China's foreign exchange administration will this year make more efforts to improve the management rules so as to adapt to the standards of the WTO. The national foreign exchange administration's rules, issued in 1996, will be revised this year, as their content conflicts in some ways with WTO principles, said Lu Nanping, deputy director of the State Administration of Foreign Exchange (SAFE). According to WTO requirements, foreign-funded ventures and domestic firms should be treated the same under foreign exchange regulations after China joins the body. Besides revision, some new rules covering specific sectors will also be drafted this year.

SAFE will draft a set of regulations requiring both domestic and foreign banks to have the same management systems for the buying and selling of foreign exchange. Under China's existing exchange system, Chinese firms are required to sell their foreign exchange earnings to designated banks. Only a small number of domestic firms are allowed to keep a certain amount of their foreign exchange earnings. When needed, Chinese firms can buy hard currency from designated banks by showing valid documents, such as an import contract. Foreign banks are at present only allowed to buy and sell foreign exchange for foreign-funded ventures. The new rules will enable foreign banks transact business for all kinds of firms in China.

According to Lu, three sets of regulations will be drafted this year to enhance the supervision of foreign exchange activities in the service trade sector which includes tourism. Rules managing travel agencies foreign exchange activities will be issued in the near future to prevent any loss of the hard currency earned by the tourism industry. SAFE held recently a two-day national annual conference in Beijing. The administration this year will improve its services to create a sound environment for foreign trade and investment. SAFE also vowed to crack down on any activity that violates the rules to maintain the country's favorable balance of international payment and stability of the renminbi. The administration will continue its fight against fraud and illegal arbitrage in relation to foreign exchange. The administration will design and set up an international investment position (IIP) statistics system this year. The system, which gauges the latest value of foreign investment, loans and stocks, will help the administration get timely information about the country's financial situation.

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Foreign and private investors will have more chances to buy into present state-owned property during China's ongoing economic structural adjustments, though the process might take some time, said recently Li Zibin, vice-minister of the State Development Planning Commission. The state-owned capital is spread across too many areas, and it should be withdrawn from some minor ones such as garment and shoemaking and concentrated in industries vital to the national economy. Such a proposal has been made by senior officials before, but what is new is that Li clearly welcomed foreign and private investors to purchase state-owned properties during the adjustment.

Zhou Xiaochuan, chairman of the China Securities Regulatory Commission, revealed in a previous meeting that China's A-share market, which is exclusive to foreigners, will be gradually combined with the B-share market's opening to overseas investors. He stated that as China has promised to open its capital market to foreign investors after being granted WTO membership, foreign enterprises will soon be able to enter the country's A-share market. Foreign investors will be able to participate in transactions on China's stock market through registered foreign invested institutions and Sino-foreign joint equity fund companies and restrictions in this field will be further eased. So far the process has not been launched, but experts have suggested that the stock market could be a channel for the transfer of state-owned properties.

One of the problems is what to do with the workers in the state-owned properties. For government, it is pivotal to maintain social stability, but investors may very likely have little interest in the welfare of these workers. Li promised that the government would not impose personnel burdens on buyers of the state-owned properties, rather the problem will be dealt with through the gradual implementation of a comprehensive social security system. The State will also make laws and regulations to ensure the safety of foreign and private investments in state-owned properties. The vice-minister also stressed that the government will assist state-owned enterprises in updating their technology and equipment to increase productivity.

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Regulations giving individuals or organizations the right to develop business in Beijing's flag high-tech park have been announced in writing. Zhongguancun Science and Technology Park was set up in June 1999 in Beijing's Haidian District. The Regulations of the Zhongguancun Science and Technology Park lay the foundations for businesses to operate within a sounder economic environment. Dubbed Zhongguancun's basic law, the regulations were approved by the Standing Committee of Beijing People's Congress in December, and put in force from January 1, 2001. Organizations and individual also may now undertake any business not banned by established laws and regulations as long as it is not against the public interest, does not disturb national economic order and does not act against social morality.

Experts said this kind of provision is generally accepted throughout the world's business communities, but this is the first time China has actually proclaimed it in writing. They indicated the provision intended to increase transparency for investors and entrepreneurs, especially foreigners, and pave the way for the parks entry into the global economy. Another provision states that commercial administrative bodies will have no right to examine or ratify commercial activities and projects as long as the start-ups are not engaged in illegal business. The regulation was a significant reform for China's industrial and commercial registrations, offering more room for entrepreneurs creativity. Furthermore, the provision tallies with the intellectual-intensive, highly marke torientated and rapidly developing characteristics of the high-tech companies in the park.

The long-awaited law emphasized that the government's administrative power was under the supervision of enterprises and individuals in the park, which can voice any complaints to higher authorities. This will inevitably increase the working efficiency of governmental departments, prevent corruption and guarantee the companies interests. Up to 20 other detailed provisions will come into effect based on the new law. These will include articles on protecting enterprises assets and individual revenue, providing preferential policies, developing real estate and setting up a venture capital system. The first batch of the new articles is expected to be issued in February, officials said.

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The State Taxation Administration recently released the ¡°Circular of Issues Related to Taxation Concerning Foreign-Funded Enterprises and Foreign Enterprises Engaged in Consulting Undertakings" to make clear taxation matters concerning foreign related consulting undertakings. The circular, which became effective on June 1, 2000, stipulated:

l. Whereas a foreign-funded firm or representative office set up inside China signs contract independently with clients for earnings from its provision of consulting services, it is requested to pay business and corporate income taxes to the local taxation administration.

2. Whereas an overseas consulting firm signs contract with clients independently for earnings from its provision of consulting services, it should declare and pay business and corporate income taxes in full amount to the competent Chinese authority if the services provided are all inside China. Whereas the services provided are both inside and outside China, business and corporate income taxes should be paid for incomes generated within China. In general, services provided to clients within China will be considered as the source of incomes (should be no less than 60% of the total income) generated within China. For overseas consulting enterprises that provide consulting services to clients outside China, their incomes earned shall not be taxed in China.

3. Whereas an overseas consulting firm signs contract with clients jointly with a foreign-funded enterprise or foreign representative office in China for providing consulting services and subsequently earns incomes, an appropriate ratio shall be set according to the workload or the contract to divide the incomes between the domestic and foreign enterprises or institutions. The foreign-funded firm or foreign representative office in China should declare and pay business and corporate income taxes according to its incomes earned. Whereas a foreign consulting firm provides consulting services together with its associated enterprise inside China or its representative office in China for clients inside China, the ratio of incomes allocated to the foreign-funded enterprise or representative office inside China should be no less than 60% of the total incomes generated. Whereas the overseas enterprise sends personnel to China to participate in the consulting services, then the incomes earned from that should be considered as the incomes of the overseas enterprise (should be no less than 50% of the incomes thus generated) earned inside China. Business and then corporate income taxes should be paid as stipulated.

Whereas the overseas consulting firm as mentioned in the above two articles has representative office in China and the office provides consulting services together with the firm, the incomes earned from the service of the firm should be included in the incomes of the representative office for paying taxes. For an overseas consulting firm that has not set up representative office inside China, or although it has set up a representative office inside China, the office has not provided such kind of services together with the firm, the services given shall be considered as offered by an overseas consulting firm for taxing and the related tax shall be unifiedly deducted and withheld from the payment. Moreover, for consulting firms coming from a country that has signed avoidance of double taxation agreement or arrangement with China or from HKSAR, a judgment should be made on whether they have constituted permanent entities according to the stipulations of related articles on permanent offices in the agreement or arrangement. For those that have constituted permanent offices, the corporate income tax shall be collected in accordance with this circular.

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According to informed sources at the State Development Planning Commission, during the Tenth Five-Year Plan period, emphasis will be put on adjustment of the industrial structure in China's foreign investment utilization. Adjustment is expected to be mainly undertaken in the following way:

1. More foreign investment will be directed towards the first and tertiary industries and the investment in industry will be appropriately lowered. At present, the percentage of foreign investment in China's first and tertiary industries is rather low, compared with that of the second industry. The State Development Planning Commission has worked out a preliminary plan for foreign investment utilization. During the first l0 years of the 21st century, the percentages of foreign investment in the first, second and tertiary industries will be l0%, at or below 50% and up to 30%.

2. Encouraging foreign investment in heavy industry and lowering the percentage of foreign investment in the consumption industry. At present, nearly 60% of the actually made foreign investment in China is in the consumption sector and only 40% in the heavy industry. During the Tenth Five-Year Plan period, the basic industrial structural adjustment will be geared towards heavy industry appropriately, and in particular the equipment industry will be strengthened, and investment and growth of the consumption industry will be brought under control.

3. Foreign investors are encouraged to make investment in technology-intensive industries and reduce investment in common processing industries.

4. More foreign investment will be directed towards some relatively weak tertiary sectors, such as banking, insurance, hygiene, sports, social welfare, scientific research, comprehensive technical service, education, and culture and arts.

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The amount of foreign direct investment (FDI) in China turned around last year after declining for two years. The investment increased by 0.93% in 2000 to ¡ç40.8 billion, according to statistics from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC). The 1997 Southeast Asia financial tumult sent FDI in China plunging. Investment dropped 5.4% to ¡ç40.3 billion in 1999. The declining trend slowed last year and the year-on-year monthly decline reversed in October. A recent report by the United Nations forecasts a rosy future for FDI in China, saying that after the country's entry into the WTO, it will be one of the most attractive places for investment in the world. Experts said the upsurge in FDI in China indicates a strong wish by foreign investors to conduct business in the country.

China approved 22,532 foreign investments in enterprises in 2000, up 31.76% from 1999. A total of 364,345 foreign-invested enterprises have been approved to conduct business in China, promising a total of ¡ç676.7 billion foreign capital. China has made use of ¡ç348.6 billion FDI till the end of last year, MOFTEC statistics indicate. Experts believe that China's WTO accession will further open up the country's market to foreign investors and is expected to push up its use of foreign investment. China's strategy to develop its central and western regions and various policies to encourage foreign businesses to invest in China will also help attract foreign investment in the country. But Chinese foreign investment officials remained cautious and suggested that it was reasonable to maintain last year's FDI level in 2001. At the annual national working conference on foreign trade and economic cooperation last year, MOFTEC Minister Shi Guangsheng said the country would strive to make use of ¡ç40 billion each year during the current Five-Year Plan period.

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The Xinjiang Uygur Autonomous Region is enjoying its best time in history. The region had just issued a new regulation regarding foreign investment which included a variety of preferential policies concerning land leasing and tax. The policies are more competitive than those in China's coastal regions.The 4,000-kilometer west-to-east gas pipeline project, which crosses nine provinces, called for foraying investment. Foreign companies involved in the gas industry or pipeline construction could invest directly or establish joint ventures, local officials said. As the source of the gas, Xinjiang will take full advantage of the project.

Development plans for the region were unveiled following the central government's strategy to develop the western parts of China. Xinjiang will focus on water conservation construction and communications. The economy will be based on top quality industries and priority will be given to developing the economic belt stretching from Urumqi in the east to Maytag in the west. This area includes Urumqi, Changji, Shihezi, Shawan, Usu, Kuytun, Maytag and Karamay. Work will go into protecting the environment and various conservation projects are planned. Education will be given priority with much attention being paid to developing science and technology. Xinjiang will take greater advantage of its location to step up trade with central and west Asia as well as East European markets. The Xinjiang region covers 1.66 million square kilometers, one-sixth of the total land area of China. It adjoins eight countries along an international border of 5,600 kilometers.

Xinjiang has become a booming tourist destination. Statistics show that more than 200,000 overseas visitors went to Xinjiang in 2000, bringing the region an income of nearly ¡ç80 million. Business people from the Commonwealth of Independent States also bought millions of US dollars worth of Chinese goods in Xinjiang last year. In addition, a survey shows that 7 million domestic travelers visited Xinjiang, the largest provincial-level region in China, in 2000. Naiyimu Yasheng, director of the Xinjiang Uygur Autonomous Regional Tourism Administration, predicted that the region will become one of the most promising tourist spots in China over the next five years. Experts from the Chinese Academy of Sciences say Xinjiang is in a good position to develop tourism, because of its unique scenic spots. Xinjiang, on the Silk Road, was once a center for cultural exchanges between the east and the west. Folk art and customs and a special ethnic culture all help attract visitors from home and abroad. Senior officials said the region will grant preferential treatment to foreigners who invest in Xinjiang's tourism industry. To date, Xinjiang has opened several dozen air routes which provide links with major cities in China. Trunk highway routes, local highway networks and railways are all intended to help the expansion of the tourist industry in the region.

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South China's Guangdong Province is projected to reach an economic growth of 10% in 2001. The mature market economic system and the country's pending entry into the WTO were credited as helping the province near its goal this year. China's accession to the WTO will certainly benefit Guangdong, which is relying much on its export-oriented economic development. It is predicted that Guangdong, which already accounts for about 40% of China's total export volume, would have a big export increase when China becomes a member of the WTO this year. Guangdong's garments, shoes, toys and household appliances will be sold to even more countries and regions around the world. Officials also urged more reform of the province's state-owned operations and hoped Guangdong enterprises play an active role in trying to sell more Guangdong products abroad.

The province witnessed good economic performance in 2000. Guangdong's GDP is expected to end up 10.5% for 2000, reaching 950.6 billion yuan (¡ç114.53 billion). Exports, the purchase of goods and investment are the main three reasons for Guangdong's sustained economic growth. Guangdong experienced total import and export volume of ¡ç170.1 billion last year, up 21.2% when compared with 1999. The province has a foreign trade surplus of ¡ç13.74 billion in 2000. Export volume hit ¡ç91.92 billion, an increase of 18,3%, while imports came to ¡ç78.18 billion, up 24.8%. The province's export volume represented 36.9% of China's total in 2000. Electronics and machinery products, garments, shoes, toys and textiles continued to be the major foreign exchange earners for the province in 2000. The volume of electronics and machinery exported reached ¡ç49.98 billion, up 28.6%, and accounting for 54.4% of the province's total exports. Exports of garments and garment-related goods come to ¡ç9.9 billion, up 0.3%. Exports from shoes and toys reached ¡ç4.68 billion and ¡ç4.09 billion respectively. Export volumes of foreign-funded companies and state-owned enterprises reached ¡ç49.55 billion and ¡ç38.97 billion, up 25.7% and 9% respectively. Last year,Guangdong primarily imported machinery and electronics products, crude oil, plastic materials, paper and chemicals. The province hopes to export more than ¡ç100 billion worth of goods in 2001.

Guangdong collected a record amount of tax last year, amounting to 198.465 billion yuan (¡ç23.9 billion). Accounting for one-eighth of the national total, the figure confirms the province's leading position in the Chinese economy over the past two decade. Compared with 1999, last year's tax revenue rose by 34.1%. Nearly 84% of the growth came from state taxes such as consumption tax. Another reason for the rise in tax revenue was an increase in income tax from both enterprises and individuals, which grew by 28%. Meanwhile, Guangdong's industrial production reached 429.5 billion yuan (¡ç51.75 billion), growing 12.8%and contributing 64.5% of the province's GDP in 2000. New and high-tech industries, including electronics information and telecom-munications, enjoyed rapid increase and represented 20.8% of the total industrial output value. To continue its steady and healthy economic growth, provincial authorities were urged to introduce more preferential policies and regulations to encourage non-governmental investment, which is expected to become a strong force in Guangdong's economic growth. And the government at all levels in the province will pay special heed to helping farmers increase their income. The province plans to spend 312 million yuan on a province-wide network to help spread agro-technology during the next five years. The move is designed to increase the technological contribution to local agricultural development. Over the past few decades the province has introduced 1,500 improved varieties of crop from outside, 300 of which have been popularized among farmers, and 70% of the province's arable land has been sown with improved seed varieties. More than 150 new technologies have been applied to farming. Science and technology have increased the province's agricultural development by 46%.

The province has vowed to remove regulatory obstacles that go against the rules of market economy and the WTO. According to the provincial plan, the province is to take a lead in building a well-developed socialist market economy in the coming five years with sufficient preparation for formal entry to the WTO. In the coming year, local legislators will examine regulations that are incompatible with the rules of the WTO. A series of new regulations will be drafted to enhance the legal system and plug legal loopholes. In the government itself, reforms will be made to limit the undue administrative power of some departments. The government will retreat gradually from interfering in business operations. Enterprises, particularly the state-owned ones, are encouraged to speed up their establishment of modern management mechanisms to sharpen their competitiveness.

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During the Ninth Five-Year Plan period (1996-2000), the northern city of Harbin has made great steps in attracting foreign investment. The city began to draw in foreign investment in 1984, and the past five years have seen a more mature period in attracting foreign capital, drawing in a total of ¡ç752 million. Because of economic readjustments and the Asian financial crisis, the number of foreign-funded businesses and investment dropped by 49.4% and 34.8% respectively in the first two years of the Ninth Five-Year Plan. To overcome the downfall, the city has taken positive measures to improve legislative transparency and services and has built more infrastructure facilities. In 1998, foreign investment began to recover. The city approved 93 foreign-funded projects with a total pledged investment of ¡ç90 million, in-creasing by 9.4% and 51.6% over the previous year. In 1999, it approved 144 foreign-funded projects with a pledged investment of ¡ç186 million, growing by 54.8% and 104%. Over the past 16 years, the city has approved a total of 2,468 foreign-invested projects with pledged investment of ¡ç2.29 billion. The city has also seen an increase in the scale of individual foreign-funded projects. Over the past five years, the average investment of each foreign-funded project has been ¡ç1.12 million, increasing by 25.8%over the Eighth Five-Year Plan period.

This can be attributed to the enhanced presence of multinational companies. These firms have brought in advanced technology, equipment and managerial experience, contributing much to the city's economic development and industrial restructuring. As a result, seven companies involving foreign investment, including the Harbin Airplane Plant and Shuangtai Electronics Co Ltd are now listed in China's top 500 foreign-funded businesses. To date, Harbin has a total of 186 foreign-invested companies, each with an investment surpassing ¡ç5 million, 101 firms each with investments exceeding ¡ç10 million. These businesses account for 7.9% and their investment makes up 60% of the city's total.

During the past five years, foreign investment has been used in all economic fields. The ratio of investment in agricultural, manufacturing and service sectors is 1.1:92.4:6.5. The agricultural sector has attracted ¡ç11.7 million in actual foreign investment. These funds are mostly used in developing new agricultural technology, farm products and by-products, husbandry and processing and distribution of farm products. The Thailand-invested Heilongjiang Chatai Group is the largest business in this sector. Annual production output and exports are valued at ¡ç120 million and ¡ç12 million. Another firm, Shuangcheng Nestle Co Ltd, is expected to net 500 million yuan (¡ç60 million) in 2000. The manufacturing sector is the principal destination for foreign investment. During the past five years, investment in the sector has increased by 8.4% annually. The city has approved 424 foreign-funded industrial projects with a total actual investment of ¡ç618 million. Foreign funds and technology are used in industries including chemicals, machinery, textiles, pharmaceuticals and light industry.

Foreign investment has played a greater role in upgrading traditional industries such as automobiles, food and pharmaceuticals. These industries have become the backbone of Harbin's economy. The city government encourages foreign investors to open businesses in the service sector including trade, catering, transport, telecommunications, real estate and community services. During the Ninth Five-Year Plan period, the service sector has attracted ¡ç170 million in foreign investment, increasing by 11% over the previous five years. Harbin has made great efforts to widen channels for foreign investment. It has organized trade fairs and the Harbin Ice and Snow Festival to publicize the city's investment environment.

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1. Comprehensive waste treatment project in Eastern Harbin. Total investment: ¡ç22 million.

2. Harbin Wenchang Sewage Treatment Plant. Total investment: ¡ç58.86 million.

3. Harbin Mopanshan Reservoir and Water Supply. Total investment: ¡ç539.6 million.

4. Light rail subway. Total investment: ¡ç361.5 million.

5. Harbin Songhua River Tunnel. Total investment: ¡ç181 million.

6. Construction of Limin Thermal Power Plant. Total investment: ¡ç30 million.

7. Jiangnancun Mansion. Total investment: ¡ç15 million.

8. Centralized heating project to Nangang District. Total investment: ¡ç60 million.

9. Production line for high-quality aluminum and aluminum alloy plate and sheet. Total investment: ¡ç423.3 million.

10. Paperboard production. Total investment: ¡ç28.2 million.

11. Production of welding steel tube for low and medium pressure boilers. Total investment: ¡ç22.95 million.

12. Production of transmission gearbox for automobiles. Total investment: ¡ç10 million.

13. Production of degradable resin fast food containers. Total investment: ¡ç2.5 million.

14. Traction transformer for electric railways. Total investment: ¡ç13 million.

15. Production of high-voltage power transmission cables. Total investment: ¡ç29.8 million.

16. Production of monochlorophythlic anhydride. Total investment: ¡ç3.9 million.

17. Production of NC flame plasma cutting machine. Total investment: ¡ç24.6 million.

18. Automatic systems for residential buildings. Total investment: ¡ç11.24 million.

19. Production of soy-bean isolated protein and compound sugar. Total investment: ¡ç120 million.

20. Corn processing. Total investment: ¡ç113.55 million.

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Thanks to large-scale foreign cooperation, China is rapidly developing a coalbed methane (CBM) industry. Up to 2000, China United Coalbed Methane Co Ltd (CUCBM) has concluded 10 CBM contracts with foreign companies since its establishment in 1996. The contract areas are located in Ningxia's Yinchuan, Inner Mongolia's Jungar, and Shanxi's Shouyang, Gujiao and Jincheng. According to CUCBM, the company will probably become an active contributor in the country's ambitious west-east gas channeling project. Coalbed methane is an unconventional form of natural gas. The tremendous potential for coalbed methane development in China has attracted international attention. Foreign companies, such as Shell and Burlington Resources from the United States, are negotiating with CUCBM to seek cooperation opportunities. On January 10, CUCBM and US-based Virgin Oil Company Inc signed a contract to jointly explore and develop the coalbed methane reserves in Ningxia. CUCBM has now concluded 11 CBM contracts with foreign companies. The new contract cover an area located in Hengshanpu, 40 kilometers southeast from Ningxia's capital Yinchuan. Encompassing roughly 1,700 square kilometers, the area is estimated to boast coal reserves of 55 billion tons and CBM reserves of 230 billion cubic meters.

To cater to the demand of an increasing number of foreign investors, CUCBM is ready to propose more target areas for international cooperation The areas include the Qinyuan area of Shanxi,the Liupanshui area of Guizhou, the Enhong area of Yunnan and the Hancheng area of Shaanxi. The State Council has granted CUCBM the exclusive right to undertake the exploration, development and production of coalbed methane in cooperation with overseas partners. It is reported, CUCBM's existing contracts have been smoothly implemented. Five contracts have entered the second phase of risk exploration, meaning more wells will be drilled in coming years. CUCBM has learned experience and many advanced techniques from its overseas partners. For example, it is adopting a new technology of pouring carbon dioxide into wells to enhance output.

China could tap coalbed methane as a new clean fuel source to achieve both ecological and economic benefits. To prevent gas explosions, China emits 6 billion cubic meters of methane from mines annually, seriously polluting the environment and wasting energy resources. Meanwhile, China is plagued by the ever-increasing shortage of petroleum. The country imported 70 million tons of oil in 2000. The government has paid great attention to the utilization of coalbed methane. To speed up the country's methane development, CUCBM was officially established in 1996. The State Council granted favorable policies to CUCBM, including tax reduction, duty exemption and independence in invest-ment and import and export decisions. China's coalbed methane reserves, estimated at about 30,000 to 35,000 billion cubic meters, ranking third in the world, are located about 2,000 meters under-ground. CUCBM aims to produce 10 billion cubic meters annually by 2010.

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High and new technology is the driving force for Liuzhou, a traditional industrial base in the middle of Southwest China's Guangxi Zhuang Autonomous Region. Liuzhou has witnessed rather rapid development in its manufacturing industry in the past few years and the sector's achievements have made it possible for the city to further speed up its development. China's pending entry to the WTO and the nation's strategy to accelerate the development of its western regions would positively impact the development of the city's economy and Linzhou has every reason to make the best out of the new opportunities. Liuzhou will take full advantage of the world's latest high-tech developments to revamp and upgrade its traditional industry. New technologies, new materials and new management mechanisms are all conducive to and necessary for a faster development of the manufacturing industry in Liuzhou. In 1999, Liuzhou pooled an investment of 330 million yuan (¡ç39.76 million) to revamp its traditional industry with high and new technology making up 35% of its total upgrading funds. The automobile industry, the light industry (consisting of sugar, paper and daily necessities), as well as the metallurgical industry--the city's leading sectors--are all planned for overhaul. Meanwhile, Liuzhou is to beef up efforts to develop the environmental protection industry, the bio-engineering industry as well as other high-tech sectors.

Liuzhou's efforts are aimed to make its brand names more competitive at home and abroad as well as to foster a large batch of high and new products. The city is implementing alliances, mergers and acquisitions among its enterprises and 12 firms have been formed through regrouping. Liuzhou plans to invest even more in technologically renovation of its manufacturing industry in the next few years. In 1999, the city invested 932 million yuan (¡ç112.29 million) in 144 renovation projects, up 2.5% from 1998. Investment and technologies from more developed cities in China and from other countries are important to the city's future and Liuzhou plans to secure at least 20 of the world's most powerful enterprises and 10 of China's top firms. Liuzhou has 360 manufacturing enterprises, including 102 large and medium-sized enterprises, mostly state-owned. The city realized a gross industrial production output value of 13.06 billion yuan (¡ç1.57 billion) in the first half of last year, a growth of 8.9% from 1999.

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China's automobile sector played an important role in driving the country's economy forward during the Ninth Five-Year Plan period (1996-2000). Automobile output increased to 1.83 million units in 1999 from 1.46 million in 1995 with an annual growth rate of more than 6% in that period. The number of automobiles owned by private individuals increased to more than 4.2 million by the end of 1998 from approximately 2.5 million in 1995. More and more private consumers, instead of government institutions, are expected to buy cars because of simpler licensing procedures, less fees to pay and a general improvement in people's living standards. This will provide favorable market conditions for the nation's car industry, especially for car manufacturing. During the past five years, the top 13 domestic car- makers produced nearly 90% of the country's total car output. More than 80% of the cars made were from three carmakers -- The Shanghai Automotive Industry Corp, the First Automotive Works (FAW) in Jilin Province and the Dongfeng Motor Corp in Hubei Province. Industrial analysts said the sector must speed up its re-organization to form some companies which are large enough to deal with the challenges from the country's accession to the WTO. The central government has decided to support three to five large automakers.

The sector product mix was also improved significantly during the period. The number of home-made cars increased to 570,400 in 1999 from 322,800 in 1995. The proportion of trucks decreased to 36.7% of total automobile production in 1999 from 50% in 1995. Many new car models, such as Passat B5 and Santana 2000 of Shanghai Volkswagen, Buick of Shanghai General Motors Co Ltd, Audi A6 of FAW Volkswagen and Accord of Guangzhou Honda, were launched in the plan. They are proof of the strengthened cooperation between domestic automakers and global auto giants. The domestic automakers also accelerated technical up-grading during the period. Many cars have been equipped with electronic--fuel--injection systems and three-way catalyst converters to alleviate pollution caused by exhaust fumes. The development of the industry also boosted related sectors. The number of car repairing enterprises surged from 100,000 in 1990 to 310,000 in 1998 with 2.4 million employees and an output value of 30 billion yuan (¡ç3.6 billion). The turnover of automobile insurance businesses increased to more than 25.2 billion yuan (¡ç3 billion) in 1997 from 1.6 billion yuan (¡ç192.7 million) in 1987. There were 13 million insured automobiles in China in 1997.

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Three Chinese companies will cooperate with Fairchild Domier Aerospace, a US-German joint venture, in developing and producing new 32-seat jet planes. A letter of intent was signed recently among Hainan Airlines Group, China No 1 and No 2 aerospace industry conglomerates, and Fairchild Domier Aerospace. According to the letter of intent, the four partners will invest in a new joint venture that will be set up in accordance with international practices so that profits and risks will be shared. Along with fast economic growth and expansion in air transport, market demand for small planes has been increasing in China. It is estimated that in the next 10 years, the country's demand for small planes will stand above 100.

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Germany-based electronics giant Siemens is taking big steps towards fortifying its foothold in China. The company plans to be able to claim 15% of the market in China by 2001 and even more in subsequent years. Siemens has set up a mobile phone production plant in Shanghai, its only mobile phone plant outside Germany. Annual production capacity of the plant presently stands at 5 million units. The company is trying to expand capacity at the Shanghai plant to 10 million units by this year through the installation of additional state-of-the-art production lines. The company has budgeted ¡ç1 billion for investment in China in the next five years and nearly half of it will be utilized in 2001. Besides, the investment will also go into the company's two R£¦D centers for mobile information and communications, as well as into some cooperative projects with domestic telecommunications research institutions and related technology suppliers.

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Zhonglian Coalbed Methane Co Ltd and Texaco of the United States have signed a contract recently on the development of coalbed methane products in Junggar, Shenfu and Baode areas. The contract areas are located in Inner Mongolia Autonomous Region, Shanxi Province and Shaanxi Province, covering a total area of 6,897 square kilometers. The total reserves of coalbed methane in the areas are expected to exceed 1,000 billion cubic meters, and promise great potential for development. During the five-year exploitation period, Texaco will undertake risk prospecting and exploration independently, and during the development and production period the two sides will make joint investment and the income from the coalbed methane products will be divided according to each party's contribution.

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