China is likely to impose a fuel tax in the second half of this year to replace road maintenance fees as part of a scheme to abolish illegal charges and random fees imposed by local administrations. The Ministry of Finance has designated the transportation and vehicle tax reforms as the breakthrough points this year, and will resolutely phase out illegal and irrational charges. The fuel tax and a vehicle purchase tax will be used to finance the construction and maintenance of highways and expressways, reflecting the principle that ”°the more you use the road, the more petrol you consume, the more you pay."

Statistics showed that the number of different fees collected in the transportation sector and from vehicles amounted to 530 last year, of which 245 were fees set by local governments that exceeded their authority. Fees collected in the name of transportation construction funds, road building funds, priority construction funds, and urban road construction funds were all illegal and must be eliminated. It is reckoned that the revised draft plan of the fees_to_tax reform will be submitted to the standing committee of the National People¬šs Congress in the second half of this year.

Implementation of the fees_to_tax reform is a very complicated process because it will involve a wide range of issues including adjustments in the interests of the central government, local governments and related ministries. Resolving such technical issues as how the fuel tax will be imposed on ships, machinery and farming vehicles is also a tough job. On April 29, at the Ninth Session of the Ninth National People¬šs Congress Standing Committee, top legislators nullified the draft amendment of the Highway Law tabled to them for approval. The amendment of the Highway Law was made to pave the way for the reform of replacing highway tolls with petroleum taxes. During debates before the voting, members of the Standing Committee all voiced support of the initiative. However, they expressed fear that the reform would increase the financial burden of farmers, fishermen, taxi drivers and transportation companies. They also feared that some local governments might continue to collect tolls after adoption of the law. Besides, it is difficult to design a collection system under which the fuel tax can be charged on producers, wholesalers or retailers. But it is likely that the tax will be collected from refineries even though such a move could stimulate smuggling.

Informed sources say the proposed fuel tax rates are 1 yuan (”ē0.12) per litter for diesel and 1.2 yuan (”ē0.14) per litter for gasoline. Cheaper diesel is expected to boost the use of heavy_duty trucks and diesel_powered passenger vehicles.
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China is considering formulating new policies on new starting of industrial undertakings, it is reported from related government department. All industries except those monopolistic in nature will be open to domestic, private and foreign capitals. In a bid to break up the monopoly by the government, new financing channels will be introduced and competitive mechanisms will be adopted. Many experts hold that the introduction of the new policy will bring forth significant impact on the socialist market economy and play an important role in breaking up monopoly, optimizing industrial structures, and promoting positive competitions.

The principles of the new policy include: 1. Bidding will be used to select responsible legal persons for projects monopolistic in nature and public utility projects, which are used to be invested by the government; 2. Investors and operators of a large number of infrastructure projects will be chosen through the market for a full responsibility for the investment, operation and profits of the projects and the government will only exercise supervision over the projects; 3. Scope for government¬šs investment will be reduced and in case the government needs to invest on a limited basis, it should not be directly aiming at gaining profits.

It is reported that, on the basis of the past experience and lessons, the new policy is expected to be introduced first in the five industries of agriculture, water conservancy and industrial infrastructure construction ( including parking lots and green areas), renovating the traditional industries with imported new products, technologies and equipment, environmental protection, and new type services. To this end the State will publicly announce investment directories and telephones for the information.

However, some experts warn against a rush in introducing the new policy. They suggest that seeking quick results and instant benefits should be avoided and the government should adopt flexible methods for the nation¬šs sensitive sectors such as communications and finance to gradually change the complete monopoly of the sectors. For the time being the State may have to maintain domination in the above mentioned sectors. However, some sectors, such as natural resources may be opened fully. Energy and metals and minerals used to be monopolized by the State but now interested parties with different backgrounds are allowed to participate in the development, including the farmland and water conservancy construction.

The State¬šs supervision and administration will become more important after the introduction of the new policy. It is reported that the State Economic and Trade Commission is revising the ­·Directories of Foreign Investment Industries" with other related departments. Investment in agriculture, new and high_tech industry, infrastructure, basic industries, environmental protection industry and export and foreign currency earning industries will be encouraged and more foreign investment will be allowed in these sectors to increase the portion of foreign investment. In the meantime ­·Directories of Advantageous Industries for Foreign Investment in Central and Western China and the Advantageous Projects" will be worked out so as to guide and encourage foreign investment in the central and western regions. In a bid to expand domestic demand and actively foster new economic growth points, the State is considering formulating related industrial policies, mainly to promote the agricultural industrialization and set up mechanisms to support, protect, and provide services to agriculture. The development of tertiary industries will also be encouraged.
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China is expected to shift its energy strategy towards the use of more natural gas and away from coal as pressure for environmental protection mounts. State policy support to fuel enthusiasm for clean energy is in the pipeline. A policy package embracing heavy inputs from the State budget, tax holidays and project approval priority is expected to be a significant attraction for overseas investors. The central government, determined to pursue environment_friendly policies, is considering ending decades of rigid control over pricing the clean energy. The controls will be lifted next year as conditions mature, according to sources from the State Administration of Petroleum and Chemical Industries. In their place will be pricing formulas to ensure the interests of both suppliers and end_users and State surveillance to prevent abuse of market power by monopoly providers.

Standards on internationally accepted take_or_pay contracts will be prepared. Together with a compensation mechanism, the take_or_pay rule will help encourage participation by foreign governments and companies. In a take_or_pay deal, the buyer should pay the seller for any failure to accept the due amount of gas within the contracted period. A high_pressure reserve outlet cannot be blocked once opened. Natural gas development and transmission in high_pressure pipelines is usually risky. In China, major reserves are all verified in the remote west while most energy_thirsty cities are concentrated in the booming east, thousands of kilometers apart. The possibility of buying resources from Russia increases the necessity of a nationwide pipeline network, a must for supply stability.Supplementary to the network will be underground storage facilities. Construction of the first of these, estimated to cost up to 500 million yuan (”ē60 million), is to be started this year. Consensus has been reached on the policies and principles to care for the environment. The government decided to make natural gas the centerpiece of its new energy strategy five years ago.

China will launch into its ambitious program of development and use of clean energy early in the 21st century. Annual use of natural gas in the country is expected to be increased from last year¬šs 22 billion cubic meters to 80 billion in 2010. The policies are to be decided by the State Council. Industry officials are optimistic, saying the central government looks set to fight against the economic slowdown by increasing government spending. Expensive pipelines need support from the State budget.
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To promote the development of private enterprises, Jiangsu Province has recently promulgated regulations to ensure credit loans and provide legal protection for the fledgling economic sector. The Regulation on the Development of the Individual and Private Economy, which just came into effect in February, provides legal guarantees for 1.55 million self_employed businesses and 100,000 private enterprises in the province. Over the past several years, individual and private economy in the province has witnessed swift development. Last year, its total output value amounted to some 78 billion yuan (”ē9.4 billion). Sales were 156 billion yuan (”ē18.8 billion) and total commodity retail sales reached 85.8 billion yuan (”ē10.3 billion), up 68.9£„, 36.3£„ and 38.1£„ respectively over the previous year. Total registered capital of individual and private enterprises has increased to 64.4 billion yuan (”ē7.8 billion). There are now already 39 private enterprise groups.

For example, through efforts over the past few years, the Jiangsu San Xiao Group has multiplied its annual output to 900 million (”ē108 million), and its production maintained a good momentum. Products have sold well on both domestic and foreign markets. In addition, individual and private enterprises in the province have made prominent contributions to reemployment of laid_off workers from the State_owned and collective enterprises. Moreover, these enterprises paid taxes totaling 4.9 billion yuan (”ē590 million), about 9£„ of the province¬šs industrial and commercial revenue. They have thus become a new growth factor of the province¬šs economy that is now full of vigor. However, for a long time, individual and private enterprises were plagued by heavy burdens, such as arbitrarily imposed fees, fines and charges.

Although governments at all levels undertook measures to rectify tax collection problems, these measures had not actually been efficient due to insufficient legal enforcement, which is impeding the development of the private sector. According to the newly promulgated regulation, no one is allowed to collect fees and raise funds from individual, industrial, commercial and private enterprises outside the legal framework.
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Last year, China saw a steady growth of foreign exchange reserves and stability of the Renminbi (RMB) exchange rate, according to the People¬šs Bank of China. At the end of 1998, the RMB exchange rate was kept at ”ē1:8.2789 yuan, a rise of nine basic points on 1997. The country¬šs foreign exchange reserves at the end of last year was ”ē144.96 billion, up ”ē5.07 billion. The demands and supplies in the domestic foreign exchange market kept balance, and foreign currency savings deposits of both individuals and enterprises rose by a fairly large margin. Since 1998, the State, through reform and policy regulation, has adopted a series of policies to increase investment, strengthen infrastructure construction, encourage exports and introduce foreign capital.

Although the Asian financial crisis and the domestic devastating floods produced an adverse impact on the country¬šs economy, actual international revenue and expenditure remained sound. The total volume of imports and exports last year reached ”ē323.93 billion, down 0.4£„ from 1997. This included ”ē183.76 billion in exports, a rise of 0.5£„. The year saw ”ē43.59 billion in trade surplus, up 7.9£„. Rehabilitation growth was achieved in newly signed contracted foreign capital, while paid_in foreign funds continued to grow, reaching ”ē45.58 billion.

Despite the deepening of the Asian financial crisis, foreign investors are still showing great interest in China. The country approved the establishment of 19,846 foreign_funded enterprises (FFEs) in 1998 though 5.7£„ less than the preceding year in number, contracted foreign investment involved totaling ”ē52.132 billion to record an increase of 2.21£„, averting the drastic fall for two consecutive years and foreign investment actual put to use reaching ”ē4.56 billion, up 0.67£„.

Up to the end of 1998, China had approved an aggregated total of 324,712 FFEs with contracted foreign investment totaling ”ē572.52 billion including ”ē267.45 billion that had put into actual use. According to the Ministry of Foreign Trade and Economic Cooperation (Moftec), investment from Europe, America and the free port areas continued to grow in 1998 with contracted investment and investment in place from the European Union region coming to ”ē5.91 billion and ”ē4.3 billion, respectively up 39.8£„and 3.1£„;contracted investment and investment in place from the United States coming to ”ē6.21 billion and ”ē3.91 billion, respectively up 25.8£„ and 20.8£„; contracted investment and investment in place from part of the free port areas coming to ”ē7.35 billion and ”ē4.14 billion, respectively up 29.2£„ and 100.7£„.

In terms of structure of foreign investment, the proportion of industrial projects account for 66.7£„ of the total contracted foreign investment, up 10.3£„ over the preceding year, and that of real estates projects for 9.9£„, down 1.4£„. In scale of investment, the average investment of a single project went up to ”ē2.627 million, up 8.2£„. The Central_Western Regions registered faster growth of foreign investment than the Eastern Region, with contracted foreign investment totaling ”ē7.33 billion, up 10.9£„, while the Eastern Region was about the same as the preceding year, with a growth of only 0.01£„.

Statistics from Moftec indicated that newly pledged foreign investment inched up 0.02£„ to ”ē8.72 billion in the first quarter of this year, while actual foreign capital input plunged 14.6£„ to ”ē7.34 billion. State Councilor Wu Yi said earlier this month that the government will adopt a series of measures to underpin foreign investors¬š confidence in China. Local governments are urged to ensure all their policies related to foreign investment are in line with the central government¬šs foreign investment laws and regulations.
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Statistics from the General Administration of Customs showed China¬šs import volume grew a remarkable 11.6£„ to hit ”ē32.99 billion in the first three months this year. However, export volume landed at ”ē37.27 billion, down 7.9£„ from a year earlier. Although exports to Hong Kong and Russia continued to plunge, those to the United States still grew by 8.4£„, reaching ”ē7.93 billion. The chief reasons for the hefty growth of imports are the expansion of domestic demand and the tough campaign against smuggling. Although imports of raw materials used to process goods for export dipped by 4.7£„ to ”ē14.45 billion, general trade imports targeted at the domestic Chinese market surged 76.9£„ to ”ē13.77 billion in the first quarter.

The first quarter saw imports of machinery and equipment rise by 18.5£„ to ”ē5.8 billion, while instrument imports increased by 12£„ to ”ē920 million. The introduction of advanced machinery and equipment will inject fresh power into China¬šs export sector. A considerable part of China¬šs exports is made up of labor_intensive and low value_added products. They have met huge challenges from their counterparts in the crisis_hit Asian economies due to the latter¬šs sharpened competitiveness in the wake of currency depreciation.

Moftec Minister Shi Guangsheng said China¬šs exports actually rose by 10£„ in quantitative terms last year, but the growth rate of earnings only stood at 0.5£„. To upgrade the domestic enterprises¬š equipment through imports is an important and effective way to promote exports. As the Asian financial turmoil has driven down demand, and hence prices, on the international market, some Chinese trade experts have called for more imports of advanced machinery and equipment.
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Shandong Province, which ranks third in the nation in gross domestic product, will try to improve its investment environment by emphasizing law enforcement and better service. This is a major step in responding to the increasing number of complaints from overseas investors in recent years. The province has so far approved more than 20,000 overseas_funded projects, worth ”ē32.3 billion in contracts. This year, the province will revise some laws and regulations related to this and a coordinating and supervisory system will be established to deal with problems in overseas businesses. As part of a national effort, the province will increase efforts to give national_status to all overseas enterprises and gradually stop all unreasonable fees levied against them and there will be more service centers and intermediaries to provide better services.

In Qingdao, the largest port of Shandong, construction of several large docks has been completed, raising its total handling capacity up to 100 million tons of cargo. This makes the port the third largest in the country behind only Shanghai and Qinhuangdao. Qingdao Port has set the goal of becoming a major international port in the near future. While upgrading the old facilities, the port also began developing a new harbor area in Huangdao about a dozen years ago at an expense of 7 billion yuan (”ē846.4 million). Now the port has 14 docks and 70 berths, and has established business ties with some 450 overseas ports. Qingdao Port is now the largest ore depot in North China, the biggest crude oil depot, the second largest container shipping port and the fifth largest coal port in China, with freight volume increasing by an average of 10 million tons annually over the past few years.

The use of overseas investment in Shandong rose a reported 29£„ on a yearly basis to ”ē450 million during the first quarter of the year. The province added 312 overseas_funded enterprises during the three_month period, involving ”ē616 million contractual overseas investment. Investment from Hong Kong climbed by 287£„ on a year_on_year basis during the period; that from the Republic of Korea jumped 331£„; from Japan 55£„; and that from Germany grew by 92£„. The province offered recently a batch of projects covering six areas to solicit foreign funds, with the amount for each expected to exceed ”ē10 million to ”ē100 million. The six major areas include the following:

1. Key infrastructure projects, including highways, railways, bridges, berths, airports and telecommunications facilities.

2. Agricultural projects, such as planting, aquaculture, farm produce, intensive processing, comprehensive agricultural development, irrigation and water conservancy, and industrialized and intensive farming.

3. Development of new and high_tech industries. Foreign in vestors are encouraged to invest in high_tech projects in high_tech development zones to form a high_tech industrial complex.

4. Renovation of State_owned enterprises, with emphasis on large pillar and advantageous enterprises.

5. In line with overall urban planning and the State¬šs industrial policies, foreign investment is encouraged in old city renovation and the construction of roads, living quarters, water and heat supply facilities, public traffic systems and other public facilities.

6. Commerce, service, tourism and transportation sectors.
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Shanxi Province, an inland industrial province located in North China, is stepping up efforts to develop its tourism industry and boost its economic growth. At the beginning of this year, tourism and environmental industries were designated ­·pillar" industries by the Shanxi provincial government. The government has increased its budget used to support development of the tourism industry to 40 million yuan (”ē4.81 million) for this year from 3 million yuan (”ē361,000) last year. Shanxi Tourism Bureau reforms will lead to the establishment of a large tourism company, which will include tourism agents, hotels, car leasing companies and local enterprises operating tourism areas and scenic spots.

The move, which has been approved by the Shanxi provincial government, is aimed at creating an independent investment entity to build infrastructure, improve management and service levels of the tourism industry. One of the most important tasks of the tourism group is to cooperate with its counterparts in China and overseas in marketing and operations, and to work with domestic and foreign investors on building and managing tourism projects.

To attract foreign direct investment, the Shanxi provincial government has drafted a package of favorable policies to encourage investors to explore local abundant tourism resources. Investors who build provincial_level tourism resorts will be able to enjoy the same preferential treatment as those who invest in economic and technology development zones and high_tech development zones. Investors who invest in construction of high_grade hotels in priority tourism cities will be exempted from sometimes large fees that would otherwise be collected under relevant regulations. A series of projects that are considered feasible will be published regularly, and cooperation with foreign investors can be conducted in the forms of joint venture, sell_offs, equity_sharing, transfer and leasing. The government is also considering encouraging tourism enterprises to get listed on the stock market and is considering issuing bonds to raise funds for priority tourism projects.
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The past 20 years have seen an increase in the number of foreign_funded projects, committed foreign investment and paid_in foreign capital in Tianjin at an average rate of 41.7£„, 46.8£„ and 48.6£„ respectively. The city has approved 12,644 foreign_funded projects, involving ”ē24.68 billion in negotiated foreign investment. The two figures were 9.2£„ and 22.9£„ higher than the national average.

So far, 199 transnational companies and world_known enterprises have invested ”ē6.55 billion in 311 projects. Of the world¬šs top 500 firms, 48 have invested in the city, involving 101 projects. Foreign_funded enterprises in Tianjin feature a high technological level, capital_intensive funds, large production scale and competitive products, with part of their products enjoying brisk sales at home and abroad. The advantages of foreign_funded enterprises have promoted the readjustment of the city¬šs industrial structure and product mix, and stimulated State_owned enterprises to introduce foreign funds and realize asset reorganization.

To date, Tianjin has approved 570 technological renovation projects to use ”ē3.5 billion of committed foreign funds. These projects cover electronics, machinery, chemicals and food processing. Under the guidance of the State preferential policies to encourage foreign investment in communications, energy and infrastructure facilities, the Tianjin municipal government set the target of opening up wholly. The tertiary industry has also reinforced efforts to introduce foreign funds. Thus far, the city has set up 3,753 foreign_funded enterprises, 4.8 times that in 1992. Their added value reached 14.8 billion yuan in 1997, accounting for 11.9£„ of the city¬šs GDP compared with 0.4£„ in 1992. Their annual output value has reached 79.04 billion yuan.
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As one of China¬šs 14 coastal cities first opening up to the outside world, Zhanjiang is a city of great potential for development because of its special geographic advantages. It has also established Zhanjiang Economic and Technological Development Zone and Donghai Island Economic Zone in recent years. Centrally located among the coastal areas of Guangdong Province, Hainan Province and the Guangxi Zhuang Autonomous Region, the Zhanjiang Port provides the shortest route from China to Southeast Asia, Africa, the Middle East, Europe and Oceania. The city occupies a strategic position in the geographic economy of the Pacific and Asian regions. With the Guangzhou_Zhanjiang Highway and Sanshui_Maoming Railway connecting the Pearl River Delta areas and with the Zhanjiang_Litang Railway linking the Guangxi Zhuang Autonomous Region, from where such transportation arteries as the Nanning_Kunming Railway, Guangxi_Hunan railway extend to the provinces of Guizhou, Yunnan and Hunan, Zhanjiang becomes the most convenient outlet to the sea for the Southwestern and the Central regions of China.

Zhanjiang is located in the tropical and subtropical maritime climate zone. With an average annual temperature of 23 degrees centigrade, it is neither cold in winter nor hot in summer. The yearly precipitation is 1,500 millimeters. The climate conditions are suitable for the growing of rice, sugar cane, rubber trees, lichees, bananas, pineapples and other tropical crops. The city has 1,500 kilometers of coastline, 495,000 hectares of shallow sea waters, and 100,000 hectares of wetland, which provide bountiful aquatic resources. On the continental shelf near the city, rich reserves of petroleum and natural gas have been discovered. Zhanjiang is now ready to explore these resources.

Zhanjiang Port, one of the eight biggest ports in China, has 100 kilometers of coastline where deep_water berths can be constructed. Along the 6.5 kilometer_coastline of Weilu, Donghai Island, navigation channels and berths can be built for super vessels with tonnages of 200,000 to 300,000. During the last 40 years, Zhanjiang has constructed 29 berths, of which 23 are deep_water berths. The berths, with modern equipment can handle containers, petroleum, grain, ore, coal and bulk chemical products. With the full facilities of loading and unloading, storage and on land transportation, Zhanjiang is a comprehensive and up_to_date commercial port. Zhanjiang port ,now handles 18 million tons of goods every year to and from more than 100 countries and regions in the world. The city recently offered the following projects for foreign cooperation.

1. First stage project of Zhanjiang Donghai Island Harbor

2. Zhanjiang_Maoming Railroad

3. Donghai Island railway project

4. 5,000_ton container wharves of Xiahai Harbor

5. Liusha harbor and highway project

6. Wharf project of Hai¬šan New Harbor

7. Storage vessels for liquidated petrochemical products

8. Construction of 200,000_ton dock

9. 4A zenolite project with an annual production capacity of 30,000 tons

10. Metal wire rod factory with an annual production capacity of 430,000 tons (to be continued)
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China is determined to use more foreign funds to fulfill sustainable development targets set for its coal industry. Foreign investment is expected to help revitalize the coal sector through science and technology. It will assist the coordination of environmental protection efforts and industrial development, according to Zhang Baoming, director of the State Coal Industry Bureau. Though China¬šs coal market has been sluggish, it is expected to rebound after 2005, thus laying a sound foundation for foreign investment in the sector. China will use more direct foreign investment for new mine development and construction, particularly for large_scale open_cast mines and high_yield and high_efficiency underground mines.

Currently, some multinational companies are negotiating with industrial institutions to launch additional coal development projects. In the meantime, China will take advantage of the foreign funds to modernize existing mine operations by converting existing State_owned coal enterprises into share companies. This is expected to lead to an upgrading of coal mines and better economic returns.

The Chinese Government will invest about 10 billion yuan (”ē1.2 billion) to further upgrade technologies in more than 70 mines in the coming years. Foreign investors, backed by advanced technologies and top_rated management, along with strong capital capacities, will find opportunities in upgrading China¬šs coal mines. For example, China has imported advanced equipment from Long_Airdox Corp of the United States to build several movable modular coal preparation plants. Moreover, overseas capital will be encouraged to invest in four promising projects __ building coal slurry pipelines, tapping coalbed methane, building pit_head thermal plants and developing clean coal technology.

China is expected to utilize ”ē678 million in foreign capital to build a long coal slurry pipeline from Shanxi¬šs Yuxian County to Shandong¬šs Qingdao, with an annual capacity of 7 million tons. In cooperation with the Johnston South Development Co of the United States, China is planning to establish a large pit_head power plant in Shanxi¬šs Gujiao Mine. In the coming years, China will devote major efforts to the preconstruction preparations of more than a dozen large and medium_scaled pit_head power plants in the Junggar Basin and other mining areas by using foreign funds. China will try to woo foreign investment to exploit coalbed methane as a clean fuel to cater to the demand for environmental protection. In the last two years, China United Coalbed Methane Corp has signed five contracts with Texaco Inc, Arco and Phillips of the United States to jointly explore coalbed methane resources in Shanxi and Anhui provinces. In addition, the country will try to develop a great number of comprehensive coal utilization projects with the foreign funds, including coking plants, cement works, mining machinery and refractory material factories. Up to date, China has received ”ē9.34 billion of contracted foreign capital in its coal industry, of which ”ē4.18 billion have actually been used.
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Located at the axis of the fan_shaped open ports group in Heilongjiang, a center city in the middle section of the international trading passageway from Harbin via Vladivstok of Russia to Nigata of Japan, and also a communication hub of Heilongjiang, eastward to Vladivstok and southward to the Tumen River, Mudanjiang City is the political,economic and cultural center in Southwest Heilongjiang Province, with four cities of Hailin, Ningan, Muting, and Suifenhe and two counties. The city plans to attract more foreign investment in 1999.

Rich in natural resources, Mudanjiang covers 3.02 million ha of forests and the dense forests are the habitat of the Northeast Tigers and over 50 kinds of rare animals. The city has over 80 kinds of verified mineral reserves and it is blessed with 1.2 million kw of hydroenergy resources. Beautiful landscapes of the city include the picturesque Jingbo Lake, the State_class forest park, the forest under the mouth of volcano, and the site of Bohai Kingdom in the Tang Dynasty. These and the travel to the snowy mountains and forests and the Sino_Russian border attract over one million Chinese and overseas tourists every year.

To meet the needs for opening, the city has set up in Suifenhe a zone for economic and technology cooperation, a bonded warehouse, and an economic and technology cooperation zone in Dongning County. A zone for processing products for export to Russia is to be set up this year and a series of preferential treatments in terms of taxation, land_use and the import of expertise have been worked out. From 1985 to the end of 1997. the city approved the establishment of a total of 467 foreign_funded projects with contracted foreign investment of ”ē281 million, with ”ē114 million having been put to use.

Last year, the local gross domestic product topped 11.8 billion yuan (”ē1.4 billion), 10.3£„ higher than the previous year. In 1998, its foreign trade volume reached ”ē890 million, 15£„ more than in 1997. Sales through border trade increased to ”ē820 million, almost 70£„ of the province¬šs total. Rubber tire, wood work machinery, pharmaceuticals as well as border trade will get priority support from the local government. By consolidating its traditional markets in Russia, Japan, the Republic of Korea, Singapore and Hong Kong, Mudanjiang developed new markets in the European Union, the Middle East, Africa and America this year. By the end of last May, its import and export had increased 22£„ compared with the same period of the previous year.

Mudanjiang¬šs target is to become a regional center of personnel flow within the Northeast Asia economic ring, a center of circulation and marketing of important domestic and foreign goods, a competitive processing center, a multi_functional financial center with strong economic strength, and a culture and tourist center integrating sight_seeing, recreation and shopping.
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China needs to step up efforts to locate and develop its abundant heavy oil and tar sands resources to support its long_term energy supply strategy. It is urgent for the country to exploit heavy oil resources to make up for the shortage of conventional oil to back up its rapid economic growth. Heavy oil boasts higher viscosity and contains less hydrogen and more carbon, sulfur, nitrogen and heavy metals than conventional oil. Tar sands are a natural compound of asphalt and sands.

Heavy oil and tar sands have been found in China¬šs 12 major oil_bearing basins. It is estimated that heavy oil accounts for about 25£„ of China¬šs total oil reserves. China¬šs heavy oil industry has achieved rapid growth since its birth in the early 1980s. In 1997, China¬šs heavy oil output hit 13 million tons, making it one of the largest producers in the world. China has four major heavy oil production facilities in the Liaohe, Shengli, Xinjiang and Zhongyuan oilfields. Liaohe Oilfield is the biggest, pumping over 8 million tons every year. However, the industry only focuses on developing known heavy oil reserves. No specific plan for a comprehensive survey of China¬šs heavy oil reserves has been drawn up.

It is technically much more difficult to explore, develop and refine heavy oil and tar sands because of their physical characteristics. In addition, drilling heavy oil can cause serious environmental pollution. The current slump in international oil prices poses a significant challenge for heavy oil development, which usually involves higher production costs than conventional oil. The Seventh United Nations Institute for Training and Research International Conference on Heavy Crude and Tar Sands, held in Beijing last November, provided a sound opportunity for China to launch extensive international exchanges to tackle current problems and challenges. China will promote foreign co_operation to boost its heavy oil and tar sands sector.
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Yanshan Petrochemical Group Corp Ltd (YPC) signed recently contracts with ABB Lummus, Exxon of the United States and Toyo Engineering of Japan to build a massive technological upgrading project. Upon completion of the project, the ethylene production capacity of YPC will be raised from 450,000 tons a year to 660,000 tons. The group plans to use about 3.4 billion yuan (”ē410 million) to complete the upgrading project. Rather than pursuing sheer expansion in output, the project will help adjust product mix, increase varieties of products, and bring down production costs. Output of downstream products, including diesel fuel used in industrial and civilian sectors and materials used to make plastics, will be increased significantly when the facilities are upgraded. The project will use ethylene cracking technology jointly developed by ABB Lummus and a Sinopec research and development center. Apart from this, Exxon and ABB Lummus will provide other technologies crucial for the project. Toyo will assume the basic design work. Because the global petrochemical market is facing a glut, many petrochemical giants are eyeing China¬šs market as a focal point for future growth. China¬šs ethylene production capacity and actual output hit 3.94 million tons and 3.03 million tons respectively, ranking fifth in the world.
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Hofung, one of the leading Dutch trading companies in China, is joining hands with the Energy Research Institute under the State Planning Commission on four gas_fired co_generation projects. The four projects aim at making full use of steam and heated water, by_products of gas_based electricity generation which are wasted in traditional power plants. The four projects, two in Tianjin, one in Chongqing and one in Qiqihar in Heilongjiang Province, are valued at ”ē400_500 million in total. They are part of the framework agreement reached by China and the Netherlands last February. Hofung, together with Stork Engineers £¦ Contractors from the Netherlands, has five projects in China which aim at removing sulfur from the waste gases of refineries. China is importing an increasing amount of crude oil from the Middle East which has a high sulfur content. Hofung is serving as a bridge between China and the outside world by introducing and providing financial support for environmentally friendly projects and technologies.
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Bayer Jinling Polyurethane Co Ltd, a joint venture between German Bayer company and Jinling Petrochemical Corp in Nanjing, has opened a new formulating plant capable of producing 10,000 tons of polyol a year. The company, 55£„ owned by Bayer and 45£„ by Jinling, started construction less than a year ago. China is now the second largest individual market for Bayer in Asia. Its sales exceeded 1 billion German marks (”ē550 million) in China in the past two years. Production in Nanjing is intended mainly for the Chinese market. Polyurethane manufactured from the formulations produced there will be used in a variety of applications in the automotive industry, and as insulating materials for use in refrigerating appliances, the construction industry, container manufacturing and heating pipelines.
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Rockwell, an international electronic controls and communications company, will open three new facilities in China, further expanding Rockwell¬šs presence in the nation. These facilities, with a total investment of ”ē30 million, include an automation_avionics service and logistics company; an automation research center in Shanghai and Rockwell¬šs China headquarters in Beijing. The automation_avionics service and support company consists of a service and support center for maintenance, repair, training and technical assistance for avionics and in_flight entertainment systems supplied to Chinese airlines, and a logistics center for distribution of Rockwell automation products. The three facilities are expected to speed up the development of innovative automation technologies and support the localization of Rockwell products in conjunction with Chinese partners and manufacturers.
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