A nationwide logging ban is anticipated that will force fundamental changeson China's timber industry. The logging prohibition will benefit thecountry in the long run, but it puts great pressure on the timber industry.An upsurge in timber prices can be expected next year when the radicalmeasure for protecting natural forests is fully implemented.

Logging ban was announced on September 1 in the 4.63 million hectares ofthe Chuanxi Forest, which covers 54 counties in Sichuan Province. The banis expected to become effective nationwide next year to help prevent floodssuch as those that have devastated the Yangtze River areas and NortheastChina for more than two months this year. Unrestrained logging along theupper reaches of the Yangtze River has caused serious erosion, raising waterlevels and silting up channels.

Yunnan Province's forestry department has also decided to stop cutting theprimeval forest along Jinshajiang, the upper reach of Yangtze River,beginning September 1, with the aim of conserving water and soil in theprovince's eight regions on the upper reaches of the Yangtze River, as wellas in Xishuangbanna prefecture. Local governments at all levels have beenurged to implement the decision at once without preconditions. The upperreaches of the Yangtze River basin's forests and ecosystems have a directeffect on the middle and lower reaches of the Yangtze River. The provincialgovernment has already adopted some measures to protect remaining forests.The measures took Yunnan Province 10 years and 170 million yuan ($20million) to implement. Of that, 120 million yuan ($14 million) was raisedby the province itself to save the forests, as a result of "The Project ofYangtze Upper_Stream Shelter_Forest System".

The timber industry had to abandon its traditional dependence on forestryand develop new materials as the sector cannot rely completely on imports.Some timber plants are already using bamboo, sorghum and hemp to produceplywood. Such technology is expected to be applied widely in the comingyears. The ban will also be an opportunity for the industry to sharpen itscompetitive edge as it will be forced to introduce advanced technologies andimprove efficiency. China's timber resources cannot be effectively utilizedas long as China's timber industry continues to operate at a low level. Thedevelopment of alternative materials can also ease the pressure fromincreased imports brought by the logging ban. Planting market_oriented treescould be another alternative business option for the sector.

Forest plantations have contributed more than 30 million cubic meters oftimber to the Chinese industry. They still have huge potential to beexplored__China has become the world's top tree planter with 31.83 millionhectares of forest plantation. The timber industry is expected to adjust itsoperational strategies to meet emerging market demands. The robustdevelopment of residential housing will expand timber demand significantly.It is predicted that China will consume 119 million cubic meters of timberannually by 2000. The decoration and furniture industries, which have beenstimulated by increasing personal income, will also spur timber consumption.
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The central government is establishing price controls to protect theviability of domestic machinery and equipment manufacturers. The move isexpected to halt abnormal competition, assist an overhaul of markets for theproducts, and to stimulate demand, according to the State Machine BuildingIndustry Bureau (SMBIB). SMBIB recently required machinery and equipmentproducers trapped in a vicious price war to adopt price controls, by eithersetting price floors or ceilings. The products first affected includedpassenger cars, computerized digitally controlled machine_tools, farmtrucks, loading machines, and power generating equipment. Final measures areunder discussion, and results are expected to be publicized soon.

Analysts said even though the move ignores the free market mechanism, theChinese Government has no choice but to intervene in the hotly contestedmarket to prevent some large State enterprises from losing more money andlaying off workers. A statement issued early in September by the StateEconomic and Trade Commission (SETC) established principles for exercisingprice controls.

The SETC price control document lists 21 products, ranging from machinery,to chemical products and building materials. Because of duplication ofprojects, an over_supply of industrial products has prompted variousenterprises to undercut each other, taking a big bite out of their regularprofit margin, according to the statement. As a result, State tax revenueswould be significantly reduced and the bank loans extended in line withadministrative orders to the State projects could barely be repaid, analystssaid.

On another front, the SETC and the State Development Planning Commission(SDPC) issued a proposal urging project owners, construction contractors andbuilding teams involved in infrastructure projects to use domestically madeequipment and to source raw materials locally.
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Regulations on the management of bar codes, the first of its kind in China,will take effect on December 1, 1998, officials from the State Bureau ofQuality and Technical Supervision announced on September 11. Product articlenumbers, widely known as bar codes, are attached to commodities todistinguish them from other kinds of commodities. The regulations clarifythe privileges of those using bar codes to label their products as well astheir obligations. The printing quality of the bar codes are highlighted inthe regulations, while legal liabilities borne by people involved in makingor using false bar codes are clearly stated.

Bar codes, recognized as being important in facilitating the production andcirculation of commodities, are used widely around the world, especially indeveloped countries. Before 1986, Chinese exporters often found themselvesin a frustrating situation where their goods were refused entry into othercountries' markets or they were forced to under_quote their exports. Tosharpen the competitiveness of Chinese products on the global market,product quality supervisors in China found it essential that China join theuniversally_recognized bar code system established by EAN International, theEuropean Article Number Organization rounded in Europe in 1981. The ArticleNumbering Center of China, which was formally established in December 1988,became an EAN International member in April 1991.

The use of bar codes has spread rapidly. More than 40,000 enterprises havegained the approval to use bar codes for about 500,000 categories of goodsin chain stores and supermarkets. A survey conducted in 1997 showed that56.4% of commodities on the market were labeled with bar codes, while95.2% of the numbers could be recognized by scanning machines. However, theburgeoning growth of this field has been accompanied by rising numbers ofcases involving the improper use of bar codes or even the use of fake barcodes. In 1997, only 70% of bar codes attached to commodities metrequirements set by the State Bureau of Quality and Technical Supervision.In a survey conducted last year by the Beijing Bureau of TechnicalSupervision along with the Beijing Article Number Quality SupervisionStation, the improper use of bar codes was found to have occurred in thelabeling of more than 465 categories of food and articles of daily use inCarre Four and the Lufthansa Wangjing Shopping Center in Beijing.
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Tianjin has recently promulgated Regulations for Further Encouraging ForeignInvestment to facilitate the inflow of foreign investment. Major contentsare as follows.

1. Foreign_funded projects that are encouraged by the State will enjoy aeasing of restriction of the portions of the products for domestic andoverseas sales and prior to actual investment input foreign investors mayimport the prototypes of their products to be shown in the bonded zone aftergoing through the Customs formalities.

2. Foreign_funded new and high_tech projects in the Tianjin Economic andTechnological Development Zone, the Tianjin Port Bonded Zone, the TianjinNew Technology Industry Park and Tianjin Export_Oriented High_TechAgricultural Modernization Demonstration Zone will enjoy deductions ofland transfer fees if the land use rights are acquired through directtransfers. Newly established enterprises with good economic returns inthe above_mentioned zones will have half of their land transfer fee refundedif, for three consecutive years since they become operational the ratiobetween their annual payment of value added tax(value added tax in theimport phase excluded), business tax and corporate income tax and land usearea is no less than RMB500 per sq m.

3. With an approval of competent authority, foreign investors may establishFFEs through purchasing the stock right of the existing enterprises orjoint_stock companies in Tianjin through bidding, auction, contractual orother means of transfer. They may also purchase, contract for and lease theexisting enterprises in Tianjin to expand their business scope and scale.

4. Foreign businesses are encouraged to invest in new and high_techenterprises in Tianjin. Foreign_funded new and high_tech enterprises in theˇ°incubation period" may use the Taida International Pioneering Center ofthe Tianjin Economic and Technological Development Zone, the offices, labsand factory buildings of the Tianjin Port Bonded Zone and the PioneeringCenter of the Tianjin New and High_Tech Industrial Park free of charge.

5. Certified high_tech productive agricultural projects funded by foreigninvestors with an operation term of more than 10 years will enjoypreferential treatment. New technology and new product areas establishedfor trial in the Tianjin Export_Oriented High_Tech AgriculturalModernization Demonstration Zone and the Tianjin Agricultural ScienceImport and Absorption Center are exempt from farming and forestry specialproduct tax for three years. FFEs engaged in the development and productionof six agricultural and sideline products__fruits, vegetables, livestock andpoultry products, sea water and fresh water aquatic products, green food andhandicraft__will enjoy the support of special preferential loans for theindustrialization of agriculture if the variety and quality of theirproducts is superior to the same kinds of products and can lead farmers andsupporting enterprises to expand export.

Foreign_funded communications and public utilities projects in Tianjin thatare operational for more than l5 years will enjoy relatively morepreferential treatment in taxation.
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In recent years, there has been a series of fowl flu outbreaks incertain American fowl farms. Different serums of fowl flue viruses have beenfound in fowl products from more than 10 countries. To prevent the threat ofthe disease spreading to this country, China's State Animal and PlantQuarantine Administration recently laid down the following regulations:

1. Those who want to import fowl or fowl products from the United Statesmust go through quarantine application procedures in advance at the stateanimal and plant quarantine authorities.

2. On applying for the import of fowl or fowl products, importers must givethe name, detailed address and official registration document and number ofthe producer or processor.

3. After entering the country, fowl products imported from the United Statesmust be processed and used exclusively by registered units. Special storagefacilities should be built, and a registration system for putting theproducts into and taking them out of storage should be established. Garbage,slops, leftovers and other wastes created during the course of usage shouldundergo immediate treatment.
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China needs to utilize foreign investment better to ensure sustained andrapid economic development, Foreign Trade Minister Shi Guangsheng said onSeptember 9. China's reforms to its economic system and development modeare at a critical juncture. The country needs to resolve some major problemssuch as an irrational economic structure, a shortage of capital, technologyand skilled professionals, and rising unemployment. Moreover, this year'sfloods, which affected 223 million people and 21.2 million hectares offarmland, have caused more than 160 billion yuan ($19.28 billion) of directlosses.

To help resolve these problems, China must open up further to the outsideworld. During the first seven months of this year, China's contractualforeign investment, after declining for three consecutive years, grew by7.25% year_on_year to reach $28.02 billion. China will step up its effortsto attract more foreign direct investment (FDI) from North America, Japanand the European Union. It will strengthen cooperation with multinationals,which have become major investors in the global economy.

Large State_owned firms are encouraged to cooperate with multinationals tospeed up development of new and pillar industries. Meanwhile, China willcontinue to open up more areas for foreign investors. The petrochemical andconstruction sectors will encourage more FDI, while the mining industry willassimilate FDI on a selective basis. The service sector will open upfurther, with more pilot projects in the fields of tourism,transportation, wholesale, retail and foreign trade. The financial andtelecommunication sectors are also expected to become more open. China willalso do its best to improve the investment climate by supporting andprotecting existing foreign_funded firms, improving the legal system andeliminating random fees and charges.
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China's economy maintained its recovering momentum in August, with majorindices progressing more rapidly than in July, according to governmentstatistics released on September 13. Growth rates of investment, industrialoutput and consumption all accelerated in August over the previous month,driven by the country's stimuli policies and demand generated by theanti_flood fights.

According to the monthly macroeconomic report, fixed assets investment ofthe State sector soared 26.9% in August from the rate recorded a year ago.In July, the State's fixed assets investment stood at 22.8%. Industrialadded_value growth rate increased by 7.9%, representing a 0.3_percentagepoint rise over July, while domestic consumption expanded by 9.3%, up from8.1%. However, as expected, the indices generally have not reached thelevels needed to support the country's 8% economic goal.

China is banking on the expansion of investment to generate domestic demandand propel economic growth. The country has launched a massiveinfrastructure construction campaign in the first half of the year and hasjust decided to escalate the investment spree in the remaining part of 1998with funds raised through an impressive special treasury bonds issue worth100 billion yuan ($12 billion). So far, the State sector has reached thecountry's annual fixed asset investment growth target of 15%, averaging at17.4% during the first eight months of the year. However, investment by thenon_State sector, which usually accounts for more than 40% of the totalinvestment growth, remained on a dropping track, indicating that totalinvestment growth is still under the 15% target.

In a market where supply of every commodity exceeds demand, industrialgrowth depends on new investments.Consumption growth can also expect astrong push from demand generated by new investments. However, as theeffects of the stimuli measures have not fully shown up, industrial growth,which stood at 7.8%during the first eight months, was under the 1998 goalof 11%. There is no official target for domestic consumption growth. Butthe January_August rate of 7.3% was much lower than the ra te of 11.1% in1997. Prices continued to fall last month on a year_on_year basis. Theconsumer price index dipped 1.4% in August alone and dropped by an average0.6% in the first eight months. The corresponding figures for the retailprice index were 3.3% and 2.4%.
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The second China Fair for International Investment and Trade closed onSeptember 12 with eye_catching results. The five_day event securedcommitments worth $14.2 billion in the form of foreign investment in 2,766projects. Of this amount, $5.52 billion aimed at 1,606 projects wereofficially approved and formally contracted. Agreements on $5.18 billionfor 707 projects were signed and await official consent, and 453 letters ofintent worth $3.5 billion were tent worth $3.5 billion were inked.

Trade transaction agreements totaled $1.05 billion, with imports reaching$189 million, and exports $864 million, Moftec statistics indicated. Lastyear, when the Xiamen Investment and Trade Fair was transformed into anational event tantamount to the China Export Commodities Fair, foreigninvestment clinched at the fair amounted to $4.63 billion and tradetransaction volume stood at $1.1 billion.

Against the backdrop of the one_year_old Asian financial turmoil, theresults of this year's fair indicate that overseas business people stillhave a strong interest in investing in China. Although $4.74 billion of thecontractual foreign investment came from Hong Kong, Macao and TaiwanProvince, the number of projects attracting European and American investorsincreased remarkably. This indicates the diversification of foreigninvestment in China, a goal which the country is aspiring to. Foreigninvestment into the infrastructure and industrial sectors accounted for alarge portion of the committed investments. Foreign investment into China'scentral and western regions soared remarkably. Preliminary statisticsindicated that $5.13 billion or 18.3% of the committed foreign investmentwas aimed at 505 projects in those regions.
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Southwest China's Yunnan Province has recently put on its agenda thetransformation of its development strategy. This province, bordering VietNam and Myanmar, was late opening_up its economy and found itself farbehind other eastern provinces. The province is now facing an unprecedentedopportunity to accelerate its development as the central government takesfresh measures to stimulate foreign investment throughout the country.

Moreover, the Southeast Asian financial crisis, although it did hurtYunnan's use of foreign funds, as well as its exports and tourismindustries, also created a high time for Yunnan to enter the capital marketof Southeast Asia. Enterprises could edge into the market through takeovers,or through holding dominant stakes, and purchasing stocks in sound listedfirms in the region. The province's investment in the region is expected tobe reinforced because Southeast Asia, despite its economic spasm, remainsthe leading export market for Yunnan.

Hong Kong, Thailand and Singapore will become the bridgeheads of theprovince's massive investment move, it is predicted. The province is alsotrying to improve its investment environment by simplifying approvalprocedures and reducing fees and charges for foreign_funded firms.Priorities will be given to infrastructure industries, high_technologydevelopment, agriculture, and the province's four pillarindustries__tobacco, biotech, tourism and minerals. Meanwhile, the provinceis also exploring ways to open its service sector. The retail industry,financial services, insurance and travel agencies will be made moreaccessible to foreign investors. Foreign cooperation will also help thetechnological advancement of State_owned enterprises.
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Despite much difficulty, Sichuan Province will invest a total of 118 billionyuan ($14 billion) in infrastructure to ensure that its goal for theyear__a 9% economic growth rate__will be reached. This year, the State hasdecided to increase investment in agriculture, forestry, irrigation works,railways, highways, telecommunications and environmental protectionnationwide. Those fields have long been vulnerable spots in Sichuan'sinfrastructure construction. The province will treasure the opportunity toreinforce its infrastructure in order to lay a solid foundation for itslong_term development.

In the first half of this year, the growth in Sichuan's GDP was 0.7% lowerthan planned. The economic growth rate for the next half of this year shouldrise to 9.5% to ensure the realization of a 9% growth rate. Sichuan's GDPin the first half of this year totaled 145.8 billion yuan ($18 billion), up8.3% over the same period of last year and 1.3% more than the nationalaverage. Its investment in fixed assets totaled 33.5 billion yuan ($4billion), up 10.3% over the same period last year and 1.7% higher thanthe national average.
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Nanjing, Asia's largest river port city and capital city of JiangsuProvince, located near Shanghai, proposed 241 infrastructure developmentprojects for soliciting $4.5 billion in direct foreign investment when ithosted an international investment promotion forum, in September to carryout infrastructure expansion and corporate reform. Nanjing, like other partsof the country, is pinning its hopes on direct foreign investment to reviveits many SOEs, some of which are now losing money due to their failure toadapt to the market economy. 49 projects involve State_owned enterprises(SOEs) to require at least $10 million of direct foreign investment foreach. The municipal government hopes to invigorate some SOEs which are inthe brink of bankruptcy or in heavy red.

In fact, of the 241 projects, 152 are in pharmaceutical and buildingmaterial sectors. Planned investment in infrastructure and real estateprojects comes to $2. 5 billion, or 55.5% of total sum of targeted directforeign investment. Major efforts have been made this year to encouragecapital inflow from overseas. Senior government officials have led sixdelegations on promotional tours to Europe, the United States, Canada, Japanand Hong Kong and signed agreements relating to 78 projects involving $640million.

Between last January and June, 96 foreign_funded projects were approved withthe contractual foreign investment 32% more than the same period of lastyear. Direct foreign investment has injected a great vigor into the city'seconomy, especially exports therefrom, which have faced pressure from theAsian financial turmoil. Municipal statistics show that FFEs accounted for55% of the city's exports in the period. Taiwan people investmentcontinued to grow in the Taiwan Industrial Park, which is located in theNanjing Economic Development Zone in spite of the devaluation of Taiwan'scurrency. Taiwan investors recently agreed to set up 10 more projects in thepark with a total agreed input of $232 million to bring the total number ofTaiwan_funded projects to 38, with an overall input of nearly $500 million.
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Based on state industrial policies and its own economic development plan,the Ningxia Hui Autonomous Region encourages foreign investment in thefollowing fields in terms of funds, advanced technology and equipment.

1. High_tech industries, infrastructure construction of energy,transportation and communication facilities, and basic raw materialindustries encouraged by the state and the autonomous regional government.

2. Petrochemical, metallurgical, machine building, pharmaceutical, andbuilding material industries, as well as agricultural and sideline productsprocessing and other pillar industries.

3. Projects for the technological renovation of large and medium_sizedindustrial enterprises to improve product quality and grade, lower costs,expand exports and increase economic efficiency.

4. Export products made in the Yinchuan High_Tech Development Zone with highadded value.

5. Projects for comprehensive development and utilization of agriculturalresources, expansion of plantation and breeding sectors, as well as theprocessing of farm and sideline products.

6. Technologies for energy_conservation, the renewal and comprehensiveutilization of resources; environmental pollution control, and urbaninfrastructure construction.

7. Commerce, tourism, catering, information, consultation and other servicesectors.

Key projects

1. Construction of Natural Gas Chemical Corp (with annual production of 1.5million tons of methyl alcohol and 300,000 tons of ethylene). Investment:$1.2 billion.

2. Third_stage project of Big Dam Power Plant. The project calls for theaddition of two 600,000 kw thermal power generators. Investment isexpected to be $1.08 billion.

3. Comprehensive development of licorice root industry. The project tocontrol and fix 6,666 hectares of sand will have an annual output of10,000 tons of licorice root, and process 250 tons of licorice root acid(75% pure) and 50 tons of mono_ammonium salt of licorice root acid (98%pure). Total investment is $25.3 million.

4. Jinlian heat_clearing medicine (to produce 30 million packs of Jinlianheat_clearing medicine annually). Investment: $1.9 million.

5. Hard tooth faced cylindrical gear speed reducer and planet gear speedreducer. The project is to turn out 10,000 sets of hard tooth facedcylindrical gear speed reducer and planet gear speed reducer annually.Investment: $26.2 million.(to be continued)
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China's Real Estate Comprehensive Index rose steadily in July, according toa report from the State Statistics Bureau. The comprehensive index, astatistical indicator for the country's real estate market, rested at103.75 points in July, up 0.81 point from June and up 5.58 points from July1997. The index is based on three major factors: land, capital and the realestate market. It is obtained by calculating 8 basic reference indices: landtransfer fees, the amount of land which has been developed, the amount ofproperty investment and development, paid_in investment, sales prices forcommercial housing, land acreage dedicated to new buildings, the total floorarea of completed housing and the amount of unsold commercial housing.

According to the report, the reference index for property investment rosefrom 103.09 points in June to 105.97 point in July while that for landtransfer fees dropped from 110.72 points to 109.43 points. The referenceindex for housing prices rose from 101.93 points in July while that forunsold commercial housing dropped from 103.88 points to 102.18 points. Sinceits April recovery from a year of stagnation, pushed by growing jointinvestments, China's real estate sector has maintained relatively strongmomentum.
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China plans to beef up investment in railways and roads to sustain economicgrowth, especially in the wake of the loss of some transport facilities tothe recent floods. According to incomplete statistics to the end of Augustissued by the Ministry of Communications, the floods had damaged 46State_level and 483 provincial_level highways and 2,393 county roads tovarying degrees. The damage has disrupted traffic and seriously affectedconstruction work in the sector. Some 29,000 kilometers of roads havebeen damaged, about 2.5% of the country's total.

To safeguard the transportation of relief materials, the ministry hasearmarked 60 million yuan ($7.23 million) for repairs to the damaged roads.Despite the huge losses caused by the floods, the ministry is determined tofulfill the target it set earlier this year. It is fully committed tocompleting its 180 billion yuan ($21.7 billion) investment program in thesector. To ensure a smooth flow of traffic on the highways, personnel havebeen working day and night to repair damaged bridges and roads in the faceof almost insuperable difficulties.

In another development, the Ministry of Railways is to readjust itsconstruction schedule in an effort to do more to expand internal demand andstimulate economic growth in the remaining four months of the year. Railwayconstruction in the past few months has been slower than expected due to alack of preparatory work. Major problems have arisen in acquiring the landrequired for building the lines. These problems have been compounded by theprolonged flooding in certain areas of the country since June.

In spite of flood damage and the abnormally high temperatures this year insome parts of China, the ministry completed investment of 10.37 billion yuan($1.25 billion) in the three months from June to August. This amount isabout 1.4 billion yuan ($169 million) more than that completed in the firstfive months of this year. The State recently decided to increase investmentin the sector by 4.2 billion yuan ($506 million) to give further stimulusto railway development. Adding in funds from local authorities and foreigninvestors, investment in the railway sector this year is expected to amountto 53 billion yuan ($6.4 billion).
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The Chongqing Economic and Technological Development Zone (ETDZ) located atNanping, was founded in 1990 and approved by the State Council in 1993 to bethe sole State_level ETDZ in Southwest China. Taking up an area of 9.6 sqkm, the zone is near to the Chongqing_ Guizhou expressway to the eastand faces the Yangtze to the west and north. The Yangtze Bridge and theEgongyan Bridge link the zone to downtown Chongqing. The zone is easy ofaccess__3 km from the railway station, 5 km from a port and 28 km from anairport. An investment of RMB1.7 billion had been pumped into the zone tobuild water, power, gas, telecom, road and other infrastructural facilities.

Up to October 1997, 270 foreign_funded enterprises (FFEs) have been approvedin the zone with a total investment of $1 billion and $380 million inforeign funds under contract. 890 Chinese enterprises have entered the zonewith registered capital totaling RMB2.8 billion. 67.5% of the FFEs areindustrial enterprises whose investment makes up 72.5% of the total andthere are 22 industrial projects each with an investment of over $3million, forming four pillar industries focusing on motor vehicles, theirparts and components, telecom, biotech, medicine and foodstuffs. Renownedmulti_nationals have made headway in the zone. The zone enjoys preferentialterms given to development zones, municipalities under the jurisdiction ofthe central government, the 3_Gorges Area and the New Pudong Area inShanghai. The zone is entitled to preferential terms worked out on its own.

Taking advantage of its position at the joint of the Yangtze economic beltand the big market in Southwest China. the zone will stand on a vantagepoint in terms of opening up and economic development level, become a windowfor the export_led economy of Chongqing and play an exemplary role for thewhole three_Gorges area and the economic growth in Southwest China. Makingfull use of Chongqing's industrial basis and the resources edge inSouthwest China, and the new_type industrial area linking in an overall wayto the international economies, the zone will optimize its environment forinvestment and fully develop its tertiary industry revolving monetary,trade, services, transportation and information.

At the turn of the century, Chongqing will spend 15 years to give play tothe edges of its own, rev up development and turn the zone into a modernindustrial park focusing on motor vehicles, their parts and components,telecom, bio_products and food_processing.
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Despite the sharp economic downturn experienced by its neighbors, China'sexports of electrical and machinery products stood at $30.12 billion in thefirst half this year, jumping 17.7% from the same period last year. Exportsof high technology and value_added products have experienced dramatic upturnover the past six months. Exports of automatic data processing equipment andcomponents were valued at $3.7 billion in the first five months, up 38% ona year_on_year basis. Diversifying the market for exports has helped keepthe total on the upswing. Europe, North America, Africa, and Latin Americaare increasingly becoming the primary consumer markets for China's exports.

Processing trade exports for machinery and electrical products gained a bigboost, accounting for 60% of the total. There was also a stable increase inthe exports of State_run enterprises. China has set the goal for the exportsof electrical and machinery products at $65 billion this year, up 10% fromlast year. The figure accounts for more than one_third of the target oftotal exports by China set at the beginning of this year.

In 1997, exports of electrical and machinery products were valued at $59.32billion, making up 32.5% of total exports, a record figure. The financialand economic crises in China's neighboring countries have yet to producemuch impact on exports of technology_intensive industries. In fact,electrical and machinery exports reported a month_on_month 2_3% fall duringthe first half this year. However, the Central Government has implementedurgent measures to encourage exports, which usually account for one_fifth ofthe nation's gross domestic product and is crucial to making up thetargeted national economic growth for 1998. These measures includefavorable credits for exporters, an increase in tax rebates formanufacturers and a streamlined export administration system. The vesselexport tax rebate rate was given a sizable increase recently, from 9% to14%. Industry insiders suggest that the government should also increaseexport tax reimbursement rates for such items as power generation equipmenttransmission and distribution equipment, telecommunications facilities,household appliances and auto components.
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Italy will join to explore 850 square kilometers of Bohai Bay. ChinaNational Offshore Oil Corp and Agip Division of ENI SpA signed the contractrecently in Beijing. The 09/11 contracted block is located in northern QikouSag of western Bohai Bay where the average depth of water is 10 meters.Under the contract, Agip will shoulder all exploration risks and conductgeophysical and geological research, three_dimensional seismological datacollecting and well_drilling operations. Geologists at home and abroadbelieve the block will yield substantial oil reserves, because many oil andgas finds have been reported recently in neighboring areas of the block.More and more foreign oil firms are becoming interested in promisingexploration prospects in the Bohai Bay and are eager to develop the areawith CNOOC.
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Motorola will invest $225 million in Sichuan Province. The funds will beused for the third_phase expansion project of Leshan_Phoenix SemiconductorCo Ltd, the first joint venture between Motorola and a Chinese partner. Whenthe project is completed, the company's annual output of semiconductordevices will increase from 2.5 billion to 7.5 billion units. In addition, itwill turn out 1 billion integrated circuits and 250 million transistorsannually. Motorola is satisfied with its arrangements in Sichuan, and plansto build an electronic spare parts and semiconductor plant in the ChengduNew and High Technology Development Zone. Sichuan has approved 6,740foreign_funded projects, with a contractual value of $8.1 billion, rankingfirst in Southwest China.
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The Australia_based Broken Hill Proprietary Co LTD (BHP) has signed acontract with Guizhou Province to jointly seek gold deposits in theprovince's Nanpan River Valley over the next six years. The venture expectsto discover gold mines with reserves exceeding 100 tons in the area. As anew gold production base, Guizhou has witnessed a rapid growth of goldoutput since 1987 when it began gold_mining, and output achieved ayear_to_year increase of 35.7% during 1991__95. So far, some 300 tons ofgold deposits have been found in the province's Buyi_Miao AutonomousPrefecture, where the cooperative exploration will begin. Under the six_yearcontract. the firm will invest $6 million in the first phase ofprospecting. The Carlin_type gold mines to be explored in the autonomousprefecture are of low_grade and metallurgical refractory type. The companyhas promised to apply the latest exploring theories and technologies to thisundertaking.
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China's first credit rating joint venture was established on September 11in Beijing, a move believed to hold great significance for the developmentof China's financial market. The two major shareholders of China ChengxinInternational Credit Rating Co are China Chengxin Credit Rating Co, thecountry's biggest rating firm, and international investor service providerFitch IBCA. Another source of capital stock for the new firm isInternational Finance Corp, a member of the World Bank Group involved in theprivate sector, and China Business Times Industrial Development Co, theinvestment arm of the national business newspaper. The business scope of thenew firm covers the credit rating of bonds, funds and financialinstitutions. Experts said credit ratings, reflecting credit risks ofsecurities and the credit worthiness of financial institutions, areindispensable benchmarks in a modern financial system.
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After dealing with dozens of cooperative projects with Chinese jointventures, the World Bank's private sector arm recently signed its firstcontract with a fully private Chinese manufacturing business. TheInternational Finance Corp (IFC) will set up a joint venture with theZhenjing Leather Products Co, in Leshan, in Sichuan Province. The local firmis Sichuan's biggest non_State exporter. IFC will invest $2 million in thejoint venture, holding a 12.5% share of the new firm's capital stock. Itwill also provide $4.5 million in loans to the joint venture. The IFC isgreatly encouraged by China's decision last year to upgrade the privatesector from a supplementary part of the economy to a significant componentof the economy. They expect the private sector to play a more important rolein the country, which will create more opportunities for IFC operations inChina.
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