qinhuangdao, Jingtang and Huanghua harbors, and plans to
introduce foreign capital to perfect their functions.
Qinhuangdao is China's largest energy wharf with an annual handling
capacity of 100 million tons. The province plans to build another two 25,000
_tonnage bulk goods berths each with an annual handling capacity of 3.8
million tons. The two berths need ¡ç98.8 million of investment, including
¡ç48.41 million of foreign capital. The berths will handle goods imported
from and exported to Japan and Northeast and Southeast Asia. It will also
handle the transport of cement, grain, and mechanical and electrical
products between harbors along China's southeast coast. The first dock of
Jingtang Harbor, jointly built by Beijing and Hebei, has an existing annual
handling capacity of 7.8 million tons. The province plans to build the
second dock with an annual handling capacity of 4 million tons. The project
calls for ¡ç147 million of total investment, including ¡ç72.08 million of
foreign capital.
The province has also decided to use foreign investment to construct a berth
at Caofeidian, 30 nautical miles from the Jingtang Port area. The berth,
designed to accommodate 200,000_dwt vessels, will be used especially for
handling raw materials imported by north China's iron and steel
enterprises. Another wharf is being built at Huanghua Port, 50 nautical
miles from Tianjin Harbor, especially for coal transportation. The province
will introduce foreign capital to build a harbor here with six bulk goods
berths for sundry goods, building materials, containers and bulk salt. The
province will also introduce foreign capital to build eight berths at
Shanhaiguan Port with a combined annual handling capacity of 10 million
tons.
Foreign investment and technologies and equipment still have plenty of room
for expansion in Guangdong's electricity industry, which has enjoyed
double_digit growth in recent years. This southern province will try to
generate electricity by using nuclear, wind, natural gas and solar energy in
the following months to better serve Guangdong's rapid economic growth.
Guangdong, which lacks natural resources and energy, needs to upgrade its
technical facilities and open channels to attract financial support to help
boost its power industry. Several power projects, some of which utilize new
energy generating methods, are being planned or are already under
construction in the province.
Foreign investment and technological equipment are being sought to support
the construction of these projects, set to cost billions of US dollars.
Guangdong is expected to have 10 nuclear generating units, each with a
capacity of 1 million kilowatts, by 2010. Several power plants which use
natural gas, wind and solar energy to generate electricity are also being
constructed or are planned to be built in the cities of Shenzhen, Zhuhai,
Huizhou and Shantou.
Shanghai will expand channels to absorb more foreign investment this year.
Overseas investors are encouraged to acquire medium and small State
enterprises on a trial basis through mergers, contracts, buying shares or
leases. This year, 101 State_owned ventures have been approved to be listed
on the Shanghai Property Rights Exchange. The municipal government will also
allow more foreign capital to be used in launching joint venture schools,
stores, public utilities, transportation companies and finance firms. An
experiment with joint venture travel agencies is expected to be carried out
within the year.
The city wants to absorb ¡ç4 billion in contracted direct foreign investment
this year. However, it will make efforts to accomplish last year's volume,
¡ç5.3 billion. In addition, the local government hopes that the exports of
foreign_invested enterprises will reach ¡ç6 billion in 1998.
19. Production of high_grade synthetic_fiber artificial woolen fabrics. To
import 260 rapier looms and auxiliary facilities for producing 18 million
meters of high_grade synthetic_fiber artificial woolen fabrics annually.
Investment: ¡ç31 million including ¡ç14 million from foreign partners. Form:
Joint venture.
20. Production and use of steel components. To import equipment for
processing H_shape steel components and connectors; to set up a production
line for turning out light plates for walls and floors; and to import
hoisting and construction machinery. The annual output will be 30,000
tons of steel components. Investment: ¡ç15.6 million including ¡ç6
million coming from foreign investors. Form: Joint venture, co_operative,
shareholding or other forms.
21. Production of steel with electric furnace and continuous casting. To
produce 273,800 tons of liquid steel and 261,000 tons of continuous casting
blanks per year. Investment: ¡ç50 million including ¡ç13 million from
foreign side. Form: through consultation.
22. Import of a production line for producing colored concrete roof tiles.
To import an Italian production line for producing 5 million colored
concrete roof tiles per year. Investment: ¡ç2.1 million. Form: joint
venture, cooperative or shareholding.
23. Production of large sealed storage batteries. To import technology and
key equipment to set up a large sealed storage batteries with a capacity of
120,000 kvah per year. Investment: ¡ç10.2 million including ¡ç8 million
from foreign side.
24. Production of high_speed rapier looms. To jointly manufacture 2,000
high_speed rapier looms up to the world standard of the 1990s per year.
Investment: ¡ç18 million including more than ¡ç4.5 million from foreign
partners. Foreign side provides technology and funds.
25. Printing and dying of high_grade imitation silk clothing materials. To
import advanced dyeing and printing equipment from Switzerland and Austria.
Investment: ¡ç4.82 million including ¡ç4.5 million from foreign investors.
Form: Joint venture.
26. Production of POY filament. To import Japanese filament spinning
equipment for producing 30,000 tons of special form, super fine and
polymetric fiber annually. Investment: ¡ç14.46 million including ¡ç6 million
from foreign partners. Form: Joint venture, co_operative or other forms.
27. Generation of electricity by garbage incineration. To build a 75T/H
(steam) fluid bed boiler with garbage incineration mixed with coal to
generate power by a set of 12 MW turbogenerator. Investment: ¡ç10.2 million
including ¡ç4.8 million from foreign partners. Form: Joint venture.
28. Production of 100,000T/Y zinc_coated aluminum sheets. To establish a
production line for turning out 100,000 tons of zinc_coated aluminum
sheets per year. Investment: ¡ç48 million including ¡ç29 million from
foreign side. Form: Joint venture or other forms.
29. Back_end assembly line of 100 million pieces IC a year. To set up a
back_end assembly line for producing 100 million ICs per year. Investment:
¡ç36.15 million including ¡ç30 million from overseas investors. Form: Joint
venture.
30. Producing 50T/Y of beneflumetol. To set up a production line for turning
out 50 tons of beneflumetol annually. Investment: ¡ç11 million covering ¡ç5
million from foreign partners. Form: Joint venture.
31. Production of kaolin soil. To build an establishment for producing
10,000 tons of kaolin soil (used for paper and paint_making). Investment:
¡ç4.82 million, half or one third of which will be contributed by foreign
side. Form: Joint venture or cooperative.
32. Establishment of a meat processing center. Investment: ¡ç4.55 million,
40£¥ of which invested by foreign side. Form: Joint venture or cooperative.
33. Import of a frozen vegetable processing line. To import an advanced
production line for processing all kinds of frozen vegetables. Investment:
¡ç2.4 million, 40£¥ of which will be invested by foreign partners. Form:
Joint venture.
34. Production of high quality swine for Hong Kong. To expand pig farms to
produce 100,000 high quality swine for Hong Kong. Investment: ¡ç12.05
million including ¡ç5.7 million of foreign funds. Form: Joint venture or
shareholding.
35. Soilless culture garden. To build a 4 hectare soilless culture base to
produce tomatoes, cucumbers and green peppers and to import vegetable seeds.
Investment: ¡ç4 million, more than a half will be invested by overseas
partners.
China's new Ministry of Information Industry (MIl) plans gradually to open
up the country's telecommunications market to the outside world. According
to a recent re_organization plan, MII's one of its major functions will be
to make China's telecommunications industry more international. One way to
do that will be to separate the telecommunications sector from the postal
sector, a move that is expected to allow China to open up its postal market
first. China will open up all of its postal services, except for letters, in
the next few years, Director of the State Postal Service Bureau Liu Liqing
said, adding that China has made express mail and other services competitive
and open to overseas investors. The telecommunications equipment business
has already become one of the most open and competitive markets in China. A
tenth of the US company Motorola's global sales are in China, and
Germany's Siemens is expected to have annual sales of 1.5 billion marks
(¡ç800 million) in China by the year 2000.
China spent 124.5 billion yuan (¡ç15 billion) on posts and
telecommunications infrastructure in 1997. According to the Ministry of
Foreign Trade and Economic Cooperation (Moftec), the country imported nearly
¡ç6 billion worth of electronic and telecommunications equipment. The market
is still growing and Chinese spending is expected to exceed 150 billion yuan
(¡ç18 billion) this year, while business in these sectors is expected to
grow 28£¥ over last year. As China continued its re_organization of
government institutions and industry and its infrastructure development, it
would open up its telecommunications when conditions were ripe. Bell
Atlantic, the world's largest telephone directory publisher, has become the
first foreign company in China's telecommunications market. The US giant
became the sole agent for yellow page advertisements in Shanghai by setting
up a joint venture with the local telecommunication administration in May.
Minister of the Information Industry Wu Jichuan said that China is ready to
increase international cooperation in these fields and proposed that Apec
members jointly develop standards for wideband multi_media communications
and E_commerce and study tariff and settlement arrangements on the basis of
equality and mutual benefits. At present, the Chinese Government still has
remarkable influence on telecommunications fees, as the country's
telecommunications market opens wider, a more flexible fee system will come
into being and allow China to use telecommunications as a major lever in
trade with other countries.
China is calling for large_scale overseas cooperation to spur its fledgling
coalbed methane industry. The China United Coalbed Methane Co Ltd (CUCBM) is
negotiating with several foreign partners to seek enhanced overseas
cooperation after successfully signing five contracts with three US
companies. The tremendous potential for coalbed methane development in China
has drawn wide international attention. The State Council has granted CUCBM
the exclusive right to undertake the exploration, development and production
of coalbed methane in cooperation with overseas partners.
Last year, the Chinese Government approved seven coalbed methane concessions
to be opened up for foreign cooperation. These are the areas of Huainan and
Huaibei of Anhui, the east area of Taihang Mountains in North China, and
Linxing, Sanjiao, North Sanjiao, Shilou and Liulin areas in Shanxi. Texaco
Inc of the United States was the first overseas company to join in the
project. It signed a contract with CUCBM on January 8 in Beijing to jointly
explore coalbed methane resources in Huaibei coalmine in Auhui. The
contracted area is 2,676 square kilometers, with an estimated volume of
coalbed methane resources exceeding 60 billion cubic meters, is expected to
attract a total investment of about ¡ç500 million. It is projected that the
total output of coalbed methane will reach 500 million cubic meters per
year. On June 29, CUCBM wrapped up three contracts with Arco of the United
States to jointly develop coalbed methane resources in Sanjiao, North
Sanjiao and Shilou concessions in Shanxi. It also inked a contract with
Phillips of the United States for the cooperative development of coalbed
methane in Linxing concession of Shanxi.
The four projects are all located in the Hedong coalbed methane area in
Shanxi. The total area under the terms of the contract is 8,700 square
kilometers, while the estimated volume of coalbed methane resources exceeds
440 billion cubic meters. If these four contracts enter into commercial
production, the annual production is expected to reach about 3 billion cubic
meters. CUCBM has also mapped out seven other target areas for international
cooperation awaiting the approval of the State Council. The seven areas are
Gujiao, the Lu¬ðan and Jincheng areas of Shanxi, the Fengcheng area of
Jiangxi, the Liupanshui area of Guizhou, the Enhong area of Yunnan and the
Xinggong area of Henan. The new target areas will provide new opportunities
for foreign investors. Besides broad international cooperation, CUCBM also
launched its self_financed coalbed methane development in the Qinshui area
of Shanxi last year. With a total area of 4,000 square kilom eters, the
Qinshui region is estimated to have reserves of 2,500 billion cubic meters
of coalbed methane. Some commercial methane flow has already been
discovered.
China could tap coalbed methane as a new clean fuel source to achieve both
ecological and economic benefits. Coalbed methane is an unconventional form
of natural gas. To prevent gas explosions, China emits 6 billion cubic
meters of methane from mines annually, seriously polluting the environment
and wasting energy resources. Meanwhile, China is troubled by the
ever_increasing shortage of petroleum. The Chinese Government pays great
attention to the utilization of coalbed methane. To speed up the country's
coalbed methane development, CUCBM was officially established in 1996. The
State Council granted favorable policies to CUCBM, including tax reduction,
duty exemption and the right to make decisions itself in investments as well
as import and export businesses. As a new company, CUCBM is expected to
shape a modern corporate structure, resulting to low costs and high
efficiency. China's coalbed methane reserves, estimated to constitute about
30,000 to 35,000 billion cubic meters, are located about 2,000
meters underground. CUCBM is ambitious to produce 10 billion cubic meters
annually by 2010.
Pingdingshan, an industrial city in Henan Province, is accelerating the pace
of reform of its State enterprises. There are more than 200 large and
medium_sized industrial enterprises in Pingdingshan. Among them, 40£¥ are
owned by the State. Technology and equipment in some enterprises often lay
idle, while in some large and medium_sized businesses, production capacity
was restricted due to lack of equipment or capital. To reverse the
situation, the city began a process of industrial structural reform in 1988.
And its efforts have paid off.
As one of the three largest cord fiber producers in the world, the
Pingdingshan Shenma Cord Fiber Company has powerful advantages in
technology, management, marketing and quality control. It was designated by
the provincial government as one of the 10 enterprises for structural reform
on an experimental basis in Henan. During the last 10 years, the company has
merged with six enterprises including a rubber processing factory, an
electromagnetic products firm and the Shanghai Cord Fiber Company. The group
now has total assets of 5.2 billion yuan (¡ç422 million). The group is
expected to take over another two enterprises in Henan which have combined
assets of 1.5 billion yuan (¡ç181 million). To become a more powerful
industrial group, the cord fiber producer is seeking channels to establish
relations with foreign counterparts to expand its business overseas.
The Pingdingshan Coal Mine Group Co has merged with a leather processing
factory in the city and is making preparations to take over some local coal
enterprises. The Tianying Group arose from a merger of 16 firms. It has
total fixed assets of 657 million yuan (¡ç79.16 million). The city's Wuyang
Iron and Steel Works has become a member of the Handan Steel Group, a model
steel enterprise in Hebei Province which is well_known for its economic
efficiency. Wuyang has become a major tax payer and an economic pillar of
Pingdingshan.
The efficiency improvement of small State enterprises is another task of
the
reform. Small State enterprises now own 20.8£¥ of the total industrial
assets of the city. More than 80£¥ of them are in debt. To support small
enterprises, the city has issued a series of policies. They include: 1.
Small uncompetitive enterprises are to introduce the stock holding system
and development methods such as leasing, contracting and cooperating. 2. The
government will help well_managed enterprises to increase inputs and adjust
product mix. 3. Merging with pillar industries is encouraged to make full
use of the existing equipment of small State businesses. 4. Bank_ruptcy
will be ordered in cases of long_term debt, where debt exceeds assets, and
where no hope exists for paying off debts.
China is the world's largest coal producer, turning out an annual 1.35
billion tons, one_third of the world's total. The country is planning to
export more coal and coal byproducts in a bid to reduce the country's large
domestic stockpile. To support coal exports, the Industrial and Commercial
Bank of China will offer coal enterprises loans totaling around three
billion yuan (¡ç361.44 million) this year to alleviate their shortage of
funds. The country will offer a 9£¥ export rebate to coal enterprises
instead of the current 3£¥. The administration will still cut export
commissions for coal enterprises by one_third in an effort to create
exporting initiatives.
China has exported 150 million tons of coal over the past five years.
However, China's annual coal exports amount to only just over 30 million
tons, about 6£¥ of the world's total coal trade and so there is a huge
untapped potential. The government plans to export 35 million tons of coal
this year, and 50 million tons by the year 2000. The expansion of coal
exports will make this sector of the economy more open to the rest of the
world.
French Power Company announced recently its formal participation in China's
thermal power projects to join in the Shandong Zhonghua Power Ltd, so far
the largest Sino_foreign joint venture in the country, to have a total
installed capacity of 3 million kw, including four power generation
stations. The 1st stage of Shiheng project has already begun operation, the
2nd stage is scheduled to begin operation soon. The Heze power station and
Liaocheng power station are scheduled to begin operation by the year 2004.
For all the projects, the French side holds 19.6£¥ of the total stock and
later a trial of using anthracite will be undertaken with the 600, 000 kw
boiler of Liaocheng power station for the first time.
Motorola, one of the world's leading mobile phone makers, has decided to
invest an additional ¡ç1.5 billion in Tianjin over the up_coming
two_and_half years to expand production. The funds will be used to expand
production of the most sophisticated semiconductor integrated circuit chips
used in automotive electronic components, energy products and other
telecommunications components. The decision was made after China allowed
foreign_funded projects to be exempted from tariffs and import_related
value_added taxes on equipment imported for their own use. In addition,
Motorola will put to use in September its Iridium mobile telecommunications
global network at a cost of ¡ç270 million. The system includes 66
communications satellites, which have already been positioned. It will also
invest ¡ç50 to ¡ç100 million to build a training center for Chinese
management personnel. Upon completion of these projects, the total
investment of Motorola in China is expected to reach ¡ç2.5 billion by 2000.
Siemens AG of Germany forged ahead in China's access network market by
launching a joint venture inn Chengdu, Sichuan Province, increasing the
company's number of joint ventures in China's telecommunications market to
six. The new company will develop, manufacture and market ·last mile"
products for telecommunications networks. The primary focus will be on
systems using fiber_optic and radio technology. The new company, involving
a total investment of ¡ç28 million of which half comes from Siemens, is
capable of producing FastLink, DectLink and CDMALink products, yielding an
estimated annual sales volume of ¡ç260 million by 2001.
A Mitsubishi Corp_financed farm opened on May 27 in Beijing, and is expected
to be a pilot scheme for expansion by the Japanese company into China's
lucrative agricultural market. The farm, Mitsubishi's first agricultural
project in China, is expected to initiate China_Japan cooperation in
agriculture. The company is seeking other agricultural opportunities across
China. It is in discussions with companies in Shanghai over jointly
developing new types of greenhouses. Currently Shanghai uses glass
greenhouses, while Mitsubishi uses plastic film at the Beijing farm at a
much lower cost. At present, the farm grows strawberries, sweet melons and
romaine lettuce, and it will grow other high value_added products for
Japanese and other foreign markets.
The great potential of the Chinese market has prompted the Swedish
pharmaceutical firm Astra to expand investment in its Chinese subsidiary.
Investment in the Astra (Wuxi) Pharmaceutical Co Ltd has been increased to
¡ç100 million from an original ¡ç12 million. The firm produces drugs used to
treat alimentary and respiratory system diseases and cardiovascular
diseases. It plans to set up a research and development center in China
after its sales volume reaches 1 billion yuan (¡ç120 million), company
officials said.
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