China recently revealed a package of measures to step up its foreignexchange management under both the current account and capital account. Themeasures included forbidding domestic firms to repay foreign debts inadvance and stepping up verification on trade documents to counterfraudulent activities aimed at obtaining foreign currency. In a circular,the Chinese Government urged the maintenance of currency stability and theavoidance of financial risk. The State Council ordered local administrationsto further monitor foreign exchange and debt, and crack down on exchangeinfractions such as evasion of foreign exchange payment and black marketactivities. With the development of reform and opening_up, China hasexperienced a sound position in international payments and foreign exchangebalance as well as a rapid increase of foreign currency reserves. To preventevasion of foreign exchange payments, the People¬šs Bank and the StateAdministration of Foreign Exchange (SAFE ) will better supervise foreignexchange dealings in banks and institutes which are authorized to engage insuch business.

In accordance with the circular, the central government will alsostandardize foreign trade agent services and strengthen management of tradewith overseas enterprises. The SAFE will punish businesses dealing withforeign exchange matters without documents and letters of credit, or doingso with false documents. In case enterprises with import and exportmanagement rights are involved in illegal activities resulting in values ofmore than ”ē1 million, the government will revoke their import_exportpermits, and accordingly punish those responsible for the infractions. Inaddition, on October 7 SAFE called on firms which have bought foreigncurrency through fraudulent means to confess to their wrongdoing immediatelyand return their illegal foreign currency.

The government departments involved will step up verification of tradedocuments presented for the purchase of foreign currency and crack down onfraudulent practices. In addition, customs offices throughout the countryare urged to strengthen their administration of declarations and documentsconcerning foreign exchange payments. A computerized network covering theentire country linking customs and foreign exchange administrations will beestablished for more effective management. Furthermore, nationwideadministrative offices for industry and commerce are required to clear outunqualified companies which have no capital, warehouses or regular offices.Those who evade foreign exchange payment and engage in arbitrage must bepunished severely. This move aims at reinforcing control over the capitalaccount.

In late 1996, China introduced currency convertibility under the currentaccount, which mainly covers payments for foreign trade and services. Butthe currency is not convertible under the capital account__the fundamentalreason why China has been relatively insulated from the Asian financialcrises. However, there are still loopholes in capital account management.The ban on domestic firms¬š offshore foreign exchange holdings has alwaysexisted but many firms have deliberately flouted the rule. Public securitydepartments will investigate cases of falsification of documents and lettersof credit. It also urged strict control regarding the scale of foreignloans. The State will implement uniform supervision of the total volume andstructure of foreign debts.
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Due to take effect on January 1, 1999, the new law establishes a modifiedland_management system centering on land_use supervision. The right toapprove land use is being returned to central and provincial governments.The current land_management system was instituted under the influence of theplanned economy, with cities and counties having the major responsibilityfor management of their land. After the introduction of a market_orientedeconomy, the old system was unable to achieve a suitable balance betweeneconomic development and rational land use.

Under the new land_use system, land is divided into farmland, land forconstruction, and unutilized land. Land use should be consistent with thecategory of the land concerned. The revised law establishes a strict systemto examine farmland being used for other purposes. The new land_use lawalso strengthens law_enforcement supervision and calls for deepened land_usereform. Farmers¬š rights to contract arable land for agricultural purposesare protected by the law, which aims to encourage them to value arable land.

The new law is an overall revision to the current legislation rather thanamendments to a few articles. It signals a major transformation in the useand management of land. The existing Land_Use Law, which took effect adecade ago, has played its role in the development and utilization of landresources and the protection of arable land, but it cannot resolve thecomplex problems that have appeared on the way to a socialist marketeconomy.
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Reconstruction in areas devastated by the floods this summer will offerunprecedented investment opportunities to private capital and foreigninvestors. Badly damaged firms that caused serious pollution, relied onout_of_date technology or showed no sign of making profits prior to thefloods are to be closed or allowed to die a ”°natural" death. Privatecapital is expected to flow into the areas where the closure of such plantscreates fresh investment potential and room for development. The StateEconomic and Trade Commission (SETC) has established a principle that thereconstruction should not simply copy the pre_flood situation. For yearsmany State enterprises have been expected to have their ownership structurealtered.

SETC is engaged in discussions with other ministries on new policies toencourage structural adjustment of industries and technical upgrading in theflood_stricken areas. Some building materials and construction companies inBeijing have rushed to Hunan and Hubei provinces to grab orders andcontracts. As the floods recede, local officials are talking aboutrestarting credit programs for fledgling private enterprises. Regionalauthorities that have made persistent efforts to foster non_public ownershipseem well aware that this is an ideal moment to usher in more privatecapital to restructure old_fashioned economic structures.

Analysts said a new wave of bankruptcies, mergers and acquisitions is likelyto emerge in view of cheaper labor, lower land_use costs, and lower pricesfor property rights of companies affected by the floods.The government¬šsrole should be confined to ”°outlining targets and setting quality standardsfor projects."

It is estimated the State_allocated funds for reconstruction, including bankloans and capital funds, could bring up to another 300 billion yuan(”ē36.14 billion) in investment to the flood_hit areas. In the interests ofmodernizing industries, SETC has called on authorities in the affectedregions to optimize their industrial mix, raise technological levels andavoid simple replicas and duplication of projects.
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More Chinese trading companies are setting up branches in Pudong to takeadvantage of Shanghai Port__the busiest in China__to boost their exports.According to the Pudong New Area Administrative Commission, six companiesfrom Jiangxi and other provinces will soon open branches in the area. Pudongis the only place in China where the government allows companies andenterprises from the rest of the country that have trading rights toestablish operations. But many companies were deterred because their yearlyexports couldn¬št meet the previous requirements set for a branch in Pudong.

According to the new rules issued by the Ministry of Foreign Trade andEconomic Cooperation, trading companies from central and western regions canopen branches in Pudong if their annual exports exceed ”ē25 million whilefirms from the coastal regions must surpass ”ē50 million in their annualexports. Previously, the provision was a ”ē100 million for all non_Shanghaicompanies seeking to set up a trading branch in the area. From 1995 to theend of August, 1998, trading firms from around China were approved toestablish their branches in Pudong.
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China announced on September 24 anti_dumping regulations for the domesticsteel industry in an effort to ensure fair competition in view ofoversupplied markets. The measure comes three months after similarregulations were established for the flat glass industry. The text of theregulation, co_released by the State Development and Planning Commission(SDPC) and the State Bureau of Metallurgical Industry, said some steelproducers have cut prices in search of greater market shares, a move whichwould eventually result in greater losses for the whole sector. Themetallurgical sector, in cooperation with price monitoring administrations,will punish speculators who offer a sale price lower than production costsafter the regulation became effective last month.

The anti_dumping regulation covers three kinds of steel products includingrods, hot_rolled steel and threading steel. The country¬šs 35 large andmedium sized steel manufacturers recently signed an agreement supporting theanti_dumping measures. China¬šs steel sector has already confronted greatimport pressure from Japan and South Korea. The two large steel producershave benefited from the financial turmoil in Southeast Asia and haveexported at lower prices because their currencies have been depreciated.China imported 7.64 million tons of steel products in the first eight monthsof this year. South Korea exported 1.6 million tons to China, an increase of57£„ from the same period last year.

The increasing momentum of domestic steel dumping aggravated a toughexternal situation which the steel sector has already been dealing withsince the second half of last year. The domestic price of steel products onaverage dropped 180 yuan (”ē21.69) per ton in the first eight months thisyear, down 6£„ from last year. According to a survey conducted by themetallurgical bureau, most of the main 21 steel products suffered a largeprice cut.

China, with a steel output of 107.6 million tons last year, has maintainedits position as the world¬šs largest steel producer for two consecutiveyears. But, outmoded technologies and products have hobbled themetallurgical sector¬šs development. Therefore, the sector is focusing ontechnological renovations and product upgrading in coming years.
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Zeng Peiyan, minister of the State Development Planning Commission, voicedon September 23 strong confidence in China¬šs ability to achieve itseconomic goals for 1998. The targets proposed by the government at thebeginning of the year__an 8£„ growth in gross domestic product (GDP);inflation of less than 3£„; and a stable exchange rate __ can all bereached. He reiterated China¬šs stance on maintaining the value of therenminbi, saying the country does not want a devaluation of the currency toruin investors¬š confidence in China.

Zeng cited the State sector¬šs surging investment growth in August asevidence for an economic recovery, saying an escalating infrastructureconstruction spree in the remaining part of the year will acceleratefixed_asset investment growth. Facing a slump in export growth and stagnantdomestic consumption, China is counting this year on an expansion ininvestment to generate domestic demand and fuel economic growth. The countryneeds 15£„ to 18£„ expansion in fixed_asset investment to support the 8£„GDP growth objective. To reach that rate, the country launched a massiveinfrastructure construction campaign in the first half of the year, whichresulted in a year_on_year 17.7£„ increase in the State sector¬šsfixed_asset investment in the first eight months.

But it is feared that a slowdown in investment growth in the non_Statesector__which accounts for 40£„ of total investment_could erode theaccomplishments of the State sector. The government has therefore decided toboost spending with funds raised through a huge treasury bond issue worth100 billion yuan (”ē12 billion). This will prompt banks, local governmentsand enterprises to dish out another 250 billion yuan (”ē30 billion) for theprojects. All these inputs combined will add more than 1 percentage point ofGDP growth this year.

Domestic consumption is also showing signs of recovery and will make itscontribution to 8£„ economic growth. The country¬šs retail sales volume,adjusted for price changes grew by 13£„ in August compared with the samemonth last year. Accelerated consumption growth was accompanied by aslackening in price deflation, which hasdbeen prevalent for the last 11months. Although retail prices were 3.3£„ down in August on a year_on_yearbasis, they rose 0.8£„ over the previous month. But since year_on_year priceindices have remained negative throughout the year, it will be very easy forthe country to contain inflation within the 1998 target of 3£„.
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Responsible government departments are formulating measures to furtherfacilitate domestic enterprises to invest abroad. The key areas are theMiddle East, Central Asia, Southeast Asia, South Africa and LatinAmerica. Until now, China has set up more than 6,000 enterprises in 130_oddcountries and regions, with investment exceeding ”ē6 billion. Facing alack of certain resources, some domestic enterprises have sought todevelop overseas resources. These include the extraction of iron ore inPeru, oil in Sudan and exploitation of timber resources in the SouthPacific.

Many have also gained advanced technology and management expertise directlythrough purchasing overseas companies, especially small and medium_sizedtransnational companies. This is a new trend for domestic enterprises movingabroad. In Shanghai alone, there are more than 400 enterprises withoperations in some 70 countries, involving a total investment of ”ē300million. Following the Asian financial crisis, the Chinese government plansto speed up its investment centered on certain key projects in SoutheastAsia, while encouraging domestic enterprises to conduct various forms ofeconomic cooperation with counterparts in the region, so as to promotedevelopment of related businesses at home.
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Despite suffering huge economic losses from the worst flooding of theYangtze River in 45 years, Central China¬šs Hubei Province is confident itwill meet its target of maintaining economic growth of 12£„ for 1998. Theauthorities¬š cautious optimism is based on the province¬šs sustainedeconomic growth in the first half of the year and a package of measures thatthe provincial government has launched to encourage all localities toconcentrate on flood control and facilitate industrial and agriculturalproduction in the disaster_stricken regions. According to projectionsunveiled by the Provincial Statistics Bureau, Hubei¬šs GDP gross domesticproduct expanded by 9.5£„ in the first half of this year, which is 2.5percentage points higher than the national average.

The province¬šs output of summer grains totaled 5.02 million tons, the thirdlargest harvest in its history, while industrial output grew by 9.9£„, ortwo percentage points more than the national average. Fiscal revenue andforeign trade also witnessed significant growth. Hubei¬šs industrial sectorsuffered severe losses in August as flooding worsened. In Wuhan alone, over1,000 enterprises had to stop operation because of the disaster. However,losses were minimized as the local government assisted Wuhan¬šs 55 keyenterprises with more capital, power supply and transportation. As a result,Wuhan¬šs industrial sector experienced remarkable progress during the month,with output registering an increase of 11.8£„ over the corresponding periodlast year.

The provincial government has also unveiled a series of policies to help itsfarmers resume agricultural activities on over 25 million mu (1.70 millionhectares) of cultivated fields affected by the deluges. Major steps willinclude increasing the province¬šs vegetable cultivation, raising the perhectare yield of late rice in regions not affected by the floods anddeveloping livestock farming and township industries.
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China¬šs Guangxi Zhuang Autonomous Region has worked out its blueprint forthe 21st century. This target is one year ahead of the national schedule foreliminating poverty across the country. A drop in the impoverishedpopulation, along with the region¬šs enhanced economic strength and improvedinfrastructure facilities, offers good conditions for Guangxi to achieve anew economic take_off.

Rich mineral and tourism resources, an advantageous location and fasteconomic development in the Eighth Five_Year Plan period (1991_95) have laidgood foundation for the take_off. In that period, the region chalked up anaverage annual growth rate of 16.6£„, 4.1 percentage points higher than thenational level. Guangxi is the passage from South to Southwest China andpresents the shortest route for southwestern provinces to reach the sea.

However, despite rapid growth, the region¬šs economic development remainslow with per capita gross domestic product at only three_quarters of thenational average. In seeking its own development route, Guangxi is exploringa development strategy with its own characteristics. Five economicdevelopment zones have been outlined in order to make the best use of theregion¬šs rich resources. Southern coastal Guangxi is likely to grow intothe spearhead of the region, concentrating on harbor construction, marineindustry and high_tech industry. Liuzhou, a key industrial city in centralGuangxi, will give top priority to the renovation of traditional industries.Northern areas, boasting beautiful scenery like that in Guilin, will givefull play to tourism industry, while the eastern part of the region willdevelop modern agriculture. For the poorest, western part of the region,mineral development, animal husbandry and bamboo will become pillarindustries.

The region¬šs economy bottomed out in the second quarter and is now on anupward course. The growth target for this year is 10£„. Next year, theregion will put attracting foreign investment and opening wider to theoutside world at the top of its agenda.
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Beijing is pinning its hopes on high_tech industries to promote its economicgrowth. In 1997, the industrial added values of Beijing¬šs high_tech sectorsreached 12.47 billion yuan (”ē1.5 billion), representing 23.7£„ of thecity¬šs total industrial added values. According to plans, the capital¬šshigh_tech industries will share 25_30£„ of its total industrial added valuesby 2000. The capital is implementing a series of favorable policies tofurther boost high_tech sectors, said an official with the Beijing municipalgovernment.

Beijing is to establish a high_tech risk guarantee fund and a high_techinvestment fund to provide capital support for enterprises. In co_operationwith the Ministry of Science and Technology and the China SecuritiesRegulatory Commission, the city is eager to get excellent high_tech firms tofloat stocks in domestic and international markets.

A service center has been opened to help improve information exchangesbetween technical inventors and investors in the Beijing Economic andTechnology Development Zone. A similar center will be established in theBeijing High_tech Development Pilot Zone. Moreover, the municipal governmenthas created 10 special favorable policies to help private high_tech firms.In line with State institutional reforms, Beijing is ready to transform somelarge scientific research institutes into high_tech enterprises. The formerMetallurgy Industry Ministry¬šs Automation Research Academy, for example,will be reorganized into a high_tech firm by merging with some otherresearch institutes.

The city is determined to invest a lot of funds to upgrade its traditionalindustries by applying the latest technologies. Currently, Beijing¬šshigh_tech firms mainly focus on information technology, electronics andmachinery and new energy industries. The municipal government is encouragingdevelopment of the biological and medical sectors, environmental protection,and new materials industries. Aided by China¬šs reform and opening_uppolicies, Beijing¬šs high_tech industries have achieved explosive growthin last two decades.
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A new local regulation aimed at protecting the investment rights of overseasChinese has recently been approved by the Standing Committee of theprovincial People¬šs Congress of East China¬šs Fujian Province. Theregulation will help improve Fujian¬šs investment environment and stop suchillicit activities as arbitrary charges levied on overseas Chineseinvestors. The province has benefited greatly from its large population ofoverseas Chinese who contribute some 70£„ of the province¬šs overseasinvestment. The regulation clearly states that the necessary examinations ofenterprises funded by overseas Chinese can only be conducted by a certaingroup of government departments, and also must be in strict accordance withthe law. Moreover, the regulation legalizes preferential treatment foroverseas Chinese investors in such fields as taxation and infrastructure.

Fujian has emphasized the introduction of overseas capital for itsdevelopment of infrastructure such as expressways. By the year 2007, theprovince is expected to open expressways connecting nine cities with atotal length of 1,200 kilometers. Fujian has made progress in expresswayconstruction since 1992. The province will emphasize construction of the154_kilometer Fuzhou_Quanzhou expressway this year. Through June, 2.5billion yuan (”ē302 million) has been spent on the project. The opening ofthe Wulongjiang Bridge by the end of 1998 will mark the completion of thefirst expressway to the provincial capital, Fuzhou.

The province has nearly 50,000 kilometers of expressways. Xiamen, Quanzhouand Zhangzhou are connected by expressways with a total length of 120kilometers. By the end of 1999, the Fuzhou_Quanzhou expressway will be inoperation. The expressways will help Fujian invigorate its economy.
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6. Grape Production and winery. The project is to expand the grapeplantation area by 2,000 hectares and build a winery with an annualproduction of 25,000 tons. Investment: ”ē45.6 million.

7. Highway construction. Transfer of the operational rights of LiupanshanMountain tunnel, Shizuishan Yellow River highway bridge, Ruxi and Yinguhighways, and the Yellow River Bridge. The transfer period will be 20_30years, and the price will be negotiated with interested parties.

8. Shahu Lake tourist resort. The project is to build a canal, Huyuan Hotel,Jinguiwan (Golden Turtle Bay) Holiday Resort, Lotus Garden and other scenicspots. Investment: ”ē15.7 million.

9. Blood regulating valve. The project is to introduce the manufacturingtechnology of computer_controlled blood collection system, with annualproduction capacity of 120 million pieces. Investment is expected to be”ē28.9 million.

10. Joebao and anti_cold capsule. To produce 120 million Jiebai capsules ayear, and to develop and produce anti_cold and coronary_artery activatingcapsules. Investment: ”ē1.8 million.

11. Antibiotics (yearly produce 600 tons of hydrochloric acid TCs tetra_cycline and 100 tons of EM erythromycin). Investment: ”ē15.7 million.

12. Coke molding. The project is designed to produce 300,000 tons of hotbriquette formed coke a year. Investment: 36 million yuan.

13. Yellow River Shapotou Water Conservancy Project. The project, with 26million cubic meters of reservoir capacity and an installed capacity of153,200 kw, is expected to develop 26,733 hectares of irrigated land, andimprove the irrigation conditions of 67,333 hectare of farm land.Investment: ”ē244 million.

14. Medium_and Micro_Hole Non_Patterned Bratterned Granulated Coal. Theproject is to annually produce 10,000 tons of such coal. Investment: ”ē6million.

15. Coal plastic compound particles. The project is to produce 10,000 tonsof such particles. Investment: ”ē4.9 million.

16. Sanxin ZK series vacuum boiler. The project is to expand the productionand sales scale of vacuum boilers, as well as the development anduniversalization of ZKY/ZKQ oil_ and gas_fueled boilers. Investment: ”ē3.5million.

17. Drip irrigation pipes. Annual production will be 6.72 million meters(436.8 tons) of 20_mm drip irrigation pipes. Investment: ”ē1.42 million.

18. High_grade daily_use paper. Annual production is expected to be 10,000tons. Investment: ”ē14.5 million.

19. Expansion of Helanshan Ferroalloy Factory. Annual production isestimated at 4,500 tons. Investment: ”ē1.9 million.

20. Construction of Hongliang Coal Mine. Annual production capacity: 300,000tons. The coal seam is 103 meters thick with exploit_able deposits estimatedat 15.72 million tons. Investment: ”ē6.3 million.

21. Shiauishan Coal Slurry Waste Rock Thermal Power Plant. Annual generatingcapacity is 600 mwh. Investment: ”ē73 million.

22. Carbon Dioxide Gas Fertilizer and Cellulose. The project plans toproduce annually 2,000 tons of carbon dioxide gas fertilizer and 1,200 tonsof cellulose. Investment: 47 million yuan.

23. Sodium Chlorate and Product Development. Annual production will be10,000 tons of sodium chlorate, 2,000 tons of chlorate dioxide, 1,000 tonsof sodium chlorous acid and 3,000 tons of hydrogen peroxide. Investment:”ēl6 million.
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China¬šs State Economic and Trade Commission (SETC) has announced newstrategic plans in an effort to achieve sustained growth in the petroleumand chemical industries during the next decade. The country will focus onsome new businesses, in addition to chemical fertilizers, caustic soda andsoda ash. To speed up prospecting and exploration for crude oil and gas, andthe development of the petrochemical industry, is one of the most importantstrategies for growth in the national economy.

By 2000, China is expected to fall short of its demand for crude oil by30_40 million tons. Crude oil output in 2000 is expected to be only 145million tons and the output of natural gas 35 billion cubic meters. Toguarantee profits of State_owned oil exploration enterprises, the key tothis year¬šs economic target, the Chinese Government will have to suspendoil imports beginning in the fourth quarter rather than purchasing oil atcurrent low prices and creating future reserves. Production of ethylene willrise to about 4.6 million tons at the turn of the century, leaving a hugegap to be filled because forecasts of actual demand are expected to be 7million tons. Last year, China produced 3.58 million tons of ethylene.

Synthetic materials, fine chemicals, rubber products, and chemicals used forenvironmental production are four other major product lines SETC urgedenterprises to develop intensively. The output of synthetic resins was 6.49million tons in 1997, but imports exceeded the figure by a large margin, at9 million tons. China will push for establishment of several productionbases each with a capacity of 5 million radial tyres by 2000. The output ofautomobiles is expected to hit 2.7 million a year by then. The marketpotential for chemical products and equipment was described as ”°huge"although current annual sales of environmental products in China isestimated at only 7 billion yuan (”ē843 million).

To ensure the economic growth this year, the central government recentlyinitiated a series of measures, including anti_smuggling moves and a ban onimports of refined oil products, to revive flagging demand. The ban onchemical fiber processing trade is expected to be implemented soon. Therestructured petroleum and chemical industries account for 7.7£„ of thenation¬šs industrial assets. Statistics showed that rebuilding inflood_stricken areas has created an increased demand for plastics andchemical fibers, injecting life into a struggling petrochemical sector.
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The soaring packaging demand in China¬šs rapidly developing sectors ofpharmaceuticals, cosmetics, food, textiles, chemicals and building materialshas prompted China¬šs packaging industry to turn over a new page in itsdevelopment, according to Qiu Chunpu, head of the China Packaging IndustryAssociation. China¬šs packaging industry shoulders the task of packagingover 1 trillion yuan (”ē120 billion) worth of domestic products and ”ē100billion worth of exports each year. The industry has experienced an averageannual growth rate of 19£„ over the past two decades. Last year, the sectorreaped a total industrial output value of 154 billion yuan (”ē18.6 billion),up 10£„ from 1996. By 2000, China¬šs packaging industry would achieve anoutput value exceeding 193 billion (”ē23 billion), it is predicted.

The sector is expected to produce 9 million tons of paper packages, withpaper packaging products reaching 9.2 million tons, 3.3 million tons ofplastic packages, 2.3 million tons of metal packaging products and 550,000packaging machines by the end of this century. Meanwhile, the moreeconomical and environmentally friendly packaging materials such as paperand metal have taken a lead in China¬šs packaging sector to share over 50£„of its total output value last year, while the output of more outmodedpackaging materials such as glass continues to fall.
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Xiangfan, the second largest city in Hubei Province, expects to become oneof China¬šs major auto parts manufacturing bases. ight componentsmanufacturing groups are to be established in Xiangfan, 100 kilometers westof Shiyan, where Dongfeng Motor Group is headquartered. The city is idealfor developing a components base for Dongfeng Motor Group as well as otherauto makers, industry insiders say. Xiangfan produces 5 billion yuan (”ē602million) of automotive products. Of that, 3 billion yuan (”ē361 million) isfrom auto parts. Dongfeng, which produces full_range motor vehicles formid_size trucks and passenger cars, is among the country¬šs top four majorauto makers. By the end of the century, it will produce 1 million vehicles.Last year, it made 153,000 models. For the Ninth Five_Year Plan period(1996_2000), Dongfeng will spend 7 billion yuan (”ē843 million) forcomponents made in Xiangfan.

Xiangfan¬šs clients are diversifying. 60£„ of the parts made in Xiangfan arefor auto makers elsewhere in China. Last year, automotive production valueconstituted 20£„ of the city¬šs industrial value, compared to 7£„ inShanghai. Last year, Shanghai produced 200,000 passenger cars; Beijingturned out 130,000; and Tianjin assembled 150,000 cars. Xiangfan generated36 billion yuan (”ē4.3 billion) of production value in 1995, a 6,600 yuan(”ē800) per capita gross domestic product, 7£„ higher than the country¬šsaverage. The Xiangfan automotive industry started in the 1960s. About 180components manufacturing plants produce 600 kinds of auto parts. About 45£„are large and medium enterprises, representing an industrialized levelhigher than that in many other auto_oriented provinces and municipalities.The large and mid_size enterprises include a foundry that turns out 30,000tons of products annually; a ”ē157 million assembly line that makes 150,000light_duty vehicles annually; an automobile research and developmentcenter and Dongfeng¬šs ”ē482 million sedan engine assembly line.
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China¬šs machinery and electronics exports generated 74£„ of the country¬šstotal export growth in the first half of this year. The total export volumeof the sector in the six_month period rose 17.7£„, or ”ē4.54 billion, fromlast year to hit ”ē30.12 billion. The nation¬šs average export growth ratewas 7.6£„. The steady growth of the machinery and electronics export sectorhas played an extremely important role in shoring up China¬šs exportaggregate against the baneful influence of the Asian financial turmoil. Butto reach the 10£„ growth rate target for the whole year requires the sectorto achieve ”ē6 billion in export volume in each of the latter six months,which will be an arduous task.

It is predicted that the machinery and electronics export sector will rankfirst on China¬šs 1998 export scoreboard. The high technological andvalue_added nature of the machinery and electronics products have given thema relatively stronger capacity to grapple with the Asian financial turmoilcompared with other export sectors. Whether the sector can turn in asatisfactory performance in the second half of this year will decide whetherChina can reach its ”ē345 billion export goal by the end of this year.Inview of the current Asian economic crisis, more efforts are being made totap markets such as those in Europe, America and Africa. However, manyChinese traders have altered their market strategies to maintain their Asianmarkets, aware that if they lose the traditional markets in Asia now, theywill have to pay a higher cost to re_enter them in the future. Exportsmade by for eign_invested ventures accounted for 59.5£„ of China¬šs totalmachinery and electronics export volume in the period.
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A large Sino_Japanese insulator joint venture officially went into operationearly in September in Tangshan, Hebei Province. The joint venture involves atotal investment of ”ē28 million and is co_funded by NGK Insulators Ltd andItochu Corp of Japan, plus the Tangshan High Voltage Porcelain InsulatorWorks. The joint venture__NGK Insulators Tangshan Co Ltd will make use ofthe advantages of all three partners to tap both domestic and overseasmarkets. NGK Ltd is one of the world¬šs largest high_voltage insulatorproducers and claims its products have higher quality than any of theirrivals. Products manufactured by the Tangshan joint venture will adopt thesame technical and quality standards as those produced in Japan, aiming tomake the joint venture the biggest and best ultra_high strength suspensioninsulator producer in China.
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As the largest foreign investor in China¬šs chemical industry, BASF hasalready set up 10 joint ventures in China. Recently, it openly claimed thatit would proceed its investment project in China. BASF is to start a 2.75billion petrochemical project, including a naphtha_cracking unit with anannual output of 600,000_ton ethylene, an extraction plant of aromaticcompounds and butadiene, gas synthesizing plant, gas separating and powerplant to source naphtha from the Chinese counterpart. BASF has also decidedto set up jointly with its Chinese counterparts several units in Chinaincluding one to produce of 200, 000 tons of polyethylene a year, oneproduce 250, 000 tons of ethylene oxide, and another unit producing 300,000 tons of styrene as an supplementary facility for producing 410,000 tonsof styrene polymeric a year. Propylene extracted from cracking naphtha willbe sufficient for producing 116,000 tons of propylene and 250,000 tons ofcarbonly synthesized alcohol yearly. The project is scheduled to beginoperation in 2003.
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The global building materials group Lafarge signed on September 23 a jointventure agreement with the Chengdu Dujiangyan Building Materials Corp tobuild a new ”ē150 million cement plant in Sichuan province. The new plantwith a capacity of 1.3 million tons will be the largest modern cement plantin the southwest of China. It will support the large_scale infrastructuredevelopments being launched in Sichuan and will give Lafarge and itspartners important competitive advantage. Lafarge will have a 75£„ share ofthe joint venture and will also be the operator of the plant which isexpected to be completed by 2001. So far Lafarge has committed around ”ē200million since 1994 in new investments in China.
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A new large Sino_US joint venture, with total investment of ”ē30 million toproduce petrochemical products, was officially signed on September 23.Yangzi Petrochemical Industrial Corp (YPIC) and Eastman Chemical Ltd inked acontract to form the joint venture to produce Eastotac hydrocarbontackifying resin for adhesive manufactures. The new plant will be locatednear the existing YPC site in the Dacheng District of Nanjing. Constructionis expected to begin in mid_1999 and be completed by 2000. Eastman¬šsEastotac resin is used by adhesive manufacturers to produce hot_meltadhesives for infant and feminine hygiene products, packaging, glue sticks,tapes, labels, and other adhesive applications. The new plant, a 50_50 jointventure is Eastman¬šs first one in China. Currently, all Eastotac resin ismanufactured by Eastman in the United States.
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Cultor (China) Company Ltd officially kicked off on September 16 inGuangzhou, adding flavors and flavor enhancers to the Chinese market. The”ē3.2 million wholly_Finnish funded company will study, analyze and designproducts which it hopes will sell well in the Chinese market. The companyhas several well_equipped labs which officially started operation onSeptember 16 to provide customers with local manufacturing of highperformance nutritional products and technical support. Production willformally begin next year. Main products include low calorie and health foodingredients, flavors and flavor enhancers and preservatives.
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