CIEC ECONOMIC BRIEF
C a t a l o g
Foreign_invested firms have received an extended tax break from the Chinese Government__until the end of 2000, according to a circular jointly issued on December 17, 1998, by the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Finance and the State Bureau of Taxation. The tax_exemption extension applies to the value_added tax and customs duties for goods and services exported by these firms, provided they were established before December 31, 1993.
However, refunds of taxation differences between the total of the value_added, consumption and business taxes compared to commercial and industrial consolidation taxes for these firms will be eliminated effective January 1, indicates the circular. China¬ğ s taxation policies stipulate preferential taxation treatment for foreign_funded firms expires five years after their establishment. Foreign_funded firms, especially those in processing, complained about the pending expiration of the preferential taxation treatment, arguing it will increase export costs and impair competitiveness. They are especially concerned due to the lingering Asian financial turmoil.
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A new price regulation is expected to prevent enterprises from launching price wars and safeguard the profits of companies unfairly attacked. The oversupply of industrial products in recent years has prompted many enterprises to slash prices, sometimes to a level below production cost. The regulation on preventing the dumping of industrial products at low market prices, issued last November by the State Development Planning Commission and the State Economic and Trade Commission, aims to bring an end to price wars.
Market competition is generally good because it forces enterprises to reduce production costs, improve management and technology, and carry out promotional activities. However, some enterprises cut their prices regardless of the consequences, often not including depreciation charges and interest on bank loans in their production cost. Indiscriminate price_cutting has brought chaos to the market as it has forced other enterprises to follow suit to avoid losing market share.
The regulation, drafted in accordance with the Price Law, is the first of its kind in China. It stipulates that an enterprise is prohibited from selling its products at lower_than_production cost. Companies excluding competitors from the market with malicious intent will also be treated as breaking the law. It is reported that authorized industrial administration departments, such as bureaux of light industry and metallurgy, will regularly issue the average production cost of products in certain industrial sectors and use this average as a guide for market prices. Large enterprises with a dominant market position are not allowed to establish cartels to set monopoly prices and seek extra profits. The economic principles followed in drafting the regulation are those of encouraging competition, respecting enterprises¬ğ rights to decide market prices, and preventing dumping.
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The Ministry of Railways (MOR) and a group of enterprises will soon be approved to issue corporate bonds to finance the country¬ğ s infrastructure construction spree. The quota for MOR is 1.6 billion yuan (¡ç192 million). Companies on the candidate list include central and regional enterprises in such sectors as highway construction, urban sewage disposal and treatment, and telecommunications. The China International Trust and Investment Corp late last year issued 700 million (¡ç84 million) in bonds to fund the construction of an expressway in Chongqing in Southwest China and a bridge in Ningbo, Zhejiang Province. Related sources said China is expected to issue 2 billion yuan (¡ç240 million) worth of enterprise bonds in January 1999 to finance the second phase construction of the giant Three Gorges Project. The registered bonds will include three_year bonds valued at 1 billion yuan (¡ç120 million) and eight_year bonds valued at 1 billion yuan (¡ç120 million).
China launched a gigantic infrastructure building program earlier last year to stimulate economic growth. Officials said the main funding sources for the program included last September¬ğ s 100 billion yuan (¡ç12 billion) treasury bond issue, bank loans, and enterprises¬ğ own reserves. China¬ğ s corporate bond issuers must obtain official approval before going ahead. Financial authorities usually examine applicants once a year and applicants from different industries are examined together. Last year, the authorities singled out infrastructure projects for examination first to enable qualified firms in this sector to get the funds as soon as possible. Applicants from other industries would be examined later.
Officials are sure China¬ğ s use of corporate bond issues will be expanded. Foreign financial experts have suggested China should pursue a much faster expansion of its corporate bond market to create a more sophisticated capital market and broaden investment options for the country¬ğ s fast_growing pension funds.
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China¬ğ s State Statistical Bureau and the State Administration for Industry and Commerce have jointly issued Regulations on the Classification of Enterprise Registrations to reflect the joint development of all sectors of the economy and the progress in regulating the structure of ownership serving as a basis for decision taking and operation of government administrative departments.
The regulations classify the enterprises into three categories for registration: 1. Domestic enterprises which will be sub_divided into State_owned enterprises, collectively_owned enterprises, joint stock cooperative enterprises, associated enterprises, limited liability companies and limited stock companies and private enterprises; 2. Enterprises using investment from Hong Kong, Macao and Taiwan, which include joint equity ventures, joint cooperative ventures and wholly_owned enterprises and stock companies; 3. Foreign_funded enterprises, which include joint equity ventures, joint cooperative ventures and wholly_owned enterprises and foreign_funded limited stock companies.
The similar regulations issued in 1992 will be abolished upon effective of the new regulations.
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Gradually giving national treatment to foreign_funded enterprises (FFE) is becoming an important way of China to perfect its investment environment. Informed sources believe that foreign business people will soon enjoy national treatment as a whole. Liu Mingkang, Vice President of the People¬ğ s Bank of China said recently that foreign financial institutions will be allowed to do Renminbi business in a wider scope and greater volume, and the problems concerning a unified interest rate to domestic and foreign_funded financial institutions and national treatment are under study.
Zhang Hongxiang, Vice Governor of Hubei Province said that to gradually allow foreign business people to enjoy national treatment is an important aspect of Hubei¬ğ s new policy of preferential treatment for encouraging foreign investment. FFEs in Hubei will enjoy the same treatments as domestic enterprises not only in the supplies of water, electricity, heat, and gas, water discharge, telecom, and traffic, but also pay the charges for housing, properties purchase, medical care, schooling of their children, and travel. Sun Guangming, Vice Minister of Foreign Trade and Economic Cooperation pointed out that China will speed up the establishment of a unified opening and orderly competition market to realize national treatment to FFEs.
Li Rongrong, Vice Chairman of the State Development Planning Commission said that except the key ones, new projects will no longer have to be sent to the government for examination and approval but only to be registered for record. Under the principle of · Whoever makes the investment and the decisions will have to take the risks" of their own when investing into industries, products and technologies the development of which is allowed by the government and it will be up to the enterprises to decide and take the risks. For matters of environmental protection, land use, etc it has only to go through procedures stipulated by law. And for projects which must be examined and approved by the government, the procedures will be simplified, with emphasis to be laid on whether or not the investment and macro layout of the project are rational and in conformity with the State policies and the law and regulations. The pace of commercialization of the banks will be stepped up. In the future, the commercial banks will make the decisions and take the risks of their loans according to related laws and asset liability ratio without any interference by local governments.
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To further promote Taiwanese investment in the Chinese mainland, the Ministry of Foreign Trade and Economic Cooperation has adopted seven new measures. These are:
1. Priority will be given to Taiwanese_funded projects among similar ones, along with continued more relaxed policies toward them. This measure is designed to benefit large businesses in Taiwan who are later investors in the mainland due to interference from the island¬ğ s authorities. This is also in favor of items concerning capital construction, high technology, banking and commercial services.
2. The newly amended Industrial Catalog Guiding Foreign Investment will be implemented in an all_round way, encouraging Taiwanese investment to go to agriculture, new and high_tech industries, basic industries, infrastructure, environmental protection and industries producing goods for export. Taiwanese investment will be guided into technical renovation of traditional old industrial bases. Labor_intensive projects in line with industrial policies will be promoted continuously. Certain preferential policies will be given to projects encouraged and supported by the State.
3. The legitimate rights and interests of Taiwanese business people will be protected, and their complaints resolved in a timely way. Existing Taiwanese businesses will be assisted to operate well, and helped to solve their problems and difficulties. Necessary loans will be given to those that conform to the State credit policies.
4. Competitive industries will be further opened, and service and trade sectors be opened in a step_by_step way.
5. While supporting the eastern region to develop capital_ and technology_intensive and export_oriented industries, efforts will be made to encourage Taiwanese investment to go to the central and western regions.
6. Taiwanese investment will be introduced through multiple channels and by various means, including internationally practiced investment methods. Large and medium_sized State_owned enterprises are en_couraged to use overseas capital, including Taiwanese funds, to under_ take asset reorganization. Small State_owned and collective enterprises are encouraged to sell or lease to Taiwanese business people.
7. Certain large State_owned enterprises will be selected to cooperate with large Taiwanese businesses, and encouraged to jointly set up research and development centers with the latter.
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Agricultural development, State_owned enterprise reform and financial work have been listed as the key tasks for China¬ğ s economic work in 1999, according to the three_day annual Central Conference on Economic Work which ended on December 9 in Beijing. Premier Zhu Rongji outlined the government¬ğ s plans for continued economic growth in 1999. Big headway has been made in China¬ğ s economic restructuring and many reforms have been progressing on schedule in 1998 with significant advances being achieved in some difficult issues.
In 1999, China will continue to move forward with its reform and opening_up drive, with the focus placed on expanding domestic demand to promote economic growth. The nation intends to use higher domestic demand as the main springboard for boosting economic growth, while stabilizing and reinforcing agriculture, deepening State_owned enterprise reforms and readjusting the economic structure.
Three major tasks for the forthcoming year were outlined at the conference:
1. Agricultural development is to be stabilized and strengthened. The focus will be on promoting agricultural and rural work and ensuring that the Party¬ğ s basic rural policies remain unchanged, thus raising farmers¬ğ incomes and generally ensuring the stability of rural areas. Agricultural infrastructure linked to key water_control projects will be improved in an effort to raise the capability of fending off natural disasters.
2. Priority will be given to the reform of State_owned enterprises. Next year will be a crucial stage for sorting out the problems of large and medium_sized State_owned enterprises within the three_year target. Resolute measures will be taken to separate administration from enterprise management, prevent duplicated projects, and set up a social security system, thus creating a better environment for enterprise reform.
3. The main financial task for 1999 is to maintain stability of the yuan to support economic development and avoid and minimize financial risks. Financial reforms, especially those of State commercial banks will be accelerated to assist in setting up a financial mechanism in line with development of a socialist market economy. Stringent efforts will be made to rectify any financial disorders, enhance regulation of the financial sector, and formulate efficient financial laws and regulations.
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To further promote the opening of central and western regions, and raise the quality of foreign fund utilization, the State Council has formulated a series of new policies. At the recent ¬ğ 98 Central and Western Regions¬ğ Foreign Economic and Technological Cooperation Talks, the main points of the new policies were described as follows:
According to the Interim Provisions on Guidance for Foreign Investment, projects that are able to tap the advantages of human and natural resources in central and western regions, and are in line with State industrial policies, will be listed as items encouraging foreign investment. Once approved, these projects will enjoy preferential tax policies (exemption from customs and import value_added tax), while importing equipment for their own use.
The conditions for the establishment of projects, in which foreign investment is restricted or the share of foreign equity is defined to a certain level, are likely to be more relaxed than those in the east, and the domestic market for the goods produced will also be opened wider. Priority in soliciting foreign funds in the central and western regions will be given to agriculture, water conservancy, communications, energy, raw materials and environmental protection projects, and the State will increase matching funds and adopt related supporting measures.
Domestic firms shifting from manufacturing military products to goods for civilian use, and large and medium_sized State_owned enterprises will be encouraged to seek foreign capital to aid their technical renovation. Foreign_funded businesses in the eastern regions are encouraged to invest in the central and western areas. Projects having a minimum of 25£¥ of foreign investment are considered as foreign_funded enterprises, enjoying related treatment. The experiment for opening new sectors and pilot projects permitted by the State will start simultaneously in the east and the central and western regions. With State approval, provincial capitals in the latter two regions are allowed to undertake pilot opening in regard to commerce, foreign trade and travel services.
Those areas, including provincial capitals in the central and western regions, riparian and border cities, economic and technological development zones, State new and high_tech development areas and the Shaanxi Yangling Agricultural Development Zone, will enjoy preferen_ tial policies along the same line as those offered to coastal provinces and cities. Provinces and capital cities in the central and western regions are allowed to approve the projects with foreign investment up to ¡ç30 million each, as their counterparts in coastal areas.
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The gross domestic product (GDP) growth rate in Northwest China¬ğ s Gansu Province reached 8.6£¥ in the first nine month of last year, 1.4£¥ higher than the national average. The province¬ğ s GDP was 54.2 billion yuan (¡ç6.54 billion) in that period. Acting Governor Song Zhaosu attributed Gansu¬ğ s high economic growth to rising investment in basic industries and infrastructure. He expects that Gansu¬ğ s GDP will hit 85.9 billion yuan (¡ç10.35 billion) by the end of 1998, 9.2£¥ more than in 1997.
To meet 1998¬ğ s economic growth target of 8£¥, Gansu had added 4 billion yuan (¡ç484 million) to the 29 billion yuan (¡ç3.5 billion) investment program established earlier last year, a record amount for Gansu¬ğ s investment. The new investment focused on agriculture, forest, water conservation, infrastructure, environmental protection and affordable housing. In the first three quarters of 1998, Gansu invested 19.1 billion yuan (¡ç2.3 billion) in fixed assets. The expansion of the scale of investment has led to the development of related industries including metallurgy and construction. According to local statistics, the first nine months witnessed a 19£¥ growth in the added value of the construction industry, which contributed 1.4£¥ to Gansu¬ğ s GDP growth.
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The first 10 months of last year witnessed a sustained increase of foreign funds flowing into Beijing, despite the lingering negative effects of the Asian financial turmoil. During that period, actually utilized foreign investment in the capital amounted to ¡ç2.32 billion, an increase of 8.2£¥ on a year_on_year basis. Foreign direct investment rose by 44£¥ to ¡ç1.72 billion. Contractual foreign investment had recovered from 1997¬ğ s doldrums, increasing 3 4£¥ to ¡ç1.77 billion.
Beijing approved 62 big projects with over ¡ç10 million in foreign invest_ ment each in the first 10 months last year, an increase of 10.7£¥ over 1997. Average foreign capital per project in Beijing climbed by 79£¥ to ¡ç3.27 million. Investment from multinationals maintained its momentum, with 47 new projects launched in the first half of last year, promising ¡ç380 million in foreign investment. Statistics also indicate foreign investors expanded their investment range into more high_tech industry and service sectors. Some 201 foreign firms established in the high_tech sector accounted for 71.5£¥ of newly approved industrial projects.
Foreign investors have promised to pour ¡ç860 million into the city¬ğ s service sector, accounting for 48.5£¥ of Beijing¬ğ s total contractual overseas capital. A total of 170 foreign wholly_owned enterprises was approved in the first 10 months of last year, with contractual foreign capital of ¡ç790 million. Among different regions and countries, the United States has become the top investor in Beijing. Between January and October, ¡ç300 million in investment from the United States was approved, triple that country¬ğ s commitment in the corresponding period in 1997. Investment from Europe soared 51.6£¥ to ¡ç470 million. Foreign_funded firms have played a key role in promoting the local economy. In the first 10 months of last year, 5,174 foreign_funded enterprises went into operation, increasing 4.4£¥ from the same period in 1997. Their industrial output in the same period reached 42.94 billion yuan (¡ç5.17 billion). Statistics indicate the city¬ğ s exports hit ¡ç2.4 billion from last January to October, increasing 22.1£¥ over the same period in 1997.
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With the help of foreign investment, Shandong Province anticipates an acceleration of its opening process and economic growth. By the end of last June, the province¬ğ s contractual foreign investment had reached nearly ¡ç40 billion, with actually utilized foreign investment topping ¡ç20 billion. Shandong has attracted more than 10,000 foreign_funded enterprises, with investors from over 100 countries, and 26 of the world¬ğ s 100 leading transnational companies. A total of 30,674 foreign_funded projects has been approved by the local government. About ¡ç15 billion have been used by these projects.
Deployment of foreign investment will be reformed to satisfy the needs of the province¬ğ s six priority sectors __ infrastructure, key businesses, State enterprise ownership transfer, tertiary industry, new and high_tech industries, and urban public facilities. Development emphasis will be placed on comprehensive cooperation with world_leading companies and further improvement of the investment environment. The influx of foreign capital has brought new industries such as telecommunications equipment and electronics. The building materials industry, one of Shandong¬ğ s traditional industries, has been updated through co_operation with Daewoo from the Republic of Korea.
The introduction of advanced agricultural and industrial technologies has also injected fresh vitality into the local economy. The agricultural pattern which emphasized development of ordinary crops in the past has been changed. New varieties in great demand on the world market have become one of the province¬ğ s development focuses. In the past 20 years, the province has invested a total of ¡ç600 million in agriculture.
Foreign investment has enhanced and improved the mainstay industries of Shandong Province. With the support of foreign investment, high_tech industries, such as mechatronics, information processing and bioengineering, have appeared and witnessed rapid development. Foreign_funded enterprises have contributed a great deal to the local economy. According to statistics, the province¬ğ s foreign capital now accounts for 11.6£¥ of Shandong¬ğ s total investment in fixed assets. The export volume of foreign_funded enterprises makes up 47.6£¥ of the province¬ğ s total. Tax revenue from these enterprises account for 12.4£¥ of total fiscal income.
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Chongqing is modifying State policies by abolishing quota restrictions on domestic sales of products made by foreign_funded enterprises. For nearly two decades, China has asked foreign investors to export at least 30£¥ of their products to ease pressure on domestic companies. Chongqing had achieved initial results last year in improving its investment environment and strategies for attracting foreign capital. During the first nine months in 1998, the city approved 175 foreign_funded enterprises, an increase of 2.9£¥ over the same period in 1997. Contracted foreign funds rose by 7.27£¥ to ¡ç310 million. Paid_in foreign funds rose by 153£¥ to ¡ç318 million.
In 1997, more than 70£¥ of foreign funds came from Asian countries and regions. In the first half of last year, however, the ongoing financial crisis led to a 50£¥ decline in Asian investment. Considering the new situation, the Chongqing municipal government formulated supplementary regulations on preferential policies to encourage foreign investment, and authorized lower_level departments to approve some projects. Foreign_funded projects and the contracted value involved accounted for 72£¥ and 55.5£¥ respectively of the city¬ğ s total number of approved projects and aggregated investment in the first nine months of last year.
In addition to participating in trade talks held in Hong Kong, Xiamen and Northern Europe organized by the Ministry of Foreign Trade and Economic Cooperation, the city has also encouraged some of the counties and towns under its jurisdiction to separately stage smaller_scale investment¬ğ talks to solicit capital mainly from European countries. As a result, investment from European enterprises increased by 15.8£¥ in the first nine months of last year compared with the same period in 1997. To lure investment from the world¬ğ s top_500 enterprises, the city¬ğ s mayor sent each an invitation letter. As a result, several dozen of them sent representatives on inspection tours in the city. Companies such as Ericsson, Nokia and ABB have already established businesses in Chongqing.
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Recently Hunan Province in central China offered the following projects for foreign fund and cooperation.
1. Expansion of Ouyanghai Hydropower Station, with an installed capacity of 2x24MW. Total investment: ¡ç16 million.
2. Expansion of Liyujiang Power Station, with an installed capacity of 2x300MW. Total investment: ¡ç490 million.
3. Expansion of Jinzhushan Thermal Power Plant, with an installed capacity of 2x600MW. Total investment: ¡ç532.5 million.
4. Construction of Lianyuan Open Pit Thermal Power Plant, with an installed capacity of 2xl25MW. Total investment: ¡ç172 million.
5. Taoshui Hydropower Station, with an installed capacity of 4xl7MW. Total investment: ¡ç50 million.
6. Shatou Hydropower Station, with an installed capacity of 2xl6MW. Total investment: ¡ç35.4 million.
7. Shaoyang Baiyun Hydropower Station, with an installed capacity of 3xl8MW. Total investment: ¡ç33.7 million.
8. Comprehensive exploitation of green food in Nanshan Pasture land. Total investment: ¡ç17.7 million.
9. Nanshan Pasture Development, producing 11,000 heads of cattle and 104,000 heads of sheep. Total investment: ¡ç5.1 million.
10. Construction of 80 hectares of agricultural integral base of plant_ ation, feeding, processing and marketing. Investment: ¡ç21.88 million.
11. Intensive processing of 11,000 tons of meat products. Total investment: ¡ç10 million.
12. Construction of a rapeseed processing project with an annual capacity of 100,000 tons. Total investment: ¡ç12 million.
13. Construction of a frozen vegetable production line, with an annual capacity of 2,000 tons. Total investment: ¡ç2 million.
14. Developing and producing 30,000 tons of new super_concentrated detergent. Total investment: ¡ç5.75 million.
15. Technical renovation of soft compound plastic tube for toothpaste (annual capacity: 20 million pieces). Total investment: ¡ç3.03 million.
16. Producing 1.5 million pieces of high_quality porcelain. Total investment: ¡ç10 million.
17. Expansion of viscose filament (annual capacity: 6,000 tons). Total investment: ¡ç84.73 million.
18. Production of high_grade warp knitting velvet toweling coverlet, annual capacity: 1.27 million pieces. Total investment: ¡ç6.4 million.
19. Production line of viscose inkjet_printed carpet (annual capacity: 500,000 square meters). Total investment: ¡ç4.94 million.
20. Technical renovation for Ion membrane potassium hydroxide, annual capacity: 20,000 tons. Total investment: ¡ç23.3 million.
21. Production of Barium Carbonate (annual capacity: 22,000 tons). Total investment: ¡ç1.5 million.
22. Production expansion of synthetic ammonia and urea (annual capacity: 180,000 tons and 300,000 tons respectively). Total investment: ¡ç156.7 million.
23. Production of 200,000 tons of compound fertilizer a year. Total investment: ¡ç73.5 million.
24. Expansion of production line for new technological soft carbon black with annual capacity of 15,000 tons. Total investment: ¡ç13.25 million. (to be continued)
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China will further open its colossal rural market and create favorable conditions for foreign exchange and cooperation in the agricultural sector. The nation will modernize labor_intensive agriculture by introducing state_of_the_art technology, fine seeds and efficient management. By the end of 1997 China had absorbed foreign investment totaling ¡ç12 billion for the starting of 7, 896 agro_projects contracted including a total contracted foreign investment of ¡ç1. 065 billion to start 814 foreign_funded projects in 1997 with ¡ç628 million of the investment having been put in place. The use of foreign investment has directly made up for the shortage of input in agriculture. Through multilateral and bilateral government and non_governmental channels scores of technologies with economic efficiencies exceeding RMB1 billion for each have been introduced covering areas of grain, cotton, oil crops, fruits, vegetables, forage grass, acquiculture and breeding and nursery stocks. The introduction of these technologies has elevated the level and pushed ahead China¬ğ s agricultural production. Meanwhile the country has sent over 6,000 visiting scholars and students abroad for academic exchange or advanced study and invited over 10,000 agricultural experts from other countries to improve the level of the research and education in the sector and accelerated the progress of agro_science and technology.
Foreign funds used for agriculture included foreign loans, aids and direct foreign investment. Incomplete figures show that foreign loans account for 44.5£¥ of the total; foreign aids for 10£¥ mainly for aiding the development in poor areas, providing advanced technology and expertise training; and direct foreign investment for 45.5£¥, with the last one being of the greatest ratio and the most active.
But in recent years, along with the improvement of the national strength and people¬ğ s living standard, direct foreign aid declined, while direct foreign investment increased. Foreign investments are concentrated mainly in the more developed coastal areas. Statistics show that contracted foreign investment in Guangdong, Fujian and Shandong accounts for over 70£¥ of the national total, while the proportion is very small in the Central_Western regions including some of the big agricultural provinces. And the scale of investment in agricultural projects is rather small, mostly each below ¡ç500, 000, far less than the average level of foreign_funded projects in China. The fact shows that there is still a big room in the use of foreign investment in this field.
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China plans to open its construction market further in order to take full advantage of its large market and cheap labor. This is in line with the Chinese Government¬ğ s requirement of expanding the utilization of foreign funds in the construction sector, stated Vice_Minister of Construction Zheng Yijun. Foreign investment will be used to accelerate the technical renovation of large state_owned enterprises to establish a number of knowledge_ and technology_intensive enterprises. Some large enterprises will be stimulated to adopt advanced operating methods in international construction projects and to gradually change from mere project contractors to project investors, builders and managers. Meanwhile, domestic enterprises are encouraged to cooperate with foreign contractors to jointly tap construction markets in a third country.
Foreign direct investment, by means of BOT (build, operate and transfer) or transfer of operation rights, will also be allowed in such infrastructure projects as urban transportation, sewage and waste treatment, and supply of gas, water and heating. In the fields of residential housing, China is willing to discuss possibilities in housing financing with foreign financial institutions. At present, foreign investors are welcome to develop advanced construction systems and key materials. They are also encouraged to participate in building common housing and renovating old urban areas.
According to Zheng, the construction sector has utilized ¡ç160 billion in contractual foreign funds in 39,000 projects between 1978 and 1997, with the projects¬ğ number accounting for 13£¥ of the country¬ğ s total foreign_funded items. Some ¡ç15 billion contractual funds went to 8,100 construction projects, ¡ç135 billion to 30,000 real estate projects, and ¡ç7.8 billion to 330 municipal public undertakings.
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China will invest an estimated 10 billion yuan (¡ç1.2 billion) in the next seven years to turn the northeast into the country¬ğ s largest granary and meat_processing base. Northeast China, which comprises Heilongjliang, Jilin and Liaoning provinces and four leagues in the eastern part of the Inner Mongolia Autonomous Region, covers an area of 1.24 million square kilometers. and has a total population of 116 million people.
The region expects to raise its grain output from 81 billion kilograms in 1996 to 99 billions by 2005. This increase will help meet half of the extra demand resulting from a rise in population of 90 million people nationwide during the period. The region currently supplies the government with 35 billion kilograms of commodity grain annually. Grain output accounts for 14.9£¥ of the national total. Jilin, Heilongjiang and Inner Mongolia lead other provinces and autonomous regions in terms of per capita grain consumption. The combined grain output for Northeast China and the plain of the Yellow, Huai and Hai rivers, another leading grain producer, averaged 67 billion kilograms during the 1984_96 period and accounted for 68£¥ of the national total. Northeast China will be able to provide other provinces with 45 billion kilograms of commodity grain annually by 2005. This will feed 112 million people, one_third of China¬ğ s urban population.
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In 1997, the total output value of China¬ğ s light industry amounted to 2,450.1 billion yuan, and the export volume registered ¡ç53.3 billion. During the first eight months of last year, the export volume came to ¡ç35.6 billion, an increase of 7.96£¥ over the same period in 1997. Today, China has become a big exporter in this field. At present, China is the world¬ğ s leading producer of refrigerators, washing machines, electric fans, cooker and irons, bicycles, plastic mulch films, domestic ceramics and leather shoes. It is the world number two in the output of beer, synthetic detergents and salt. It is also the world¬ğ s third largest producer of machine_made paper and paperboards, sugar, air conditioners and wristwatches.
At present, China produces more than 260,000 kinds of light industrial products, and puts more than 10,000 new products on the market every year. Thanks to the constant improvement in the quality of its products, the sector now possesses a large batch of highly competitive brandname products. Meanwhile, the management expertise of enterprises in the sector has improved continuously, creating a batch of famous businesses. The technological level of the whole sector has also been enhanced.
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China¬ğ s largest stainless steel strip sheet production base__the Shanghai Krupp Stainless Steel Co Ltd__is now under construction in the Pudong New Area in Shanghai. Estimated to have a total investment over ¡ç1.4 billion, the new company is planned to start production in 2000. The project jointly set up by the Shanghai Pudong Iron and Steel Group Co Ltd and the Krupp of Germany is described as the biggest foreign_funded project in China¬ğ s metallurgical industry. The joint venture obtained its business license issued by the State Administration of Industry and Commerce in April, 1998. The first phase construction of the joint venture is designed to be made under an investment ¡ç300 million. In the year 2000, the joint venture¬ğ s 72, 000 ton cold rolling plant is expected to be completed.
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Mannesmann VDO Car Communication (MVCC), the world¬ğ s leading manufacturer of car audio and navigation systems, announced recently it would increase investment in its joint venture starting in 1999. The tripartite joint venture, located in Huizhou in Guangdong Province, was established in 1986 by Philips Car Systems, Hong Kong Gold Peak Industries, and the Desay Group in Huizhou. The company, named Car Audio Electronics (China) Co Ltd, had about ¡ç5.7 million in registered capital at its founding, with Philips holding a 36£¥ stake, Gold Peak owning a 34£¥ equity share and Desay holding the rest. At the end of 1997, MVCC clinched a deal to acquire Philips Car Systems, thus taking over its investment in China. This time, MVCC will spend HK¡ç73 million (¡ç9.4 million) to buy the Gold Peak¬ğ s stake in the joint venture according to an agreement signed last month. That means MVCC will hold 70£¥ of the equity in the joint venture.
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Corning Inc from the United States will invest ¡ç80 million to build a high_tech venture in Shanghai in 1999. The modern venture, which is expected to go into operation in 2000, will be engaged in the production of advanced ceramic substrates for use in the core of automotive catalytic converters. These help reduce air pollution caused by automobiles and are thus conducive to environmental protection in China. Products of the new venture will also be exported to countries and regions in the Asia_Pacific. Corning entered China in the early 1980s, and has developed technology projects and joint ventures valued at over ¡ç200 million.
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Companies from Canada and Guangdong Province recently announced a new joint venture that will raise Canadian ginseng chicken, develop animal feed, process poultry products and offer technical services. The venture was announced by Transway Technology Ltd of Canada and Guangzhou Jiangcun Poultry Enterprise Development Corp. Both sides contributed equally to the 3.6 million yuan (¡ç435,000) investment of the project, which was named Guangzhou Jinyuan Poultry and Feed Ltd. The 15_year joint venture is expected to attain an annual output value of more than 10 million yuan (¡ç1.2 million). All poultry raised by the Sino_Canadian joint venture will be sold outside the Chinese mainland.
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The Sino_Israeli Weifang_Weihe Demonstration Farm, the first Sino_foreign joint venture farm in China, has been put into operation recently in Weifang, Shandong Province as Israel¬ğ s second modern agricultural investment project in China. Located in the State_level Weifang High_Tech Industry Development Zone, the farm jointly built by the Shandong Changwei Agricultural School and the Israeli Hovev Agricultural Co Ltd covering an area of 70 hectares under a total investment of ¡ç4. 25 million started construction in September 1997. The farm introduced all its facilities from Israel and adopted its high agricultural technology, with the products__flowers, vegetables, fruits and seedlings and dehydrated plants for decoration to be exported mainly to western Europe.
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