China is set to adopt more preferential incentives for the development of its western regions in the next decade, according to a circular released on December 27, 2000 by the State Council. The incentives cover increased government input, fiscal support, tax cuts and other policies to attract investors. The beneficiaries will be the 12 provinces, municipalities and autonomous regions of Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Ningxia, Qinghai, Xinjiang, Inner Mongolia and Guangxi. In the next 5 to 10 years, China will step up infrastructure construction, improve environmental protection, readjust the industrial structure and develop tourism in the western areas. The government will allocate more funds to the region, giving priority to construction of infrastructure projects in water conservancy, transport and energy sectors.

According to the circular, work will be done to create a better environment to attract investment, both domestically and for overseas, to push forward the reform of state-owned enterprises in the western area and promote the development of the private sector there. The government will cut the rate of enterprise income tax to 15% for both domestic and overseas-funded companies engaged in certain industries for a certain period of time. Preferential tax rates will also be available for projects concerning transport, electricity, water control, postal, broadcasting and TV services. The country will also give investors incentives to promote land development and the exploitation of mineral resource in the region. More sectors will be opened to foreign investors and measures including BOT (build operate and transfer) will be introduced to expand the input of foreign capital.

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China will cut its overall import tariff level from its current 16.4%to 15.3% from the beginning of the year, according to a statement from the Tariff Schedule Committee of the State Council. The country will also adjust its tariff schedule -- the number of items on which tariffs have to be paid -- increasing the number of import tax codes to 7,111 from the 7,062 at present. The tariff reduction means China has reached a goal it promised at the fourth informal summit of APEC leaders in the Philippines in 1996 to ¡°cut the country's overall tariff level to about 15% by 2000".

The reduction shows China intends to improve economic and trade co-operation with foreign countries. According to the announcement, the tariff rate reductions covers 3,462 imported items, accounting for 49% of the total. After the reductions, the average tariff rate for mineral products will be 3%, and the rate for chemical productions will be 10.6%. The new tariff rate will be 19% for farm products, 21.1% for textile products, 17.8% for building materials and 24% for goods used in transport networks.

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China is expected to open its wholesale and retail markets for refined oil products to overseas competitors in one or two pilot cities in the near future, said Chen Li, executive deputy director-general of the Institute of the Economic System and Management under the State Council. Qualified domestic and foreign companies will be allowed to invest and operate in wholesale and retail markets in pilot cities. Foreign product sharing contract (PSC) partners, who jointly tap oil fields with domestic oil companies, will also be granted permission to sell their oil and gas directly to the market in certain pilot cities. Feasibility studies on which city or cities should be chosen is under way. The names of the possibly selected cities are not immediately available.

At present, overseas oil companies are not allowed to become directly engaged in China's wholesale and retail markets for refined oil products. PSC partners have to sell their products to the market through domestic oil companies. The move will certainly spur competition in the sector. Domestic oil companies are urged to learn how to cope with competition, otherwise they will not survive once overseas firms flock in. Currently, China imposes a tariff of around 69% on imported refined oil. After China's entry to the WTO, however, that will be reduced to 6%. Non-tariff barriers like quotas on oil products will also be phased out. In five years, the oil sector will be completely open to the outside world.

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In a historical step to promote financial transparency in the market and stave off financial risks, China is now drafting a new set of accounting rules to replace its current accounting system. The new comprehensive rules will be applied to all the enterprises present in the Chinese market, including both domestic enterprises and foreign-funded enterprises. According to Chen Yugui, deputy director of the Accounting Department under the Ministry of Finance, the new system will consist of three separate sets of rules: accounting rules for general industrial and commercial enterprises, accounting rules for financial enterprises and accounting rules for smaller enterprises. The new rules will represent a great improvement over the current system, because the current system applies different rules to different industries, which often results in incompatibility between sectors. The new rules will force enterprises to publish their financial operation reports in a more transparent, objective and comprehensive way.

Accounting, an essential service industry, will have to face the challenge of globalization when China enters the WTO. An expanding foreign trade volume and growing foreign investment will put a heavy load on the domestic accounting industry. Domestic accounting regulations also should be changed to adapt to international practices. Accounting has been among the earliest sectors that opened to the outside world since the beginning of the 1990s. To date, the five biggest foreign accounting companies have come to China and cooperated with domestic accounting firms. More than 10 foreign accounting companies have set up 30 representative offices in Beijing, Shanghai and other big cities. In addition, about 100 companies have been allowed to do auditing temporarily in China, and 200 foreigners have become certified public accountants in the country. Estimates suggest that foreign companies hold more than 10% of the Chinese market. The Finance Ministry is removing regulations that go against the WTO principles and drafting new ones.

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Following years of restraints created by the planned economic system and the impact of an overheated economy in the early l990s, China's state-owned commercial banks have accumulated large quantities of non-performing loans, which not only threaten their normal operation, but also create hidden trouble for the steady development of the national economy. In order to deal with these non-performing assets, China has launched four financial asset management companies (AMCs) namely: Cinda, Huarong, Great Wall and Orient. To date, they have taken over RMB l,300 billion of non-performing assets owed by state-owned enterprises from China's four state-owned commercial banks. Among them, shareholdings make up one quarter, loans a large proportion and property rights, a small proportion.

Founded in April, 1999, Cinda was the first financial asset management company in China. The company had, by the end of l999, taken over RMB350 billion of non-performing assets. By May, 2000, it had completed around 200 debt-for-equity swaps worth RMB l50 billion. Recently the company announced a list of 38 projects in which foreign investors are welcome to participate. This is the first time a Chinese financial organization has offered such projects to overseas investors. Tian Guoli, deputy-president of the company said that aside from the first batch of the projects, his company would offer a variety of projects to domestic and overseas investors.

According to an earlier report, Huarong will over purchase RMB 400 billion of non-performing assets from the Industrial and Commercial Bank of China. Huarong has recently begun to dispose of the assets. It had successfully auctioned a mortgage in Guangzhou. The company held that there are also other ways to manage the assets including assets and enterprise restructuring, creditor's rights and stakes transfers, debt recollections, bankruptcies and assets securitisation. Since the aim of any AMC is to revive as many state assets as possible, the president of Huarong said bankruptcies and securitisations are not the best methods and will not often be used. Auctions, credit and stakes transfers, and assets and enterprise restructuring will be the major solutions. The Great Wall AMC, which is responsible for dealing with the Agricultural Bank of China's non-performing assets, will also complete its purchase work soon. The Great Wall will also create other methods within the policy domain to dispose of assets to meet investors'needs. Both AMCs welcome the participation of foreign investors in disposing of non-performing assets. This may be the easiest, cheapest and most efficient way for foreign investors to enter certain fields in the Chinese market, they said. Compared with setting up joint ventures, buying stakes or debts in these enterprises will be easier for foreign investors.

The AMCs will not only create smooth investment channels and a sound investment environment for foreign investors, but will provide all-round services in terms of investment, financing and legal services. At the moment, Huarong holds creditor's rights or stakes in at least 70,000 enterprises nationwide, covering almost all industries and areas. Many of them engage in large-scale operations and have big market shares, equipment, and talented staff. Great Wall's assets management activities have spread to almost all-industrial categories and into remote corners of the country. Under its management, there are many small enterprises that need just some money to flourish. The AMCs have been communicating with major multinationals and investment bankers concerning available investment opportunities. Quite a number of them have expressed interest and are in discussion about possible deals. Some international accounting firms are also watching China's assets disposal market and have expressed willingness to act as intermediaries in attracting foreign investors.

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A turnaround in the scale and quality of obtaining overseas investment is in the cards for 2001. The expected entry into the WTO will bolster the opening up of the commercial, financial, insurance, telecom-munications and foreign trade sectors. Newly emerged investment opportunities have already attracted the attention of overseas investors. For example, Sweden-based telecom giant Ericsson plans to expand investment from $300 million to $600 million in 200l. An optimistic prospect for economic growth in 2001 has laid a solid foundation for luring more investment from abroad. China's gross domestic product (GDP) is likely to hit 8% in 2000, and will maintain a growth rate of at least 7% this year. The government will continue to seek pro-active fiscal policies in 2001 and has introduced a multitude of favorable policies for overseas investment in the west, which will bring more market access and opportunities.

China contracted $48.57 billion in foreign direct investment in the first 11 months of 2000, up 36,3% from the same period in 1999. The number of newly approved foreign-invested companies increased by 29.1% to 19,700 in the same period. By last September, overseas investment reached $333.9 billion. Among the world's top 500 companies, 400 have invested in China. With Asian economic growing, their investment in China are picking up. Increased investment from the South Korea, European countries and Canada took the lion's share of the total increased amount of investment in China.

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China will make its foreign trade policies ¡°unbiased and predictable" in accordance with WTO rules, Minister of Foreign Trade and Economic Cooperation (MOFTEC) Shi Guangsheng said at the national working conference on foreign trade and economic cooperation, which was held on December 26-28, 2000. Foreign trade officials were urged to make preparations for China's WTO membership in the following aspects: 1 Abandon laws and regulations that run counter to WTO rules, revise those in conflict and devise new ones in accordance with WTO requirements and China's promises. 2. Local governments must keep their foreign trade rules, orders, directions and other measures in unity with central government policies. Central and local governments are required to publish foreign trade laws and rules in nominated periodicals and listen to opinions from all walks of life before formal implementation. 3. Adjust tariff rates and improve macro control means, technology supports and information services to help reform domestic industries in the transitional period immediately after China's WTO entry. The foreign trade minister suggested that an alarm system and data base on imports and exports be set up to preclude either foreign companies' dump on domestic markets or anti-dumping charge against Chinese companies.

According to Shi, China aims to increase its annual foreign trade volume to $650 billion by 2005, the last year of the country's 10th Five-Year Plan (2001-05). Trade officials were urged to help increase China's machinery and electronics exports to $160 billion and high-tech products to $60 billion by 2005, accounting for 50% and 20% of the country's total exports respectively. China's foreign trade set down a new record last year in terms of both total value and year-on-year increase. The country traded $474.3 billion worth of products and services with other countries in 2000, an increase of 31.5% over 1999 figure. In January-November last year, China's actually used direct foreign investment dropped 2.3% from 1999, but contracted direct foreign investment has come out of the shadow of the 1997 Southeast Asian financial turmoil, increasing 36.3% year-on-year in the same period.

For 2001, Shi called for officials to work hard to ensure that foreign trade will increase 8% year-on-year. Trade officials must help Chinese exporters to diversify their overseas markets, continue to encourage general trade and improve the quality of products. The exporting of machinery and electronic products is expected to increase by 15% to $120 billion and that of high-tech products, to $41.5 billion this year. He suggested some national high-tech development zones in Shanghai and Beijing be chosen as experimental spots to promote high-tech exports. The government will continue to support the exporting of name-brand machinery and electronic products. While continuing to encourage foreign companies to invest in high-tech industry, China's central and western areas and small and medium-sized enterprises, and help reform state-owned companies, the central government is also exploring new ways of using foreign investment. This includes venture capital and Sino-foreign joint venture investment funds. This year trade officials must pay more attention to the problems of export tax rebate cheats and smuggling. And it is important to encourage Chinese companies to invest overseas.

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Guizhou is trying to take advantage of the country's plans to develop its western regions by luring investment into the province. Investors from both home and abroad are being encouraged to enter sectors such as tourism, transportation, energy, minerals and infrastructure construction. As part of the campaign, priority will be given to developing the fields of energy, tourism and transportation. Guizhou has special features which makes it more attractive than other areas in the country. Located between Southwest China and the relatively developed South China, the province is rich in natural resources and cheap labor and has the potential to become a communications center. It is an important crossroads for the whole transportation system in Southwest China. Over coming years, the province will invest more than 40 billion yuan ($4.8 billion) in building up its transport network. Major construction projects include the national highway between Chongqing and Zhanjiang, Guangdong Province,and the highway between Shanghai and Ruli in Yunnan Province. These projects are open to both domestic and foreign investment.

The province has abundant energy and mineral resources. Discovered coal reserves amount to 52.6 billion tons, which equals the total amount in the other nine provinces and autonomous region which lie south of the Yangtze River. In order to make efficient use of these resources, China has launched a project which will result in Guizhou annually selling 4.8 million kilowatts of power to Guangdong Province. Beautiful natural scenery and unique ethnic minority customs mean Guizhou is also well placed to develop tourism. There are eight major scenic spots and five national natural reserves in Guizhou, which is also home to 49 of China's 55 ethnic minorities. The income generated by the province's tourism industry which is becoming a major earner increased by 23.5% in 1999 from the previous year. Domestic and overseas investors can develop scenic spots, build hotels and introduce tourist-related services. Guizhou is one of the poorest regions in China, but has developed rapidly in recent years.

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1. Zunyi-Chongxihe Highway. l0 4--lane super-large bridges totaling 4,230 meters, with 22.5m in roadbed width, designed according to the expressway standards of the Ministry of Communications. 41 large bridges spanning 8,l00 meters. 13 mid-sized bridges spanning 1010 meters. l6 small-sized bridges totaling 456 meters. 22 tunnels in 24,545 meters. 7 compatible overcrossing and 47 separate overcrossing. 9 toll gates. Investment: RMB5.5l billion. Form: Joint venture.

2. Wujiang Goupitan Hydropower Station. Wujiang Hydropower Development Co Ltd has a registered capital of RMB l billion (total assets of RMB4.2 billion by end of l999). The Wujiang Goupitan Hydropower Station is the largest hydropower station for hydropower development projects in Wujiang valley, with an installation capacity of 2.4 million kwh, output capacity of 755,600 kwh and annual electric capacity of 9.53 billion kwh. Investment: RMB11.83 billion. Form: JV.

3. Planting 200 Hectares (3,000 mu ) of Turmeric Planting and Other Seedling Base in Guizhou's Changshun County. Turmeric roots are mainly used for treating contusions, strains and other injuries as well as lymph tuberculosis. It contains steroid saponin, which can be used for producing raw materials for women's contraceptive drugs and the drugs for cardiovacular diseases. Investment: RMB3.83 million. Form: Joint venture, other methods.

4. Yimei Instant Rice Processing Project. Guizhou Lingxian Food Co Ltd introduces state-of-the-art technologies to produce instant rice. At present, instance rice is very popular on railways, highways, ports and fieldwork. Investment: $7.06 million. Form: Joint venture, cooperation.

5. Zunyi Aluminum Mill Electrolytic Aluminum Environment Protection and Energy Saving Technological Upgrades for 100,000 tons a year. Zunyi Aluminum Mill possesses 92 60KA self-roasting electrolyers and l02 70KA self-roasting electrolyers, producing 32,000 electrolysis aluminum annually. To develop, it will upgrade its 60KA and 70KA self-roasting electrolyers into l86KA pre--roasting electrolyers, which will produce l00,000 tons of electrolysis annually. Total investment: RMB 1.68 billion. Form: Joint venture.

6. Zunyi Electrolysis Aluminum Project. Guizhou Zunyi Aluminum Mill produces l20,000 tons of electrolysis aluminum annually. The new project will adopt 200KA pre-roasting anode electrolyers which boasts advanced world standards. lt. will produce export-oriented products. Total investment: RMBl.77 billion. Form: Joint venture, or cooperation.

7. Quality Super-Fine Zinc Powder Production Line for 5,000 tons a year. Guizhou Zunyi Fujin Industrial Co Ltd boasts a 1,000-ton production line, producing super-fine zinc powder (2-3 diameter). The production line utilizes ¡°evaporation and quench" new technology, which is advanced throughout the world. The company is planning to upgrade its present production line into an annual 5,000-ton capacity super-fine zinc powder production line. Investment: RMB27.82 million. Form: Joint venture, cooperative.

8. Waste tire treatment with air refrigeration and fine glue powder recovery. With advanced waste tire treatment and air refrigeration and fine glue powder recovery techniques, the company is planning to set up a waste tire treatment plant with annual turnout of l5,000 tons of glue powder. Investment: RMB45 million. Form: JV or cooperation.

9. Anti-cancer yew capsule processing project. Anti-cancer yew capsule is a new medicine from State category II, comprising yew alcohol and other anti-cancer activities elements. It is a scientific research achievement jointly made by the company and other state-level scientific research institutes. Investment: RMB60.63 million. Form: Joint venture or cooperation or compensation trade.

l0. Newly built GMP standard traditional Chinese medicine preparation production line. Making full use of rich local fauna and flora medical resources and the company's intangible assets such as high-tech, patents and trademarks, the company introduces funds to build GMP standard traditional Chinese medicine preparation production line and plans to produce annually l00 million oral capsules of Xian Yu (Tong Feng Yu), which has a State invention patent. Total Investment: RMB30 million. Form: JV, cooperation or equipment introduction.

11. Qingkailing injection and freeze dried powder. The company now has ten medicines for anti-tumor cardiovascular, digestive and respiratory diseases and has built a main workshop with a production line up to GMP standards. Qingkailing injections are mainly effective for fever, apoplexy, hemiplegia, hepatitis, infection of the upper respiratory tract, pneumonia and celebral haemorrhage caused by cerebral thrombus. The company plans to build a factory with annual production of 50 million capsules of Qingkailing injections and freeze-dried powder. Investment: RMB42 million. Form: JV or cooperation.

12. Project to produce 3,000 ton of wild osmanthus honey a year. The wild osmanthus honey produced by this company has been ranked at the top by the Honey Product Examination Center of the Chinese Ministry of Agriculture, and is honored as ¡°the nation's treasure" by the Chinese Agricultural Science Institute. Jinping County is in the center of southeast area of Guizhou Province, one of the four wild osrnanthus honey production areas in China. Investment: RMB5.28 million. Form: Joint venture, cooperation, technology introduction, equipment introduction or compensation trade.

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East China's Fujian Province is stepping up its attack on economic crimes and corruption following the Xiamen Yuanhua smuggling racket, China's biggest ever smuggling and corruption case. In the wake of the case, the province launched a campaign to investigate more than l0,000 county-level officials. Provincial leaders said the case will not stop the region's development, nor does it taint progress made during the last two decades. According to the recently completed development plan for 2001-2005, Fujian hopes to become even more prosperous, said provincial governor Xi Jinping. He explained this plan not only echoes the central government's call to accelerate development in coastal areas, but also reflects the province's desire to play a more active role in the reunification of the motherland.

The province hopes to double its per capita gross domestic product (GDP) to $3,000 by 2010 and to $10,000 in certain cities, such as Xiamen. The good news is the continued growth of Xiamen in 2000, and the city's GDP and financial revenue had soared by 15.9% and 30% respectively during the first 10 months in 2000. Eight strategies have been devised to guide development over the coming five years, including the upgrading of the industrial sector, the exploration of ocean resources and the boosting of science and technology. The province will open wider to the outside world and take the initiative in global competition. The province's GDP grew by 9.5% in 2000, amounting to 395 billion yuan ($47.6 billion), an increase of 9.5% from 1999. Annual disposable income per capita is esstimated to reach 7,424 yuan ($894), up 8.2% on the same period. In 2000, foreign investment totaling $3.8 billion was pumped into the province. The sustained economic growth is attributed to the province's focus on foreign funds, industrial production and fixed asset investment.

Fujian has long been one of China's pioneers in reform and opening up to the outside. Between 1996 and 2000, the province's GDP has grown at 11.8% annually, 3.7 percentage points higher than that of the country as a whole. Its only special economic zone, Xiamen, has also been a leader in reform and opening-up, turning itself from a bleak town into a modern city.

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The Qaidam Basin in Qinghai Province has become an attractive spot for investment since an ambitious drive to develop the vast western areas was launched. The Mongo1ian-Tibetan-Kazak Autonomous Prefecture of Haixi, where Qaidam Basin is located, had benefited from l billion yuan ($l20 million) in investments in 2000 from Australia, Italy New Zealand and the country's coastal areas. The majority of investors are opening up gold and iron mines or are involved in potash fertilizer production. Abundant reserves of oil, natural gas, borax, asbestos, gypsum and metals have earned Qaidam the reputation of a ¡°treasure basin." Qaidam leads China in potassium, magnesium, sodium and lithium reserves. Qarhan Lake at Qaidam has 60 billion tons of salt, which is enough to supply the world for 2,000 years. To date, geologists have discovered 22 oil fields and six gas fields with a total reserves of 225 million tons of oil and 150 billion cubic meters of gas.

Sino-Mining International of Australia, the first foreign company to arrive in Qaidam for venture prospecting, has invested $2.1 million into searching for gold mines at Tanjianshan. The second phase of the project is expected to cost from $20 million to $35 million. Owing to remoteness and lack of development, the prospecting of natural resources at Qaidam is still in a fledgling state, which provides excellent opportunities for overseas companies with abundant funds and advanced technology. Gold mine prospecting at Tanjianshan is only the beginning of large-scale investment in China and will lay a solid foundation for exploitation of other resources in Qaidam. Prospecting at the 370-square-kilometer area shows that the gold reserve is roughly the same as China's estimate of 50 tons. It is predicted that a gold mine with an annual production capacity of three tons will be built in three years. Agip China Co of Italy will invest $8 million to co-develop an oil and gas project in the Sebei area. To accelerate the development of Qaidam Basin, a number of new towns and new roads have been built at Qaidam.

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China is set to establish a ¡°market for technology" to encourage international corporations to invest in its agricultural sector, said recently Li Zhengdong, vice-director of the Agriculture Ministry's international Cooperation Department. The agency will help multinational firms invest more in the sector. The Ministry will help foreign companies run investment projects in China, invest in agricultural infrastructure schemes and bring in high technology to food processing. Li said the country will further open up the market and encourage domestic firms to cooperate with multinational companies. Multinationals are expected to bring cutting-edge expertise and management experience to the country. China will aid this process by improving government efficiency and simplifying procedures to facilitate investment.

Although foreign capital diverted into the agricultural sector has surged in recent years, it lagged behind the needs of the rural economy. By the end of 1999, China had registered 9,405 foreign-funded agricultural projects, with foreign investment of $18.07 billion, representing less than 3% of the total amount of foreign capital in China. The great bulk of foreign direct investment has been concentrated in coastal regions, which means interior provinces have lost out. China particularly wanted foreign businesses to join the country's ongoing western development. The Agro-Foodtech China 2001 exhibition, touted as ¡°a gateway to all agriculture opportunity in China," will be an ideal venue for foreign agricultural companies seeking to break into the Chinese agricultural market. According to Li, only a fraction of the country's agricultural products were sold abroad each year. For example, exports of China's grain, fruit and water-based products account for just 1-2% of the country's total output. In contrast, China imported $8.21 billion worth of agricultural products in 1999. With China's pending entry into the WTO, which will further integrate China's agricultural sector with the global economy, experts said the country had to enhance farm produce competitiveness.

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China plans to launch a coal liquefaction program in the next five years to ease the nation's oil shortage. The State Development Planning Commission is carrying out a feasibility study on setting up coal liquefaction projects in Yunnan, Shaanxi and Heilongjiang provinces, according to a senior official with the commission. Experiments have been finished in these three places. The results were desirable. Analysts predict that total investment for the project will amount to billions of US dollars with the annual output of 2 or 3 million tons of oil. Coal liquefaction is the chemical process of adding hydrogen to coal under high temperature and pressure to liquefy coal into crude oil. Generally speaking, 2 tons of coal can turn out 1 ton of oil, explained Shu Geping, a senior engineer of the China Coal Research Institute. Given the fact that the total reserves of coal in China far exceed those of oil, it is desirable to implement the technology to stretch the oil supply. According to Shu, 20 billion tons of the total proven coal reserves can be liquefied into 10 billion tons of oil, sufficient for China's consumption for 50 years.

Thanks to 20 years of hardwork and cooperation with developed countries, China has mastered the technology and can perform the commercial operation at a desirable cost. With the coal liquefaction technology producing 1 ton of oil is 30% cheaper than purchasing oil from the overseas market. A coal liquefaction manufacturer can recoup their total investment within 13 years. The systematic research of the coal liquefaction technology dates back to 1910. Since then many countries such as Germany, the United States and Japan have been making great efforts to develop the technology. However, due to the high cost of coal and labor in developed countries, this technology has not been commercialized on a large scale. But South Africa, whose structure of energy reserves is similar to China's, has established three coal liquefaction manufacturers with total investment of $7 billion in 1950. In 1999, these manufacturers registered a profit before tax of $610 million. China has been a net importer of oil since 1993. It is expected to import 70 million tons of oil in 2000.

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Three ¡°high-tech valleys," respectively the ¡°Silicon Valley," ¡°Medicine Valley" and ¡°Photoelectron Valley", are emerging along the Yangtze River. The ¡°Silicon Valley" at the mouth of the Yangtze River in Shanghai, is dedicated to developing various computer chips. The driving force behind this high-tech hub is a group of local institutions of higher learning or technological research, such as Fudan University Shanghai Jiaotong University, the Science and Engineering University of Southeast China and the Shanghai Metallurgy Research Institute of the Chinese Academy of Sciences. High-tech businesses add further vitality to the valley. IBM has recently declared that it will invest $300 million in the region to build a computer chip factory. By 2005, the output value of the information industry in this region will reach 400 billion yuan ($48.2 billion).

Also in Shanghai, situated in the Pudong Development Zone, a ¡°Medicine Valley" is forming, where biopharmaceutical technology has seen innovation and industrialization through joint efforts by local research institutions and businesses. Significant contributions have been made by the Medicine Research Institute of the Chinese Academy of Sciences, the National South Genome Research Center. the Genetically Modified Animal Center, the National Innovation Center for Chinese Traditional Medicine, to name but a few. The total output value of the biopharmaceutical industry of ¡°Medicine Valley" could reach 3.5 billion yuan ($421 million) in 2000, an increase of 40% on 1999. This ¡°Medicine Valley" will grow into an important biophar-maceutical base for China in five years. One or two large pharmaceutical complexes with more than 5 billion yuan ($602 million) in capital are expected to emerge in the near future.

Last but not least, the ¡°Photoelectron Valley" covering 50 square kilometers in Wuhan, a large city on the Yangtze River in Central China, is facing a promising future. This ¡°valley" focuses on the photoelectric products needed for high definition televisions, screen phones and other communication items. A contract to invest 20 billion yuan ($2.4 billion) to develop the photoelectric industry in this region has been signed recently by the Administrative Office of ¡°Photoelectron Valley" and five other national financial institutions which include the Industrial and Commercial Bank of China and the Construction Bank of China. The output value of the photoelectric industry in this ¡°Valley" is exported to reach 100 billion yuan ($12 billion) by 2005.

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China has seen a steady increase in its power generation during the first 10 months in 2000, buoyed by thriving economic growth and the State's work in upgrading power grids. It produced 1.08 billion mega-watt-hours of electricity during the period, a rise of 10.3% year-on-year. The State Power Corp of China, the country's top power provider, turned out 572 billion kilowatt-hours, an increase of 9% for the same period. During the first 10 months of 2000, China produced 882 billion kilowatt-hours of thermal power electricity, 187 billion kilowatt-hours of hydropower electricity and 14.8 billion kilowatt-hours of nuclear power electricity, up 9.3%, 14.8% and 13.5%, respectively, from production in the same period in 1999.

The robust industrial sector--gross industrial production increased by 15.8% during the same period--is one of the major consumers of the burgeoning power production. It accounted for more than 70%of total power consumption, up 11.3% on the same period in 1999. Strong power demand also emerged in the transportation and communication industries, food and commercial services and public facilities, which increased about 20% on the average for the period. The ongoing project of upgrading power grids has played an important role in spurring power consumption in rural and urban areas, which increased 14.2% to 132.5 billion kilowatt-hours. During the period, the total investment in grid upgrading reached 67.3 billion yuan, a 1.7-fold jump over 1999's level. To date, total investment has reached 155 billion yuan since the massive project kicked off in 1998. Another 150 billion yuan is expected to be put into the project by 2003. The poor quality of the grids--as much as 40% of the electricity was sometimes lost in transmission--used to have a detrimental effect on residential power consumption. Statistics indicate that China's installed generating capacity is second in the world.

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Japan-based Sanyo Electric Co, which supplies 40% of the world's mobile phone batteries, is building a new lithium battery manufacturing plant in Beijing. The factory will be run by the newly established Sanyo Energy (Beijing) Co. Sanyo Energy is expected to start assembling lithium battery packs in March, and begin manufacturing core components used in lithium batteries in 2002. Its products mainly will supply Nokia's production units in Beijing. Involving an investment of $29 million, Sanyo Energy is wholly owned by Sanyo Electric. In 2001, it will become a joint venture with Tianjin-based Lantian Power Sources Co, which will invest 12.5% of its capital

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China Petroleum and Chemical Corporation (Sinopec Corp) and Germany's BASF AG recently launched a $3-billion joint venture to build and operate an integrated petrochemical site in Nanjing, East China's Jiangsu Province. The 50-50 joint venture, BASF-YPC (Yangzi Petrochemical Corp) Company Ltd, is the second largest Sino-foreign chemical company after a $4-billion project in Guangdong Province of the China National Offshore Oil Corp and the Royal Dutch/Shell Group, which was established in October, 2000. Sinopec Corp and BASF began preparation for the joint venture in 1994. Their feasibility program was approved by the central government last year. About half of the investment in the joint venture will come from the stock markets. Construction of the petro-chemical site in Nanjing is expected to start early in 2001. The site is expected to begin operation in 2004, with an annual capacity of 1.7 million tons of high-quality products, including synthetic resin, synthetic fiber and fine chemicals

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China's largest Spandex joint venture will be set up early this year. DuPont and Lianyungang Zhongshan Spandex Co Ltd signed a contract for a Spandex company in Lianyungang, Jiangsu Province. Spandex is an elasticated fabric used in sportswear. The total investment of the new company will amount to $100 million. According to the contract, the Zhongshan Spandex Company will inject all its assets into the new company in exchange for half of its shares. DuPont will take up the other half in cash. The annual production of the joint venture is expected to reach 4,000 tons in its initial stages, and to increase to 7,500 tons before long, occupying half of the country's total production. DuPont will furnish the joint venture with the best technology, production innovation, management systems and financial services. The municipal government of Lianyungang will provide loans and preferential policies to the joint venture.

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