China will strengthen its supervision over the processing trade to ensure the sector's healthy development, said recently Foreign Trade and Economic Cooperation Minister (MOFTEC) Shi Guangsheng. The Chinese Government intends to perfect existing policies regarding the processing trade. All the basic policies for the processing trade will maintain stability and continuity. The processing trade has made important contributions to China's exports and foreign investment inflows in the past two decades. The processing trade will continue focusing on China's efforts to expand exports and increase foreign investment inflows over the long term.

China's processing trade exports increased from $235 million in 1979 to $104.5 billion last year, indicate MOFTEC statistics. The processing trade sector has created more than 30 million jobs, alleviating domestic unemployment. Thorny problems - smuggling, low technology levels, redundant construction projects and excessive reliance on imported materials - have accompanied the sector's rapid development.

The number of smuggling cases within the processing trade has risen substantially in recent years, notes Zhao Guanghua, deputy director of the State Administration of Customs. Chinese customs officials broke 174 cases of smuggling within the processing trade, involving 995 million yuan ($119.9 million), between January and April. The volumes accounted for 52.7% and 59.9%, respectively, of the number and volume of China's smuggling cases during that period.

Shi urged local processing trade management to enhance quality, especially optimizing the import and export commodity structure, encouraging the use of domestic materials and plugging management loopholes. The State Council classified processing trade into three groups - prohibited, limited and permitted - in its No 35 circular issued in April. The classifications are based on the nature of the firms' commodities. The State Council also divided processing trade enterprises into Group A, B, C or D according to their records of honesty. The circular is an important step by the Chinese Government to enhance its management over the processing trade. The State Council aims at strictly monitoring sensitive goods and rules-violating enterprises, but allowing more flexibility over general goods and businesses abiding by the law.
Back to index

A notice sent by the Bank of China (BOC) to overseas branches of foreign banks at the end of May was reported on June 3. The notice said:¡°We would like to inform your good bank to stop sending us RMB payment instructions starting from June 10, 1999. Such payment instructions from your good bank will not be accepted from the said date on." The move, which was ordered by the Administration of State Foreign Exchanges (SAFE), is just the suspension of a small section of the BOC's business. The suspension is aimed at plugging loopholes in foreign exchange management, and does not imply a foreign exchange policy change by the government. A spokesman for the People' s Bank of China, the central bank, said there was no change in the policy of maintaining the value of renminbi.

BOC is China's primary foreign exchange bank. Foreign exchange remitted to China through the BOC is expected to be paid in foreign currency beginning on June 10. The recipients will decide if the money will be converted into renminbi. The change will have no influence on the interests of the remitters and receivers, according to SAFE.

Halting renminbi remittances from overseas to its domestic branches by the Bank of China will improve the accuracy of China's international payment statistics, says the nation's foreign exchange watchdog. The decision is irrelevant to China's foreign exchange policy, the SAFE announced over the Internet. Inward remittance of renminbi refers to international settlement, in which overseas BOC customers make payments in foreign currencies but instruct the bank's domestic branches to pay recipients with yuan. As the renminbi is still not a fully convertible currency, it is difficult to apply effective management of the foreign exchange administration system for inward remittances of renminbi

The announcement, however, disturbed international financial markets as observers and market players struggled to understand the implications of the change. They feared the change signaled the devaluation of the renminbi. The People's Bank of China quickly dismissed their concerns, noting the change will not affect the nation's position regarding the renminbi's value. The renminbi has strong economic fundamentals to stay at its present level, BOC President Wang Xuebing told a symposium in Tokyo early in June.
Back to index

China has taken firm measures to crack down on illegal audio-video products and has implemented a set of regulations governing their imports. The regulations were promulgated by the Ministry of Culture and the General Administration of Customs. They stipulate that the import of audio-video products from foreign countries, as well as from Hong Kong, Macao and Taiwan, for sales, distribution or research should always pass an examination before entering the country. The Ministry of Culture is in charge of the examinations of audio-video products and of enterprises engaged in audio-video imports. After September 7, enterprises will need certificates from relevant departments to import and distribute imported audio-video products. A ban is put on import of audio-video products which are harmful to the sovereignty and unity of the country, can damage China's image or dignity, infringe on intellectual property rights, or are unhealthy, obscene, or against State laws.

While tightening control over audio-video products, China has also been cracking down actively on various kinds of illegal publications. In Beijing, more than 130,000 illegal VCDs including nearly 80,000 pornographic ones were seized by the local public security department at the end of May and in early June. The Beijing anti-pornography leading group disclosed that members of two criminal gangs selling obscene VCDs in the city and in Hebei Province were arrested. In Guangzhou, four gangs were dismantled and nearly 700,000 VCDs were seized. On May 31, the Guangzhou Press and Publication Bureau and the Guangzhou Copyright Bureau destroyed publicly 1 million pirated VCDs to commemorate the eighth anniversary of the State Copyright Law.

Over the past eight years, a total of 4.7 million copies of pirated books were seized and destroyed in Guangzhou, together with more than 3 million pirated VCDs and electronic publications. The biggest case in China in the first half of the year took place in Northeast China's Jilin Province. It involved 11 printers. The 11 printers were each fined more than 311,000 yuan ($37,470) for their illegal activities. All the provinces, autonomous regions and municipalities have set up special working groups to wipe out illegal printing and publication activities. Sources from the State Press and Publication Administration noted that the country's audio-video publication trade has developed rapidly over the past 20 years. It provides the market with more than 15,000 new products every year.
Back to index

The government is considering allowing chain stores to expand businesses previously closed to their participation, enhancing the prospects for foreign investment in the sector. If approved, the new policy will permit chain stores to deal in sales of automobiles, personal computers, medicine and petrol. The policy is likely to come out this year, said an official from the State Economic and Trade Commission (SETC). However, the liberalization will not extend to foreign-funded chain stores until existing businesses have been rectified in a nationwide program that is aimed to bring the chain store sector into good order.

At least 300 foreign-funded chain stores operate in China at present. Although the State Council started to approve pilot joint venture chain stores early in 1992, a large portion of the existing joint ventures received their permission from local government instead of getting licenses from the State Council. Sources from the SETC say that only 20 of the existing 300 foreign-funded chain stores were approved by the State Council. A ¡°rectification" campaign among chain store joint ventures has been carried out since August, 1997. Many items are under adjustment such as the ratio of foreign investment, term of joint ventures, operational scope and operating situation.

In the past two years, a total of 277 joint ventures have been placed on the list for rectification. Only 42 chain store joint ventures on the list passed the rectification procedure to be allowed to continue operations in China. Thirty-six have had their licenses suspended, while the rest are still in the process of ¡°rectifying" their operations. Although the rectification were required to be concluded by the end of last year, the job has not been done yet. Government reforms last year and other problems such as the shift in the government sector's functions have caused the delay. No deadline for the action has been set; measures to quicken the steps are still under heated discussion. Nevertheless, the number of new foreign-funded chain stores is still growing in China.

Measures to ensure the healthy development of the industry are urgently needed, said Guo Geping, who chairs the China Chainstore £¦ Franchise Association. The completion of the ongoing adjustment may lead to a slash in the number of chain store joint ventures. But it is in no way contradictory with our opening-up policy. To further open its commerce areas to foreign partners, a standardized environment will be a primary factor to accelerate the development of the chain store£®
Back to index

China reaffirmed early in June it will offer wider market access to foreign businesses once it joins the World Trade Organization (WTO). Investors will face few restrictions and get easier access to new areas, and China's sustained economic growth and a stable yuan still appeals to foreign investors said Vice-Minister of Foreign Trade Sun Zhenyu. Sun remarks came shortly after Assistant Foreign Trade Minister Ma Xiuhong announced plans to remove geographic limits for foreign banks and law firms hoping to branch out in the country.

Although Sun did not specify which specific sectors China would open first to investors upon WTO entry, it is known that most investors are ready to enter banking, farming, telecommunications, legal and accounting services sectors. As China gradually opens more of its services markets, foreign investors will have a chance to increase their presence in China. A recent Chinese report indicates that many high-powered US companies, such as General Motors, General Electric and Motorola, have expanded capital inputs in China, which promises a high investment return of 10% to 20%.
Back to index

China's export volume rebounded and achieved a 4.2% growth in May, following months of flat performance. According to the General Administration of Customs, the increased exports volume, together with the 21.5% growth in imports, boosted the total foreign trade volume to hit $29.l9 billion in May, an 11.7% increase compared with the same month last year. The combined volume of exports in this year'first five months, however, still saw a 5.3% decline, while imports rose by 15.3% to hit $60.48 billion. The cumulative exports of the processing trade gained a 1.4% growth by May following four months of decline.

The first five month sales witnessed a recovery in general exports which achieved a 0.2%t growth in May compared with the 21% plunge in January. Russia, the Hong Kong Special Administrative Region and Taiwan Province remained on the list of reduced import volumes from the Chinese mainland in the January-May period, while Japan, the United States, the European Union, South Korea and the Association of Southeast Asian Nations (ASEAN) all purchased more goods from China during the period year-on-year. As the Asian economy is bottoming out, demand is expected to continue to grow, which will bolster the growth of China exports to Asia. Foreign-invested companies in China exported a total of $31.9 billion worth of goods in the first five months of this year, up 5.4% compared with last year, and the January-May growth rate of exports by State-owned enterprises saw a growth of 2.6% over the January-April period.

The Chinese Minister of Foreign Trade and Economic Cooperation, Shi Guangsheng, recently urged foreign-invested companies to escalate their efforts in tapping the overseas market with the aim to expand exports. Foreign-invested companies have played a significant role in supporting China export sector since the Asian financial meltdown. Customs statistics also indicated a strong growth in Chin exports of agricultural, machinery and electronics products in the first five months. Agricultural exports increased by 8.1% to hit $5.35 billion, and those of machinery and electronics products also gained an 8.3% growth to reach $26.93 billion. However, declines of various degrees were recorded in the export volumes of other large items. Customs statistics showed that the exports of mineral products tumbled 21.8% to $l.89 billion, steel lost l2% to 1.19 million tons, garments dropped 27.2% to $8.86 billion and toys decreased 6.3% to $1.6 billion. Different trends were also observed in the imports of various products.

Despite the hangover left by the Asian financial crisis, China continued to enjoy a favorable international balance of payment, according the State Administration of Foreign Exchange. China's foreign exchange reserves increased by $5 billion from 1997 to $144.9 billion at the end of last year. Total international reserves rose $6.4 billion. This year, the country's foreign exchange continued to grow. The country's foreign exchange reserves hit $146.63 billion at the end of March this year, $1.67 billion up from the end of last year, representing a growth of more than $939 million compared to the same period last year. The administration improved services and a market-regulating campaign have contributed to the increase.
Back to index

China is endeavoring to expand exports this year despite lurking problems, Foreign Trade Minister Shi Guangshing said on June 15. The nation has adopted a series of measures including increased tax rebates and banking credits to exporters which are consistent with international practices. Other measures include lowering export costs and encouraging Chinese enterprises to engage in processing trade overseas. China will continue reforming its foreign trade administrative regime to make exporting easier. The nation is confident it will maintain proper export growth this year. Favorable factors include sustained economic growth and an emergence of a buyer's market at home.

The country is also taking steps to invigorate foreign trade and economic cooperation through science and technology. In collaboration with the Ministry of Science and Technology and the Ministry of Information Technology, the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) is drafting a development plan to further promote the sector. Five key industries were designated: information, biopharmaceutics, new materials, electronics and household electrical appliances. Export priority has been given to 85 products made by 118 enterprises within the five key industrial sectors. Meanwhile, 15 cities, including Beijing, Tianjin, Shanghai, Guangzhou and Xiamen, have been selected as pilot cities to commercialize high-tech research results.

Although statistics from the World Trade Organization indicate China's exports ranked the ninth in the world last year, a large portion of China's export commodities are primarily processed products with low added-value. Last year, China's export of high-tech industrial products reached $11.4 billion, accounting for only 6% of its total export value. It is estimated that by the end of this year, the figure is likely to reach $15 billion. Technologies were introduced from abroad in many industrial areas such as energy, transportation, telecommunications, petroleum, chemical industry, raw materials, machinery and metallurgy.

Last year, more than 6,200 projects concerning technology were inked with a contractual volume of $16.4 billion. The stimulation of trade through science and technology also concerns the export of technology. China has witnessed a fast development in this sector since the 1980s. By the end of 1998, nearly 9,200 items had been exported to more than 100 countries and regions with a contractual value of $28.2 billion. More than 2,500 contracts dealing with the export of techniques were clinched last year, with a contractual value of $6.7 billion, up 21% from the previous year.
Back to index

The inland province of Shaanxi is making efforts to build itself into an economic and cultural center of Northwest China. According to the province's governor, Cheng Andong, Shaanxi's blueprint for the 21st century begins with an enlarged input in the province's infrastructure. In 1999, investment in infrastructure is expected to total 60 billion yuan ($7.2 billion), 13.2% more than last year. Most of the investment will flow into the projects which are expected to play an essential role in the local economy of the 21st century. Such projects include building expressways and railways and remolding the power network in the cities and the countryside.

The loess plateau in the province is reportedly rich in oil, natural gas and coal. But poor infrastructure has long held back the local economy. Capital shortage has also been a long-term source of trouble. This year, the investment market will be opened to private funds. Besides infrastructure, the provincial government will fully support enterprises in the cities and countryside. According to a provincial government report, the average deficit of large enterprises will be cut by 10% by the end of this year. In March, an investment company aimed at collecting funds for industrial projects, such as the emerging local automobile industry and power plants, started operation. Later this year, the provincial government and local financial institutions will jointly establish a risk fund to support capital-hungry high-tech enterprises.

Shaanxi has more than 50 colleges and universities, more than any other parts of the country aside from Beijing and Shanghai. The technical personnel in the province's State enterprises and its recently developed high-tech projects are also a major force behind its scientific development. To properly use these resources of knowledge will top the government'w work agenda this year. The provincial government has also organized a special office to provide technological support and consulting services for enterprises, especially in the high-tech field. Shaanxi has 39 centers of technological development aimed at marketing scientific and technological innovations. This year, the province expects high-tech output to be worth 28 billion yuan ($3.4 billion).

Statistics suggest that the province's export volume in the first four months dropped to $304 million, 18% lower than the same period last year. On June 2 the province implemented a set of measures to check the decrease in its export volume. Shaanxi this year aims at an export volume of $2 billion, with 6% of the volume coming from foreign funded enterprises. But the provincial government is unlikely to rewrite it proposed growth target for exports this year.

The inland province is trying to improve its exports through grasping a bigger share of the export market and improving the efficiency of institutions related to foreign trade. The province is also trying to use its cheap labor to reduce costs as much as possible. Local enterprises are urged to pursue small profits and quick returns to compete for a larger market share. With the weaker Southeast Asian markets, the province is trying to get into the markets in Latin America, Africa, the Middle East and Eastern Europe. For these markets, machinery makes up a large portion of the province's exports. In order to facilitate the exports, the local government is trying to promote the cooperation between different departments and institutions.
Back to index

The largest investment fair ever held in Zhejiang Province opened on June 7, demonstrating the province's desire for more foreign investment. More than 2,000 projects were offered to foreign investors at the three-day Zhejiang Investment and Trade Symposium '99. These projects represented an investment of $20 billion. They covered various sectors, including infrastructure, machinery, electronics, chemical and pharmaceutical products, and high-technology. More than 3,200 overseas business people from 62 countries and regions participated in the event.

The three-day fair witnessed great success. According to Wang Yongming, vice-governor of the province, 360 projects with $2.08 billion of contracted foreign investment have been clinched. The fair has also reported $53.8 million worth of export contracts. The fair has promoted the image of Zhejiang and enhanced overseas investors' confidence in the potential of the province.

Zhejiang attracted $2.41 billion of foreign funds last year. Non-State enterprises became a center of attention during the fair. More than 1,000 firms had direct talks with 100 multi-national companies. Multi-national corporations and investment brokers were encouraged to explore business possibilities in the areas of fund-raising, technology, research, management and marketing. Firms were also encouraged to seek new ways to invest in high-technology enterprises in Zhejiang. Since non-State firms are quite similar to foreign companies in terms of management and operations structures, it is easy for them to develop a consensus with foreign companies. Non-State firms have become a major force in the province's economy. The industrial added value of private enterprises and foreign-invested enterprises accounted for 48% of that in the province last year. The vice-governor said the province will maintain contacts with business people who have attended the fair, and will try to reinforce confidence in the province's resources. He also said the province will pay attention to the Internet as a way to explore more business opportunities with overseas partners.
Back to index

This southern Chinese city will highlight the construction of 11 projects this year with the aim of adjusting its industrial structure and boosting consumption. The projects cover metro lines, urban transportation facilities, the east-south-west ring and second north ring expressways, a sewage treatment project in Liede, the second phase of the Xinsha Port project, Guangzhou Gymnasium, Guangzhou Iron and Steel Production Base, a computer center in Guangzhou Free Trade Zone, the research and development and commercialization of mobile communications, the Guangzhou-Honda automobile project and the new Baiyun International Airport.

The projects require a sizable sum in investment, and the provincial government will raise funds through a variety of channels. The 11 projects require a capital input of 69.56 billion yuan ($8.38 billion). Guangzhou will invest 16.46 billion yuan ($1.98 billion) in them this year. This sum will be added to the 25.79 billion yuan ($3.11 billion) already invested by the end of 1998. Guangzhou will investigate the possibility of seeking bank credits from domestic and international sources. The city will also initiate favorable policies to encourage foreign investors to participate in some key projects. Guangzhou also welcomes collective and individual investment in the projects. The city will give priority to the construction of several other projects, including an expressway to the new airport, the initial phase of the Guangzhou Interactive Visual Service project, Guangzhou opera house, the Baiyun pilot farm, and a base for communications equipment research, development and production in the Guangzhou Science Center.

Information technology and automobile industry projects and those targeting the industrialization of scientific and technological development are expected to upgrade the city's industrial structure. The infrastructure projects will improve the investment climate and living environment in Guangzhou. Investment in these projects will also boost domestic consumption. This is necessary for the healthy development of the city's economy at a time when foreign trade is feeling the impact of global financial turbulence.

Recently Guangzhou released stipulations on improving the city's soft investment environment and put forward opinions on further expanding reform and opening. According to the latter, Guangzhou will implement various policies to introduce foreign funds. It will encourage the high-tech sector to utilize foreign funds, guide foreign businesses to invest in pillar industries and undertake all-round economic and trade cooperation. Foreign firms are encouraged to develop high-tech and advanced and applicable technological results and put them into industrialized production. Overseas research and development institutes are encouraged to set up solely or jointly funded research and development institutes. Risky investment companies abroad are welcome to invest in new and high-tech projects. Cooperation will be strengthened in sectors involving electronic information, bio-engineering, environmental protection, energy conservation, new materials, mechatromics, and key technologies used in construction, high-rise buildings and space structure.
Back to index

Zhoushan City in Zhejiang Province offered recently some projects for foreign cooperation.

1. 60,000 tonnage ship repairing and building. Introducing funds and technology from abroad to construct 60,000 tonnage building berth. Investment: $30 million. Form: joint venture or cooperation.

2. Plastic, degraded plastic and aluminum-plastic compound packing. Introducing a rotary intaglio press, a fluid mulcher and equipment of producing degraded plastic, including technical training. Investment: $2.6 million. Form: joint venture or cooperation.

3. EVA plastic and bacteria-resistant plastic. Developing up-to-date bacteria-resistant plastic with HA as matrix and high quality EVA products of quadratic forming such as cases, bags and shoes and so on, with an annual output capacity of 3,000 tons. Investment: $1.5 million. Form: joint venture or cooperation.

4. Products with marine creatures as raw materials. Producing wine, drinks, oral liquid, capsules, fast food and health food, such as sea dragon wine, green algae wine, brown algae wine, spiro-algae wine, precious shellfish wine and rare seafood wine. Investment: $3.79 million. Form: joint venture or cooperation.

5. Expansion of nano silicon dioxide. Purchasing equipment, such as water purifiers and reactors, to increase the production of nano class powder by 400 tons annually. Investment: $2.5 million. Form: joint venture or cooperation.

6. High and middle grade leather chemical products. Introducing new technology from abroad to produce high-grade currying agent, tan-liquor and degreaser with an estimated output of 8,000 tons. Investment: $1 million. Form: joint venture or cooperation.

7. AT-39 high-frequency crystal syntonizers. Importing equipment, such as automatic scaling-down machines and supersonic cleaners, to produce 24 million pieces of crystal syntonizers. Investment: $9 million. Form: joint venture or cooperation.

8. Energy-saving and multifunctional controllers for AC contactors. Investment: $12 million. Form: joint venture or cooperation.

9. Mini synchronous alternators. Producing 250 KW low-noise ship generators. Investment: $2 billion. form: joint venture or cooperation.

10. Glass-fiber-reinforced plastic fishing ships. Producing 100 glass-fiber-reinforced plastic fishing ships, ferries and yachts annually. Investment: $3 million. Form: joint venture or cooperation.

11. A new dock for repairing vessels up to 300,000 tons. Constructing four docks, two for vessel repairing and two for vessel building. Investment: $190 million. Form: joint venture or cooperation.

12. NdFeB magnetic materials. Increasing the production capacity to 40 tons annually with 75% of the products for export and renovating the AlNiCo production line to reach the output capacity of 50 tons a year. Investment: $2.5 million. Form: joint venture or cooperation.

13. Furniture and wooden products. Increasing its output capacity to 100,000 pieces annually, 90% of which are for export. Investment: $1.2 million. Form: joint venture or cooperation.

14. Growing and processing vegetables for export. Output capacity of 4,000 tons annually. Investment: $2 million. Form: joint venture or sole foreign investment.

15. Oxygen-enriching pumps. The annual production capacity of H-series oxygen enriching pumps will be 20,000 sets. Investment: $2.5 million. Form: joint venture. (to be continued)
Back to index

In order to turn tourism into a pillar industry of China's national economy, the National Tourism Administration (NTA) has set the target of raising the tourism revenue to 350-360 billion yuan by the year 2000. The figure is expected to account for 5% of the GNP in the year and 8% by 2010. This grand plan is expected to provide good opportunities for foreign investors in China. According to NTA head He Guangwei, China will develop new tourism projects in the 21st century. This will promote the development of tourism from simple sightseeing to a mode that combines sightseeing with holiday pursuits and special tours, enabling China to become one of the most attractive tourist resorts in the world.

Statistics show that, during the past 20 years of reform and opening, the country's tourism sector has attracted $20 billion of foreign direct investment. This helped speed up the infrastructure construction of hotels, tourism projects, holiday resorts and scenic spots. The sector's foreign exchange earnings increased from $263 million in 1978 to $12.07 billion in 1997, jumping from a ranking of 41st to 8th in the world.

Tourism authorities suggested foreign businesses pay attention to the following two aspects when investing in China:

1. Investment should be rationally distributed rather than being concentrated in hotels and related projects. During the past 20 years, China has used foreign funds to build 734 hotels, with a total of 178,300 rooms. These hotels have introduced a total of $15 billion, accounting for 75% of the total used by the tourism sector ($20 billion). Most of them are allocated in developed coastal areas. Except for the two hotels located in Xinjiang and two in Gansu, other parts in western China including Qinghai, Tibet and Ningxia, remain vacant for overseas investment. With the investment focus moving to the west, tourism resources in these areas will be further tapped, creating a growing demand for hotel services.

2. Apart from hotels, foreign businesses should increase investment in other tourism resources and projects, particularly those in backward areas. China has used foreign funds to build 12 State-level tourism and holiday resorts, including the Nanhu Lake in Guangzhou and the Taihu Lake in Suzhou, as well as cableways at Badaling in Beijing, Huangshan Mountain in Anhui and Zhangjiajie in Hunan, the Yabuli Skiing Ground in Heilongjiang and the Jiulong Recreational Center in Beijing. Only a few people have shown interest in tapping tourism resources in the central plain area-the origin of China's civilization--and those in such minority areas as Tibet, Qinghai and Xinjiang, which are rich in scenery.
Back to index

While coastal areas eye the West for investment, Guangyuan City in Southwest China's Sichuan Province is turning its attention in the opposite direction-the economically developed eastern areas of the country. The city's authorities have recognized that not every region can become a hot target for foreign investment overnight, and also because Guangyuan and many areas of East China have complementary economies. Guangyuan, located at the junction of Sichuan, Shaanxi and Gansu provinces, has abundant natural resources such as nonferrous metals, forests, medicinal herbs and fruits, and a potentially large market. But the city lacks capital and advanced technology. To solve these problems, the Guangyuan municipal government launched a massive program two years ago to attract investment from domestic enterprises from the economically developed provinces in East and Southeast China.

By the end of 1998, committed investment in the city from other parts of the country totaled over 1 billion yuan ($120 million) for more than 200 projects. Of the agreed funds, 490 million yuan ($59 million) had actually been put to work. The capital inflow gave a strong push to local economic development last year, accounting for more than 20% of the city's gross domestic product. The city's efforts to create a favorable investment environment have attracted a number of famous domestic enterprises. For instance, the Wahaha Group from Hangzhou in Zhejiang Province, one of China's leading soft drink makers, has invested more than 80 million yuan ($9.6 million) to establish a factory in Guangyuan. The Wenzhou Kang'erda Printing Equipment Co Ltd has invested 100 million yuan ($12 million) to build the Wenzhou Commodity Town, which has attracted more than 2,000 Wenzhou people to launch businesses in Guangyuan. The people of Wenzhou in Zhejiang Province are famous for their business acumen. Having tasted initial success, Guangyuan's municipal government has decided to launch 100 investment projects every year for the next three years to lure capital from domestic enterprises from other parts of the country. The projects will continue to target enterprises in East and Southeast China while hoping to arouse interest from overseas investors.
Back to index

China's cashmere industry, suffering heavily in an oversupplied market, will restructure to accommodate new market demand. Stockpiles of cashmere nationwide are believed to be about 4,000 tons with a monetary value in the millions of yuan. The purchase price of cashmere has fallen sharply from 500 yuan ($60) per kilogram in 1995 to 200 yuan ($24.1) per kilogram.

China has been one of the world's leading cashmere producers with the record output of 9,895 tons in 1997. Farmer's enthusiasm for goat raising was driven up by a large profit margin in cashmere in the 1980s. At that time, a growing market demand for cashmere sweaters not only stimulated the expansion of processing plants, but also created a birth boom in goats when the price of cashmere per kilogram surged by nearly 300 yuan ($36.2). In Inner Mongolia alone, the number of goats soared to more than 19 million, compared with 8 million in 1985. Cashmere sweaters are also oversupplied on the market, a situation suffered by most of the country's industrial products. The cashmere processing industry, which boomed in the early 1990s, was hit hard by the glut and consumption slump.

According to the State Bureau of Textile Industry, 6 million cashmere sweaters were sold each year in recent years, but China could have produced 20 million units a year. Cashmere processing, a new growth area in the sector, has become one of the few industries capable of competing on the international market. Perhaps more worrisome is a reality that the ongoing consumption slump has triggered price cutting among the country's more than 2,500 cashmere sweater producers. Some enterprises have urged the government to take control of adverse price cuts.
Back to index

While devoting huge efforts to consolidating its position as China's biggest computer seller, Legend is strategically marketing itself as a production base for foreign partners. On May 31 this effort yielded a significant contract with Siemens. According to the deal, Legend will supply computers, carrying the Siemens brand, to the Chinese and neighboring markets. The agreement also marks the establishment of a global partnership between the two companies with long term co-operation in areas such as production, research, development and marketing. The monthly production of Siemens computers in Legend's Huiyang plant will be less than 10,000 units in the first half year. But Siemens has the ambitious goal to sell 100,000 units per month in China.
Back to index

Construction of China's largest foreign-invested agro-chemical joint venture broke ground in April in Nantong, Jiangsu Province. Zeneca Agrochemicals, the crop protection and plant science business of Astra Zeneca PLC, a British bioscience group, will hold more than 80% equity in the $85 million joint venture. The three Chinese partners are Nantong Agrochemical Company, Nantong Petrochemical Company and Jiangsu Agrochemical Company. The joint venture, which is expected to come on stream by 2001, will produce annually 6,000 tons of the herbicide paraquat, the active ingredient in " Gramoxone", one of Zeneca's leading herbicide brands. The project will make use of state-of-the-art technology developed by Zeneca and will operate to internationally adopted safety and environmental standards. The plant will also produce a leading pyrethroid insecticide.
Back to index

A Sino-Japanese environmental engineering company was formed on May 10, demonstrating China's determination to develop its environmental industry. The joint venture, Guo Hua Ebara Environmental Engineering Co Ltd, with a registered capital worth $20 million, was created by Guo Hua Energy Investment Co Ltd and Ebara Co of Japan. The joint venture will offer customers advanced environmentally friendly technologies and equipment used in desulphurization, water treatment, coal burning, and garbage disposal. Its business scope will range from project design and consulting to the procurement and supply of equipment and machinery. Guo Hua Energy Investment Co is a State-owned company in charge of managing a State fund designed to provide financial support for projects consuming more coal than oil. Currently, the company is using capital to explore clean coal technologies and some other high-technology environmental projects. The Japanese company views the environmental industry as a most promising sector in China's economic development.
Back to index