China will continue to perfect processing trade regulations and try to accommodate the demands of processing trade enterprises. Aiming to crack down on rampant smuggling and foreign exchange fraud in processing trade, MOFTEC announced a new policy earlier this year. According to the new policy, processing trade enterprises will be classified into four groups - A, B, C and D - based on their creditability and compliance level and be given different latitude in making security deposits when importing materials for processing.

The promulgation of this new policy has triggered intense responses from established processing trade businesses, most of which were established by overseas investors. Hong Kong and Taiwan businesses conducting processing trade in the mainland have shown the greatest concern over this new policy. Many of them are worried about severe funding problems they may encounter if their firms are placed into Group C. The government has pushed back the effective date from July 1 to October 1 to give enterprises more time to better prepare themselves for the change.

There may be some discrepancies between the interests of some enterprises and the goals that the government pursues, but the move aims to ensure order and fair competition in the market place, Gao Hucheng, assistant minister for MOFTEC said. Although the policy adjustment of the government may affect the interests of some enterprises, it will serve to benefit the whole economy.

His words helped alleviate concerns that the size of each of the A, B, C, D groups would be fixed. It is a misunderstanding. The government hopes more and more enterprises will enter Group A. Although the number of enterprises in Group A may not be large at present, the group's trade volume will account for over 60% of the processing trade sector's total. Enterprises in Group B and C will be promoted to a higher level if their performance improves. Processing trade has played an extremely important role since China opened up, especially during the initial stage of China's opening process.
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Price deflation of the past two years that seems to be worsening has spurred a need for cartels to halt the decline of prices. China's long-awaited antitrust legislation will likely quicken pace as the increasingly competitive marketplace urgently calls for game rules and better protection of consumers. An official from the State Development Planning Commission said that the government will promulgate rules for curbing price cartels this year. The regulation will promote competition and pave the way for anti-monopoly legislation. As part of a pricing policy package, at least two sets of regulations, on hearings for pricing and penalty for frauds, will also come out soon.

Experts believed the government has decided to step in because cartels, backed by industrial associations, have already failed to solve pricing problems. Until early August, when the Commission promulgated regulations on anti-dumping and penalties for violations of the Price Law, nearly all industrial sectors that face a glutted market have resorted to price cartels for survival. In another development for the antitrust law, several senior judicial and economics experts have teamed up for urgent research on the legislation. That could herald an early release of the legislation. The research, supported by senior lawmakers from the National People's Congress, will speed up the process. Results are scheduled to come out by the end of November. Reports may be submitted to policy makers then, if they should push forward the legislation.

It is learned the State Economic and Trade Commission and the State Administration for Industry and Commerce are considering an international seminar on China's anti-monopoly law. The seminar is expected to be held this year to help quicken the legislation. There seems to be consensus that foreign businesses should have national treatment status. Thus, the future antitrust law and pricing regulations would apply to them. To liberalize pricing, especially of goods and services supplied by competitive industries, the State Council is reconsidering brackets for control. The State Development Planning Commission revealed the government pricing control will cover fewer goods and services. New rules will not slow the pricing reforms that go towards the free market, but help speed up the process instead.

China started to draft an anti-trust law in late 1980s. After revising different versions several times, a draft is available. Officials who have participated in the drafting said the proposal could be delivered to the legislature any time, though it may need improvement. It depends on how urgent policy-makers think the legislation is. Some policy-makers once held that an antitrust law would block the way for companies to grow. But majority of them are of the opinion that an antitrust law does not oppose market power indiscriminately. It respects competition and efforts in corporate mergers and acquisitions for efficiency.
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The Chinese Government is opening up the telecom industry step by step. For many years, China's telecommunications service market has been out of reach for foreign telecom companies. However, during the past two years China' s telecom system has undergone a number of changes: 1. relevant governmental authorities regulating the industry have been restructured; 2. the former monopoly of China Telecom was split into several companies; 3. new Sino-foreign cooperative projects have sprang up in the telecom industry. These are indicators that there may be more substantial changes to come in China's telecommunications services in the future.

The Chinese Government has long adopted a monopolistic policy in the telecom industry in which only a handful of privileged domestic companies qualify for the provision of telecom services, and foreign investment is strictly prohibited. The above policy is clearly reflected in the Guidelines for Foreign Investment by the Industrial Sector (the ”°Industrial Guidelines") jointly published by the relevant governmental authorities in 1997. The Industrial Guidelines categorize types of foreign investment into projects which are ”°encouraged", ”°permitted", ”°restricted" and ”°prohibited". Postal and telecommunications industries are explicitly listed among the prohibited projects, which means foreign telecom companies are legally banned from doing any business in this field.

Despite the fact that these statutory restrictions remain in effect, the situation has altered over the past couple of years. Premier Zhu Rongji stated that China was prepared to open up its market for telecom services to international participation in the future. This April, the Shanghai Post and Telecommunications Administration and the Shanghai Information Co Ltd signed a cooperative agreement with the US company AT&T. The aim of the deal is to utilize the existing infrastructure to set up an IP service network in the Pudong New Area, including a broadband communications network. This marks the first entry of foreign capital into the Chinese telecom market. The cooperative agreement was reached after long-term negotiations between both parties. Another important deal was secured between China Telecom and British Telecom. The cooperation agreement, which allows the two companies to offer a new global relay telecom service, was announced in mid-June. The agreement aims at providing flexible and cost effective supplies to meet the communication demands of foreign companies present in China.

Overseas companies have been elbowing their way into the Chinese telecom market. However, some of them are trying to get access to the Chinese telecom service market through an indirect way - the so-called CCF (China-China-foreign) projects. CCF project involved first moving capital into a China-foreign joint venture, which then injected the funds in a China Unicom project in return for a share of the latter's revenues. The move is viewed as an indirect method for foreign companies to gain a share of China's telecom services market. The CCF mode of investment financing, adopted by China Unicom, has now been outlawed by the government. Wu Jichuan, Minister of the Ministry of Information Industry, recently stated that China continued to prohibit foreign investment in the telecommunications services sector, even though foreign companies are welcome to invest in the manufacturing and research and development of telecommunications equipment. He warned that foreign companies involved in negotiations with China Unicom (CU) over investments in telecommunications services could have their rights to operate in China revoked if those disputes are not promptly and properly settled.

Contracts concerning CCF projects have reportedly been used in anticipation of China's accession of the World Trade Organization (WTO). The WTO requires all members to open their telecom services market to outside participation. But Wu said the government regards CCF projects as ”°irregular" and all related business activity has been suspended. If China enters the WTO and makes some pledges, the Ministry will follow through with commitments made by the Chinese Government. China Unicom is currently involved in serious negotiations with foreign telecom companies which have signed 45 currently illegal cooperative CCF projects with the Chinese firm. Compensation is being sought
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The State Economic and Trade Commission (SETC) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) recently published the ”°Pilot Procedures on Foreign-funded Commercial Enterprises". It is the first law China ever published to govern foreign investment in commercial area. Under the Procedures, foreign investors can launch commercial joint ventures in provincial capitals, municipalities, independent cities in the State plans and special economic zones, to engage in retailing, import and export and complementary services, as well as to organize wholesales of domestic and imported commodities and export of China-made products.

The new Procedures extend areas for the trials from the original Beijing, Shanghai, Tianjin, Guangzhou, Dalian and Qingdao and five special economic zones to all provincial and autonomous regional capital cities, municipalities under the direct jurisdiction of the central government and cities enjoying the provincial status in planning. Each city for trial will be allowed to launch 1-2 joint equity or cooperative commercial ventures. Beijing, Shanghai, Guangzhou, Chongqing, Tianjin, Shenyang, Zhengzhou, Wuhan, Lanzhou and Chengdu and other economically central cities and commercial and trade center cities may add 1-2 ventures for trial in retails as well as in wholesales. The four municipalities under the direct jurisdiction of the central government are allowed to run one wholesale enterprise each. Retail enterprises that meet the required conditions may also engage in wholesales concurrently and new wholesale enterprises may be set up. Chain operations may be extended from Beijing and Shanghai to all other economic and commercial and trade central cities in a planned and controlled manner.

Service trade will be the main part of the extended opening up in the next step, according to SETC. The extension of the experiments in utilizing foreign investment in the area of commerce in a step-by-step and planned way will be favorable to maintain the scale of foreign investment and would help speed up the transition from traditional commerce to modern commerce and sharpen the competitive edge of Chinese commercial establishments. The issue of the new stipulation shows that China will, as always, persist in the basic principle of opening up to the outside world. But in view of the current capacity of the China home market and commercial establishments, the experiments must be carried out in a planned and step-by-step way. In order to prevent blind and disorderly development in the trials, the Procedures urge to incorporate foreign-funded commercial projects into municipal development plans and make an overall arrangements in terms of the number, distribution, performance, scale, progress of the ventures on that in chain operations and wholesales as a basis for reporting.

The issue of the Procedures has ended the situation of having no laws to abide by in the utilization of foreign capital in the commercial area. The Procedures clearly specify the qualifications of both Chinese and foreign investors, the conditions of enterprises for experiments, terms of reference and procedures and materials required for application. All these have embodied the principle of fairness and transparency. At the same time, the Procedures provide that the project proposals and feasibility study reports will be examined and approved together, thus simplifying the procedures.

It was learned that since 1993, local governments have overstepped their terms of reference to approve 277 foreign-funded commercial enterprises. SETC will, according to the requirements of the State Council, work together with departments concerned and take stock of such enterprises and handle the matter properly.
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China's overseas engineering contracting and labor service business has maintained vigorous growth. Statistics from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) indicate Chinese engineering contracting and labor service companies clinched 8,782 contracts, worth $5.83 billion, during the first half of this year, representing 2.96% growth when compared to a year earlier. Their completed projects volume increased by 11% to $4.52 billion in the January-June period. By the end of June, 338£¬000 Chinese were working abroad, 14,000 more than last year. During the period, overseas projects meant exports of $387 million worth of Chinese equipment and materials. MOFTEC minister Shi Guangsheng called foreign engineering contracting and labor cooperation businesses the most promising part of China's foreign economic cooperation sector. Global construction investment volume was $3.2 trillion in 1998, while Chinese firms only clinched $10.1 billion. This indicates there is huge room for further development.

Analysts attributed the first-half-year business growth to the maturity of Chinese contracting companies in adapting to market changes. These contracting companies are more experienced than foreign trading companies in coping with market changes. Having directly faced inter-national market changes since they came into being during the late 1970s and early 1980s, China's engineering contracting companies have gathered rich experience in tackling market changes. Ten years ago, they successfully shifted their focus to the emerging Asian market from the once exuberant Middle-Eastern market, which was withering quickly.

Since the outbreak of Asian financial turmoil in 1997, they have also achieved remarkable progress in tapping European and American markets. Statistics indicate that during the first half of this year, engineering contracts clinched by Chinese firms in the European and North American markets soared by 31.3% and 156% from a year earlier. The China Metallurgical Construction Engineering Co got a contract for a $150 million engineering project in the United States this year. This was the first time that a Chinese engineering company ever succeeded in the US engineering market. It is a historic breakthrough for Chinese engineering companies since the US engineering market is extremely competitive. A 187.3% increase was reported in the sales volume of Chinese contracting firms in Africa. The Chinese Government will guide and support a group of big contractors to bid for large projects on the international market. Incentives will range from enlarging credit lines for big firms to granting qualified enterprises the right to raise funds from overseas, and from supporting powerful contractors to obtaining listings on foreign stock markets.
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The government is set to draft a series of new policies to give an impetus to technological innovation across China. Specific guidelines, ranging from basic infrastructure construction to investment and finance, will be drafted. Implementing technological innovation projects will give a real shot in the arm to the country's economic growth. China has been following a strategy of ”°revitalizing the nation through science, technology and education" since 1995. Increasing the technological contribution to economic growth is the first step in implementing this strategy.

At present, technology contributes only 42% to the growth of agricultural production, while its contribution to industrial growth is even lower. Its contribution to overall economic growth should increase by at least 10 percentage points in the next few years, said Minister of Science and Technology Zhu Lilan. This year, the State has already issued a number of regulations to promote technology-the Decision on Restructuring and Administering Scientific Research Institutes, a Provision on Accelerating the Transfer of Technology into Production, a Regulation on the Reform of National Science and Technology Awards and a Regulation on Technological Innovation Funds for Small and Medium-Sized Technology Firms. These regulations were designed to help encourage scientific researchers to make their technological projects more industry and commerce-oriented.

China encourages enterprises and youngsters, including young Chinese scholars studying or working abroad, to take part in the national technological innovation drive. Many domestic high-tech enterprises which have established a name for themselves in the world started as small rural enterprises. The government will give particular support to small and medium-sized firms. Investment by domestic enterprises in technological development is less than their foreign counterparts. Investment in research and development accounts for less than 1% of the sales volumes of these enterprises. In developed countries, it accounts for at least 10% of sales volumes. Enterprises will bear the brunt of speeding up technological innovation. Research institutes and colleges and universities will also contribute more to promoting technology upgrade projects.
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Southern China's Jiangxi Province, with a good investment environment, solid economic base and rich natural resources, welcomes cooperation from home and overseas in different fields. Recommended projects include restructuring of existing industries and enterprises, industrialization of agriculture, development of tourism and other tertiary industries, improvement of infrastructure like energy, telecommunications and transportation and large-scale land development. To encourage and protect foreign investments, a series of rules and regulations have been formulated by the provincial government. A complaint reporting center for foreign investors has been established to protect their legal rights.

Jiangxi recently began attaching great importance to improving its investment environment. The province has built up convenient communications. The Beijing-Kowloon and the Zhejiang-Jiangxi railways converge in the province. Six State highways pass through Jiangxi. Jiujiang International Trade Wharf, a port on the Yangtze River opens direct routes with overseas cities. The waterways and land transportation networks, together with five airports, give Jiangxi easy access to the outside world. Program-control telephones and mobile telephones link every county, township and village in the province with other cities and regions all over the world. Twelve large thermal power plants and six large hydro-power stations supply the province with sufficient electric power. The total generating capacity reached 18.1 billion kilowatts in 1998.

Jiangxi has a good economic foundation. Despite the tremendous flood disaster, the gross domestic production (GDP) reached 185 billion yuan ($22 billion) last year, an increase of 8.2% over the previous year. The fiscal income totaled more than 14 billion yuan ($1.7 billion), rising by 8%. Being endowed with particularly favorable geographic conditions, Jiangxi becomes one of the major grain production bases in China, providing the country with over 500,000 tons of grains annually. Jiangxi has a complete range of industrial sectors, among which aviation, automobile, petrochemicals, electronics, ceramics, food processing, textile, pharmaceuticals and building materials are the most powerful. The province is located in the southern side of the fertile middle and lower reaches of the Yangtze River. The woody mountains surrounding Jiangxi have a large variety of mineral resources. The province's reserves of 13 minerals including copper, gold, silver bismutotantalite, uranium and tombarthite, rank first in the country.
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With a firm commitment to promoting its economic development, the Guangxi Zhuang Autonomous Region is stepping up its maneuvers to attract more foreign capital. This year, the target of import and export values of the region have been set at $1.8 billion and the expected actual utilized foreign capital is $1.35 billion. To achieve the goal, more than 170 key projects were outlined at the 99 Guangxi Investment Promotion Fair recently held in Beijing in order to seek foreign capital and cooperation in sectors such as transportation, energy, agriculture, city planning, culture and sports. Many are huge-invested projects that include a 50-square-kilometer coastal industrial park with an expected investment of more than $1 billion and a natural gas power station valued at $725 million.

Statistics indicate that by the end of July this year, the region had solicited around $10 billion in foreign capital. By introducing foreign capital, Guangxi's economy has experienced dramatic development. Figures from the Guangxi Development and Planning Commission indicate that last year the region's gross domestic products (GDP) reached 218.2 billion yuan ($26.3 billion), up 10.1% from 1997. The value of the region's import and export business totaled $2.98 billion, with the export value reaching a new record-$2.42 billion. The actually utilized foreign capital added up to $886 million.

Analysts attributed the economic development to the region's incentive policies to attract foreign capital and to the country's preferential policies for the development of the region. In 1992, the central government devised a strategy to quicken the development of Guangxi as the gateway linking up Southwest China and Southeast Asia. The region will spare no efforts to improve the investment climate and optimize the infrastructure. In March, Guangxi reformed its system of soliciting investment by establishing Guangxi Investment Promotion Group Company. This will increase the efficient use of foreign capital and help the economic construction in Guangxi. Despite the lingering Asia financial crisis and the global economic slowdown, Guangxi sustained its growth rate. Last year, its GDP ranked 15th in the country. At present, Guangxi has 34 kinds of developing zones, which include coastal opening cities, coastal economic opening areas and border economic cooperation areas. The region has worked out a development blueprint to stimulate its economy for the next decade. Under the plan, Guangxi is divided into five areas: port, high technology industry area, key industry area, tourism and agriculture.
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Wugang city, a beautiful city with an area of 1,549 sq km and a population of 700,000, is located in southwest Hunan province and is rich in resources and has sound 'investment climate. To lure foreign investment, Wugang City recently introduced some preferential treatments.

Starting of export oriented enterprises and high-tech ones by foreign investors, the land needed will be provided at basic prices except that the land is used as shop fronts in which case a 50% discount of the value-added part of the price of the transferring of land of the same grade and similar location may be enjoyed. Foreign-funded production enterprises with operational terms more than 5 years will be exempted from paying land use fees for 5 years and half of the fee according to the state standard for the next 5 years. Foreign-funded enterprises set up for the purpose of developing agriculture, husbandry, forestry, wild mountains, waste slopes, beaches and waters will be exempted from paying land using fees.

Foreign investors are allowed to engage in development of land and construction of the new city area and the transferring fees for the land used in the development and operation will be collected according to the city's standard price. They will also be exempted from paying accompanying fees for the construction of infrastructure if they engage in the renovation of the city and construction of welfare residential buildings. Foreign investors in the fields of city infrastructure and highway construction will be exempted from paying land transferring fees and use fees and their construction cost may be offset by means of fee collection and allocation of land.

Foreign-funded enterprises may be exempted from paying corporate income tax for the first 3 years, starting from the first profit making year, and are required to pay only 50% of the tax for the following six years. Foreign-funded enterprises set up there will be exempted from paying tax for the adjustment of the investment direction and value added tax for their products exported. Foreign-funded enterprises are exempted from paying fees required before their establishment and may only pay 20% of the fees required within 5 years after operation. Foreign enterprises are encouraged to purchase properties from enterprises or lease the operational right of the enterprises and their total purchase price will be given a 90% discount if they purchase the entire right of bankrupt enterprises.

Foreign funded enterprises will be provided with such services as one-window in charge of procedures required, coordination, and one-stop inspection. All foreign funded enterprises will be protected legally and a system of clarifying tax and expenses of these enterprises will be put into place. Foreign funded enterprises may refuse to pay tax and fees beyond what is specified in the system.
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As an important city in the areas circling the Bohai Sea, Qinhuangdao is one of the country's first 14 coastal port cities opening to the outside. With high development potential, Qinhuangdao will turn into a new modern port city due to its ideal geographic location and tourism resources. The city, which is located in the northeastern part of Hebei Province, 280 kilometers east of Beijing, boasts a good investment environment and improved infrastructures. Qinhuangdao is one of China's top 40 cities with good infrastructures for investment and one of the country's cleanest cities. It has constructed sea, land and air transportation networks.

The city embraces the State-level Qinhuangdao Economic and Technological Development Zone, Shanhaiguan and Beidaihe provincial-level economic and technological development zones, Naidaihe New and High-Tech Industrial Park and some tourist holiday zones. In addition to preferential policies the State granted to coastal open cities, overseas investors in the city can enjoy more preferential treatment on land prices, taxes and fees given by Hebei Province and the city of Qinhuangdao. To create a flexible environment for investors, the city has established several management and service organizations, such as a foreign investment management and service center and a foreign investors legal rights protection center. The improved investment environment and preferential policies have attracted an increasing number of overseas investors.

Qinhuangdao is a fine port and is an important outlet of North China, Northeast China and Northwest China. Focusing on energy transportation, the port boasts an annual handling capacity of 124 million tons. This year, Qinhuangdao was entitled an excellent Chinese tourist city by the China National Tourism Administration. It offers beautiful scenery and a moderate climate. The abundant tourist attractions include the Great Wall, summer resort Beidaihe, the historical town of Shanhaiguan, Qinhuangdao Wild Animal Park and Xin'ao Sea World. The special natural ecology combining the sea with the mountains have attracted more than 6 million domestic and overseas tourists a year. The annual tourism earnings total 3 billion yuan ($360 million).

Recently the city offered the following projects for foreign cooperation.

1. Qinhuangdao New Port. Content: Building four 10,000-ton deep water berths. Investment: $98.8 million. Foreign investment: $48.4 million.

2. Shanhaiguan Fishing Port. Content : Building a 30,000-ton wharf. Investment: $13.3 million. Foreign investment: $6.65 million.

3. Qinhuangdao Jidong Airport. Investment: $108 million. Foreign investment: $54.2 million.

4. Technological upgrading of No 1 Berth. Content: Turning the original 5,000-ton berth into a 10,000-ton berth. Investment: $6.6 million.

5. Shanhaiguan Port. Content: Building a 15,000-ton berth and a 35,000-ton berth. Investment: $100 million. Foreign investment: $49 million.

6. Shanhaiguan sewage treatment project. Investment: $19.89 million.

7. Qinhuangdao sewage treatment and network expansion project. Investment: $45.78 million. Form: Joint venture, cooperation or BOT.

8. Qinhuangdao daily rubbish treatment project. Investment: $7.47 million.

9. Housing rehabilitation project in Qinhuangdao Haigang District. Content: The land area is 45.5 hectares and the planned construction space is 690,000-920,000 square meters. The land price is 1,550 yuan ($187) per square meter.

10. Qinhuangdao Central Garden Plaza. Content: The place will be used for shopping, office buildings, finance, entertainment, service and apartments. The land area is 42.1 hectares and the planned construction space is 494,000 square meters. The land price is 2,000 yuan ($240) per square meter.(to be continued)
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China's chemical industry is seeking intensified cooperation with foreign companies to introduce advanced clean production techniques and expertise, as well as approaches to treat pollution. China Association for Chemical Pollution Prevention and Control Technology (CACPPCT) is looking forward to working with foreign companies to bring advanced production expertise, waste treatment technologies and capital to China. With 448 corporate members, CACPPCT is a non-governmental organization which plays an increasingly important role in helping chemical enterprises resolve environmental problems.

Over the past two decades, China has made remarkable progress in solving pollution problems in the chemical industry. As many as 554 environmental protection supervisory stations have been established across the nation, with more than 20,000 staff engaged in the sector. Many polluting enterprises were shut down and all newly built projects must meet environmental standards. Between 1991 and 1995, the State's investment in environmental protection for the chemical industry increased by 30% compared with the period between 1986 and 1990. The treatment ratio of waste water, airborne emissions and solid waste have risen by 14%, 16% and 15% respectively. However, the chemical industry is facing formidable challenges. Each year, the industry produces about 5 billion tons of waste water, 850 billion cubic meters of airborne emissions and 46 million tons of solid waste.

Over the next five years, China will enhance pollution control in the chemical sector by stressing measures taken in the production process. Massive technical upgrading will be carried out. Comprehensive utilization of resources is also encouraged. There will be tremendous business opportunities for investors since all the Chinese chemical enterprises must meet the environmental regulations by the end of 2000. A batch of proposed environmental projects related to the chemical industry were released recently at the conference, including technologies, equipment, approaches and methods for environmental assessment, treatment and monitoring.
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Jiaxing Economic Development Zone in Zhejiang Province plans to launch more overseas-funded ventures this year to spur on the local economy. Negotiations are being made. Investors will come from Britain, Japan, Holland and Finland, who are showing strong interest in the local business climate. These projects worth a combined investment of $25 million involve electronics, fine chemicals, glass fiber and other products. Five European companies have inspected the zone to seek investment opportunities.

Over the past several months, potential for transnational cooperation in the zone has been a subject of discussion with many Shanghai-based consulate generals, foreign business offices and managers of multinational companies. The zone covering an area of 18.73 square kilometers has three parks for industries, electronics and food. As of last year, it had approved 75 overseas-funded ventures with a combined investment of $513 million. Each averaged $6.84 million. Investors came from 15 countries and regions including the Republic of Korea, Japan, the United States, Italy, and Chinese Hong Kong and Taiwan. These projects will produce metalwork, textile, light industrial products, chemicals, building materials and tires.

To date, investors have put $265 million into their projects and 54 ventures are operating. A breakdown reveals that six ventures cost more than $20 million each, including two projects launched by investors of Hong Kong and South Korea with a total investment of $216 million. The zone has spent more than 600 million yuan ($72 million) in building roads, bridges and facilities to supply tap water, power, vapor and phones. The zone plans to lure foreign-funded projects worth $80 million this year. It will turn out products valued at 3 billion yuan ($361 million). The target is to lure more funds from Taiwan, Europe and the United States.
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China plans to become the world's leading flower producer and exporter, according to Jiang Zehui, newly elected president of the China Flower Association. Although China has a 2000-year history of growing flowers, the real flower industry just began in the 1980s. After 20 years of development, a new round of reform is being carried out in China and the sector has improved rapidly. The country is studying developments in Colombia, which has become the world's number two flower exporter during the past two to three decades. Colombia's flower development was characterized by heavy planning, with the government making production plans and an industry association helping implement the plans, giving technology guidance and coordinating sales. The conditions in China are similar to those in Colombia. Both are capable of producing flowers at low costs. China has various climatic zones and abundant flower and plant resources, which makes the production of various flowers and plants possible without much excess expenditure of energy or equipment.

China's florists have drawn out a blueprint to help their industry bloom into one of the world's largest flower producers in the coming century. According to the plan, the area devoted to flower growing will increase to 100,000 hectares by the year 2000, thus increasing the supply of fresh-cut and potted flowers. China intends to rationalize its flower production by guiding firms to plant flowers at appropriate regions and on appropriate sales. In this way, redundant construction incurred by irrational investment will be avoided.

The flower industry has been the fastest growing agricultural sector in China since 1990. There were 90,000 hectares of planted area last year, 6.4 times that of 1984. Nationwide there were 900 wholesale markets and 16,000 flower outlets, compared to 200 and 1,110 in 1991. The output value of the industry was 10.5 billion yuan ($1.27 billion) last year, 17.5 times that of 1984. Exports have been no less than $100 million each year. Recognizing the market's potential, foreign investors are showing interest in traditional Chinese flowers, such as plum blossoms, cymbidium and chrysanthemum.Qingcheng, a famous Sino-Japanese orchid green-house in Kunming, Yunnan Province, gets materials from Japan and exports nursery stocks back to Japan by air. To invigorate the flower industry, the country has introduced new varieties, wooed more funds, trained planters and standardized the flower markets.
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The volume of Sino-Russian trade for the first five months this year was $2.257 billion, up 0.7% from the same period last year. It showed an increase for the first time in two years. However, the figures show that $1.82 billion of this trade were in imports, up 34%, while only $430 million were in exports, a decline of 51%. Sino-Russian bilateral trade now shows signs of recovery. According to statistics, the total volume of trade between the two countries in 1997 was $6.12 billion, 10.6% less than 1996. The figure last year was $5.5 billion. The stability of the Chinese currency, China's relaxed import policy, and its more positive fiscal policy this year have all inspired the domestic need for raw materials and some types of machinery. The economic recovery of Russia, the increase of its foreign reserves, and the abolition of its 3% additional tax on imports on March 1 have also contributed to the trade rebound. The two countries are now striving to accelerate their domestic economic reforms oriented towards economic globalization, improve the trade environment, increase their proportion of high-tech products, and develop their cooperation in raw materials, timber, nuclear power, chemicals, electronics, and light industries.
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Two contracts worth $205.6 million for the China Yangtze Three Gorges Project Development Co to purchase high-voltage equipment from Siemens and ABB were signed on September 14. According to the agreement, beginning in 2002, Siemens will provide 15 550-kilovolt to 840-megavolt transformers for use by the Left Bank Power Station of the Three Gorges Project. Meanwhile, the Swiss-based ABB will supply 39 550-kilovolt gas insulated switch gears and complementary devices. The equipment is part of the key equipment of the second phase of the Three Gorges Project for the distribution of power after 2003. Under the contract, Siemens and ABB will transfer the technology to Chinese sub-contractors so they can independently design and manufacture this kind of equipment in the future. Siemens and ABB have also procured export credit for the equipment, which will contribute to the financing of the second phase of the Three Gorges Project.
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According to an agreement signed recently, the Biogen SA of the United States, the Medical Plant Institute and Beijing Union Medicine Corporation will join hands to market traditional Chinese herbal medicines to the whole world through Internet and traditional marketing channels. It is an effort aiming to increase 20% of the sales a year to a total annual sales of $6.6 billion by 2003. For this purpose the Chinese side will ensure best quality of the Chinese medicines selected for the American partner, while the American side is allowed to plant and process Chinese herbal medicines under the supervision of its Chinese counterparts.
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Nokia has recently signed a $77 million GSM expansion contract with Beijing Telecom Administration through its two Beijing-based joint ventures, the Beijing Nokia Mobile Communication Co Ltd and Beijing Nokia Telecommunication Co Ltd (BNT) to provide GSM900 and GSM 1800 network equipment including mobile switching equipment, location register, base station and base station controller. The new network is expected to be put into operation at the end of next year.
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