Talks are underway for the establishment of a number of joint venture securities companies in China, marking another strategic move by the country to open its fledging domestic securities market. These planned joint venture companies are estimated to begin operations shortly after China's accession to the WTO. The move shows the government's strong confidence towards the growth potential and stability of its equity market after l0 years growth and some eight years since China allowed foreign investors to trade the hard-currency B shares in 1992. The Haitong Securities Co, billed as the second largest securities company in the country, is now negotiating with a number of foreign firms about the establishment of a joint venture securities company. The company's possible partners include a number of large securities firms, including big names from developed and developing countries. But it is still too early to predict the details of the joint venture, such as what the stakes would be, and the exact timetable of the opening, as the government has not published the regulations.

Gao Xiqing, vice-chairman of the China Securities Regulatory Commission (CSRC), the watchdog of China's securities industry, claimed that the country will enforce measures to encourage foreign companies to explore domestic financial markets by launching their joint ventures with domestic companies. Gao said it is likely that foreign investors will be allowed to trade B shares directly at special seats on the bourses, stimulating the listing of foreign-funded firms on the domestic market and that the green light will be given to domestic enterprises to be listed on overseas markets. The domestic investment banking industry is fragile compared with the international heavyweights and it would be easily wiped out if not properly prepared. There are market rumors that foreign firms are allowed to take a maximum of 33% of stakes in the joint venture securities firms in the first three years of WTO entry, leaving a space to sharpen their competitive edge for the would-be stern competition after WTO entry. However, there are some securities companies who are rather optimistic about the opening up and their future position.

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China will unify its income tax for both domestic enterprises and foreign-funded enterprises (FFEs), according to sources with the State Administration of Taxation. The move indicates that the preferential tax treatment granted for FFEs will be abolished step by step, and the indicative industry tax preferential policy will be introduced to replace the existing general preferential tax policy for FFEs. To prepare for the entry into the WTO, China will further deepen the reform of its tax system in six areas. Apart from the unifying of income tax for both domestic and foreign-funded enterprises, the other five are: 1. To carry out reform of shifting VAT from production to consumption; 2. To readjust tax items on consumption taxes; 3. To introduce some new tax items; 4. To implement a discriminatory tax policy on import of products such as sanitary and environmental protection products relating to state safety; 5. To adopt ¡°zero tariff rate" for export.

Since the start of reform and opening to the outside, China has carried out a series of reforms on its tax system, and has basically established a multi-stage and composite tax system featured by tax division and market regulation. However, contradictions still exist, which fail to meet the requirement of the economic and social development and market economy system. The entry into the WTO is likely to sharpen the contradictions. For example, although the export draw-back rate has been reduced in recent years to an average of 15% it is still lower than the statutory rate of 17% for ordinary products, and this creates some tax burden. The existing production-type VAT cannot be deducted on fixed assets when a product is used and consumed during the production process. There is also business tax on labor, except the transportation sector, which also cannot deduct VAT. In this case, therefore, the actual amount of tax draw backs is smaller than the amount of taxes paid, and that is not conducive to China's export products being competitive on the international market. For enterprise income tax, there are different law and regulations applied to domestic and FFEs. FFEs enjoy more favorable treatment than domestic enterprises and this is disadvantageous to domestic enterprises. The new tax system reforms should effectively resolve these problems.

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China's hard currency B-share market is now open to domestic investors, a major step towards its merger with the A-share bourse. The China Securities Regulatory Commission (CSRC) announced on February 19 that individual investors in China can now open trading accounts for B-shares, previously reserved for overseas investors since its debut 10 years ago. The commission will release regulations on how the exchange will operate soon. Foreign currencies used to trade B shares should be acquired through legal resources.

CSRC said that the widening range of B-share investors is a response to changes in the capital movement of foreign currencies in China. Participation of domestic residents in B share trading will boost investing sentiment and accelerate the pace of opening-up of the bourses. There are a growing number of foreign currency holders in the country and larger foreign exchange deposits at banks. According to statistics of the People's Bank of China, individual deposits in foreign currencies at Chinese banks increased sharply in January, with the outstanding volume reaching ¡ç75 billion, up 31.9% over a year ago.

After 10 years of development, it is time to readjust the rules and function of the B-share market, according to CSRC. The news will certainly attract more investors, both from home and abroad, to the B-share market, which has long been haunted by small market scale and sluggish trade. It will also trigger the growth of domestic A shares, especially the A-share companies who also have B shares listed. Experts regarded the move as an important step toward the merger of the A and B-share market. Expectation of the merger has triggered a sharp rally of the B-share market in China last year Investment value is high for B shares, which are still traded at a sharp discount with the A shares. Admission of domestic investors to the B-share market will gradually narrow such price gaps. But a final merger of the A and B-share market still takes time and depends on the convertibility of renminbi under the capital account. Presently, renminbi is only convertible under the current account.

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Zhao Ai, deputy director of the Comprehensive Planning Group of the State Council West Development Office, disclosed recently that the pipeline project to transport natural gas from the gasfields in the west of China to the eastern areas, currently under construction, can enjoy not only preferential treatment by relevant departments in construction of infrastructure facilities, but also the preferential policies which the State grants in the drive to develop China's western areas. Further-more, there are three special policies: l. foreign businesses are allowed to hold a stake of the shares with no restriction on proportion of the shares they hold in such kinds of projects which are allowed to engage in the construction of a complete transmission line; 2. no restriction is to be placed on forms of cooperation whether joint cooperative venture, joint equity venture or other forms, for this kind of project; 3. the construction of an urban natural gas pipeline network is open to foreign investors. This marked a special breakthrough adopted by the State Council, as the above policies are banned in the Guiding Catalogue for Foreign Investment. The west-east gas transmission project is designed to be China's first large diameter, long distance, high pressure and multiple pressurizing high-grade steel material natural gas trunk pipeline of modern and world class. It is the country's first large-scale construction project in the new century.

The project is the key to the drive to develop China's west and will speed up development. The pipelines will transport natural gas from the plentiful resources of the Tarim Basin, the Junggar Basin, the Turpan-Hami Basin, the Shaanxi-Gansu-Ningxia Basin, Sichuan Basin and the Qaidam Basin in the west to energy deficient areas in the east. There are four natural gas pipelines under construction at present: 1. the 4,167-kilometer-long pipeline from Tarim to Shanghai which can transport 12 billion cubic meters of gas annually. The project is estimated to cost RMB l46.3 billion (about ¡çl7.626 billion), of which RMB28.4 billion will go to gas-field exploration and developments, RMB49.l billion to pipeline laying and RMB68.8 billion to construction of facilities in four provinces and one municipality. The project will adopt competition bidding in choosing foreign cooperation partners for financing, construction, operation and management. The project is planned to start construction of the west line between Xinjiang Lunnan and Shaanxi Jinbian, and the east line between the Shaanxi Jinbian and Shanghai at the same time in the second half of 200l and begin to provide gas to the east in 2004. According to PetroChina Company, up to January this year, 19 foreign companies including BP Amoco, Royal/Dutch Shell, Exxon Mobil and Total, are lining up for a part in the west-east natural gas pipeline project; 2. the 953-kilometer pipeline from Shebei, in Qaidam, to Lanzhou, with an annual capacity of 2 billion cubic meters; 3. the 695-kilometer pipeline from Zhongxian, in Chongqing, to Wuhan in Hubei Province, with an annual capacity of 3 billion cubic meters; 4. the 470-kilometer pipeline from the Changqing Gas Field in Shaanxi Province to Hohhot in Inner Mongolia, with an annual capacity of l.2 billion cubic meters.

The western area in China is rich in oil and natural gas resources, which occur principally in Tarim, Junggar and Turpan-Hami basins in Xinjiang, the Shaanxi-Gansu-Ningxia Basin, the Sichuan Basin and the Qaidam Basin. By the end of l999, there were proven geological deposits of oil in the area of 3.367 billion tons and 1.57 trillion cubic meters of natural gas. In the period of the l0th Five-Year Plan (2001-2005), the movement will strengthen the prospecting and development of oil and natural gas resources in the west, speed up construction of oil and natural gas pipelines, verify more oil and natural gas reserves and increase the transportation capacity of pipelines.

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China's currency is expected to remain stable this year, but the exchange rate will be more flexible after the nation's entry into the WTO, Dai Xianglong, governor of the People's Bank of China said recently. The renminbi is expected to be underpinned by reasonable economic growth, low inflation and sufficient foreign exchange reserves. He predicted China's economy will grow by between 7% and 8% this year. The economy grew by 8% last year. The consumer price index, the key barometer for inflation, increased by 1.5% in December. Official economists said they expected the index to fluctuate around its current level this year. China's foreign exchange reserves increased by ¡ç11 billion to ¡ç165.6 billion in 2000, buoyed by increasing exports and other favorable economic indices.

China is expected to become a WTO member later this year. Dai said trade would experience more changes after China joined the international trade club, which will lead to bigger changes in China's balance of payments. A bigger fluctuation range for the renminbi is the most likely immediate option for the central bank in pursuing a flexible exchange rate system. The price of the rnminbi has been moving between 8.2770 and 8.2800 to US¡ç1 for three years, under intervention by the central bank. The bank will continue to put maintaining stability of renminbi as the priority in its monetary policy for the next five years. Talking about the fate of the international trust and investment corporations (ITICs), Dai said China's financial authorities have been working to rectify the problems in the emergence of the Guangdong International Trust and Investment Corp issue. In the process of cleaning up the industry, some ITICs would be dissolved. Regulations for the industry would be issued in the near future.

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Shi Wangpeng, Vice Minister of the Sate Economic and Trade Commission revealed recently that total capacities of China's key industries for 200l will be adjusted as outlined below:

1. Textile industry: Further reduce l00,000 more spindles after the successful elimination of 300,000 outdated spindles for woolen textiles.

2. Petrochemical industry: Total outputs will be controlled at l63 million tons for crude, 2l5 million tons for finished oil, 32 million tons for chemical fertilizers. For soda ash, no more than 7 million tons will be placed on the market with the remainder for export. Varieties and amount of imported crude, oil products and chemical fertilizers will be strictly controlled according to domestic demand and supply.

3. metallurgical industry: Excluding export increase and with import substitutes, steel output is set for 115 million tons, and rolled steel for l05 million tons. Profits of key large and medium-sized enterprises will not be less than RMBl3 billion. The two groups of l03 small steel plants listed in 2000 must be shut down as soon as possible and the list of the third group for shutting down has to be considered. Import of products in excess of demand must be put on strict control and efforts have to be made to increase export to strive to export 11 million tons of rolled steel and steel billets.

4. Coal industry: Coal output is set at 950 million tons for the year and coal enterprises that have been included in State budgets should try hard to turn their deficits into profits. Coal export is arranged for 63 million tons in the year, 5 million tons more than 2000.

5. Sugar Industry: Output for sugar is set at 7.5 million tons and that of saccharin at l7,000 tons including l4,000 tons for export, and 3,000 tons for the home market. The whole industry should strive to make a total profit exceeding RMB l billion. Efforts should be made to close the l50 small sugar refineries so as to cut 2.735 million tons of production capacity, and among the total l4 saccharin plants, inspections should be made on the 9 that have been closed down or shifted their production one by one.

6. Building industry: Output is set for 570 million tons for cement and l70 million weight crates for plate glass. Shutting down l,900 small cement kilns to cut 50 million tons of production capacity and l00 small glass production lines to cut l0 million weight crates of capacity. After the new standard for cement is set on April l, 200l, cement enterprises not up to the standard will no longer be granted licenses for production and those still unqualified after rectification in the set period have to be closed down.

7. Power industry: Continue to close down or suspend production of small thermal power generation units of 2.8 million kw following the cutting of l0 million kw.

8. Pharmaceutical industry: There are over 6,300 production enterprises and l,600 commercial wholesale enterprises in this industry. The problems are too many enterprises, redundant construction and disorderly circulation. It needs to work out a plan as soon as possible to eliminate the outdated enterprises and check redundant construction.

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East China's Jiangxi Province is accelerating its economic growth through high-technology, said Hu Zhenpeng vice-governor of the province. Science and technology are expected to contribute around 40% to Jiangxi's industria1 economy and 45% to agriculture by 2005. Its state-leve1 Nanchang High-Tech Industrial Development Zone generated a total of 5.4 billion yuan (¡ç650 million) in the production value of industry and trade in 1999, an increase of 34% over 1998. High-tech businesses in the zone are to enjoy preferential treatment in land use, tax and registration fees. Hu reiterated that the role of science and technology is vital to promoting development of the province's economy and enhancing its international competitiveness.

Most parts of Jiangxi hampered by underdeveloped science and technology resources. Their development is an urgent task for government at all levels to promote high-tech research and to accelerate the transformation of such research into actual products. The provincial government has drafted a series of preferential policies to attract talents from home and abroad. Businesses are also being urged to increase their investment in science and technology, and to improve work and living conditions to retain high-quality employees. With agriculture as its traditional pillar industry, Jiangxi plans to continue tapping its rich natural resources. Local officials have vowed to build the province into the largest organic agriculture base in the country. The province currently boasts 3,463 hectares of arable land, 54% of forest cover and more than 140 kinds of mineral resources. Its 2,500 hectares of fresh water accounts for 10% of the nation's total, and the country's largest fresh water lake--Boyang Lake--is located there. Jiangxi's Deking Copper Mine is the largest of its kind in Asia, along with the nation's largest copper smelting factory Guixi Smelting Factory. There are four state-level tourist resorts in the province including Lushan Mountain, a famous tourist attraction. The province is aiming to develop tourism through high-tech to spur its economy.

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1. Nancheng-Ruijin first-class highway. The total length is 224 kilometers. Investment: ¡ç144 million.

2. Liyuan-Wenjiazhen expressway. The total length is 245.8 kilometers, starting at Liyuan, Yushan County bordering Zhejiang Province and ending at Wenjiazhen, Jinxian County, Nanchang City. Investment: ¡ç605 million.

3. Four 300,000-kilowatt coal-fueled, power-generating units. Three of the four units have been put into operation and one is under construction. Investment: ¡ç660 million.

4. Two 200,000-kilowatt coal-fueled, power-generating units. Investment: ¡çl83 million.

5. Two 125,000-kilowatt coal-fueled, power-generating units. Investment: ¡ç97.6 million.

6. Two 30,000-KW hydraulic power-generating units. Investment: ¡ç56 million.

7. Travel agency. The joint venture will offer package tours, business tours and tour bus services. Investment: ¡ç20 million.

8. Yangtianping Tourism Resort at the Lushan Mountain. The resort covers an area of 14 square kilometers. Four areas will be built including a villa area, a recreation area, a commercial area and a staff area. Investment: ¡çl4 million.

9. Porcelain Culture and Folk Custom Exposition Area. This area will include a porcelain ancestor temple, a Tianju Palace, a memorial hall for historical porcelain masters, a porcelain research building and a porcelain artists village. Investment: ¡ç6.6 million.

10. The 300,000-cow project. To raise 300,000 cows and build a production line of immune globulin milk powder, other sorts of milk powder and beef biochemical products. Investment: ¡ç27 million.

11. Non-stop conveying pipeline, hole opener line and escalator production line. Investment: ¡ç3.2 million.

12. Special power transformer. To produce transformers for railways with an annual capacity of l0 million kva. Investment: ¡ç7.2 million.

13. LED epitaxy. To introduce key technology and some key equipment of LED production. The annual capacity is expected to reach 200,000 square inches of LED epitaxy. Investment: ¡ç3 million.

14. Ceramic vacuum apparatus and glass trimmer capacitor. To introduce technology and key equipment. Investment: ¡ç2.6 million.

15. Electrolytic copper foil. To introduce processing technology. The annual capacity is expected to reach 3,000 tons. Investment: ¡ç6 million.

16. Automobile spring plates and automobile spring rolls. To innovate the production lines. The additional annual capacity will be 20,000 tons of automobile spring plates and 1 million pieces of automobile spring rolls. Investment. ¡ç25 million.

17. Polyvinyl Chloride. The annual production capacity is expected to reach 10,000 tons. Investment: ¡ç43.7 million.

18. Filter membrane and filter cartridge. To introduce technology to innovate the production lines. The annual production capacities of filter membranes and filter cartridges are expected to reach 80,000 square meters and l00,000 sets. Investment: ¡ç2.2 million.

19. Biochemical products. To build a new production line and innovate the original production lines to produce 50 million pieces of transfer factors oral liquid, 10 million pieces of prostaglandin E1, 12 million pieces of adriamycin and l5 million pieces of fibrin ferment a year. Investment: ¡ç3 million.

20. Viscose filament. To introduce 12 sets of viscose filament yarn continuous silk spinners to produce 2,800 tons of viscose filament yarn per year. Investment: ¡çl7.5 million.

21. Viscose staple fiber. To innovate the production line (with annual production capacity of 30,000 tons). Investment: ¡ç68.7 million.

22. 80% sulphoxide chloride. To innovate the production lines (with annual production capacity of 10,000 tons). Investment: ¡ç60.3 million.(to be continued)

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Shanghai's economy continued to expand at a double-digit growth rate for the ninth year. The city's GDP last year grew at a faster-than-expected l0.8%, outpacing 1999's 10.2%. The better-than-expected performance indicates Shanghai has overcome the shadow of the Asian economic crisis and sluggish domestic demand. Shanghai's economy has been on a consistently upward path. In 2000, the value-added output, the benchmark indicator of production, rose 10.5% year-on-year to 199.2 billion yuan (¡ç24 billion). The industrial output last year totaled 691.5 billion yuan, up 13.5% from a year earlier. The information technology and finance sectors were the strongest forces behind the growth. The output of the information technology industry surged 39.1% to 79.6 billion yuan, while that of the finance and insurance sectors grew l8.1% to 69 billion yuan. The local economy benefited from a turnaround in the international markets, which helped increase exports and foreign investment. The central government also issued a package of stimulative polices to boost exports. Last year's exports were estimated at ¡ç25.3 billion, an increase of 34.7% from a year earlier. A total of l,814 contracts valued at ¡ç6.39 billion were signed with overseas investors, up 55.7% compared with 1999. Foreign trade and investment have become two major engines of the city's economic growth.

Strong growth in Shanghai's information technology industry has seen overseas investment to the city hit new heights. Multinational chemical companies will also make big investments in Shanghai with the construction of the largest chemical park in China, making the city one of the key chemical industrial bases in East Asia. Currently the booming IT industry has consolidated the investment flow. The city approved 159 foreign-funded ventures worth ¡ç703 million in January, up 35% from the same period in 2000. Silicon chips, high-tech electrical equipment and farm implements will be among the industrial sectors singled out when city government announces its targets for attracting foreign investment in 2001.

The local industrial authority has established a five-year development blueprint to turn Shanghai into one of China's six largest industrial bases. Industries, such as information technology, automobiles, steel, petrochemicals, power and shipbuilding, will be enlarged through the injection of foreign capital. These industries will be a strong stimulus to the city's economic development in the new century. It is reported that projects worth about 450 billion yuan (¡ç54.2 billion) will be launched to push forward the establishment of these industries. Under the blueprint, Shanghai's industries will account for one-tenth of the nation's total industrial output value by 2005. Shanghai Economic Commission has decided to invest 360 billion yuan (¡ç43.4 billion) in the next five years to develop the city's six new pillar industries. The heavy investment will enable these industries to generate 70% of the city's total industrial output value by the end of 2005.

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1. To push forward with reorganization of strategic assets instead of continuing to import investment and technology as previously. The chemical industrial zone presently being constructed will encourage multinational companies to form groups and start projects that will incorporate up and down stream operations, in cooperation with the large state-owned groups, Shanghai Hua Yi, Shanghai Petro Chemical, and Shanghai Gao Hua-- in the form of joint venture with large input and in concentrated areas.

2. To encourage foreign businessmen to buy stock in state-owned assets. The assets bought can be transferred into joint ventures or wholly foreign-owned enterprises.

3. To make better use of the capital market for starting joint ventures. While encouraging domestic enterprises to list overseas, foreign capital will be allowed, when appropriate, to buy state and corporate stocks of listed companies in Shanghai's industrial sector, listing of Sino-foreign joint ventures will be encouraged.

4. To make better use of the channels of domestic and overseas financial institutions and social intermediaries to absorb foreign investment. Investment shall be invited more through these channels as well as directly by domestic enterprises.

5. To improve the service for foreign businessmen and investment. Policies not in line with international convention will be sorted out, to reduce the project approval procedures, improve work efficiency, attract foreign businesses to invest and start factories in the industrial development zone where priority is given to development, and to attract foreign businesses to invest in electronic information and other key high-tech industries.

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With its rich oil resources, the city of Karamay has contributed a great deal to China's economic development. Situated in the Junggar Basin in Xingjiang Uygur Autonomous Region, it is one of Northwest China's most important cities. In Uygur language, karamay means ¡°black oil". Karamay Oilfield was the first to be discovered in New China. In spite of the difficult conditions, hardworking pioneers made great efforts to build Karamay into a modern city. And because of its abundant oil reserves, the city has experienced strong economic momentum over the past two decades. Karamay is now a petro-chemical production center which combines oil exploration, oil refining, scientific research and design, machinery repair and production, communications, transportation and power generation.

Karamay Oilfield was founded in 1955. Confined by technical conditions, exploration initially focused on the southwest rim of the Junggar Basin. Since 1978, and especially after the Eighth Five-Year Plan period (1990-l995), Karamay has attached great importance to the exploration of the basin's hinterland. This has led to breakthroughs. Cainan, Shixi, Mabei, Xiaoguai and many other oilfields with reserves of between 50 million tons and 100 million tons were found. In the Ninth Five-Year Plan period (1996-2000), Shinan, Shanan, Mobei, Hutubi and Zhonggpai oilfields were found. Between 1996 and 1999, the newly-found oil reserves amounted to 400 million tons, occupying one quarter of the total oil reserves discovered since 1955. In 1999, the crude oil production reached 9.06 million tons, ranking fourth of the country's oil producing areas. Two petrochemical plants: Dushanzi Petrochemical Plant and Karamay Petrochemical Plant, both have the ability to process 9.2 million tons of crude oil a year. Their output value of oil reached l5.7 billion yuan (¡çl.89 billion) in 1999.

Over the past 45 years, Karamay has produced 160 million tons of crude oil. It has the potential to keep going for 100 years. The development of the oil industry has enhanced the overall economic strength of Karamay. In 1999, the city's GDP reached 10.2 billion yuan (¡ç1.23 billion). Karamay's GDP in 1999 accounted for 8.7% of Xinjiang's total. The per capita income in Karamay reached 38,357 yuan (¡ç4,621) in 1999, one of the highest in the country. In the Eighth Five-Year Plan period (1990-1995). Karamay focused on reforming corporate management systems. It carried out reforms of housing, taxation, insurance and medical treatment. Since 1996, Karamay has also tried such equity reforms as share-holding. The city has also enhanced its cooperation with foreign enterprises. Meanwhile, more than 10 kinds of Karamay's oil products were exported to foreign countries. Foreign cooperation has resulted in obvious economic returns. In the first two years of the Ninth Five-Year Plan period (1996-2000), Karamay imported 75 sets of high-tech pieces of equipment and started 46 technology upgrading projects. It has signed 233 technology cooperation contracts with foreign partners. Karamay encourages domestic and foreign businesses to invest in the following fields.

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1. Farmland infrastructure construction, such as irrigation projects. 2. Ecologically friendly, high-production agriculture with low water consumption. 3. Crop and livestock breeding bases and agricultural demonstration bases. 4. High-production cash crops, high-quality cattle and aquatic products.

Petroleum, petrochemical and natural gas industries

1. High value-added petrochemical products such as quality lubricants. 2. Comprehensive utilization of ethylene and corvic. 3. Rubber and plastic production. 4. Fine chemicals and natural gas industries.

Machinery and electronics industries

l. New petroleum equipment manufacturing. 2. Integration of photo-mechanic-electronics technology and new instruments and components. 3. Energy-saving mechanical and electronic products. 4. Automatic-controlling systems and related components.

Building material industry

1. New light building materials. 2. New chemical building materials.

Construction and real estate industries

1. Urban infrastructure construction. 2. Real estate development. 3. Building and decor industries.

Forestry and paper-making industries

1. Paper pulp production. 2. Industries related to forestry and paper-making.

Energy, transport and telecommunications

1. Thermo-power plant construction. 2. The comprehensive utilization of natural gas. 3. High-grade roads, branch railways and airport. 4. Advanced telecommunications equipment. 5. Regional markets and industrial parks. 6. Large-scale land development. 7. Other infrastructure construction.

Urban public utilities

1. Urban transport improvement. 2. Networks for water, power and heat supply. 3. Waste water treatment. 4. Car park building.

High-tech industries

1. Micro-electronics technology. 2. New materials, new technology development. 3. Biological engineering technology. 4. Network technology for information and telecommunications systems.

New industries

1. Resources regeneration and comprehensive utilization. 2. Pollution treatment projects and monitoring technology£®

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The Civil Aviation Administration of China (CAAC) has announced that it will grant preferential treatment for development of the aviation market in western China. The special civil aviation fund will be biased towards investment in airports. Enterprises and investment institutions from other sectors, large airports in the east, as well as foreign investment are encouraged to inject funds into construction of civil airports in the west. With the launch of the western development drive, the civil aviation market has become a new investment attraction. By the year 2005, the western part of China will have a total of 76 airports, with four regional hub airports located in Chengdu, Xi¬ðan, Kunming and Urumqi; nine trunk-line airports in Lanzhou, Chongqing, Nanning, Guilin, Hohhot, Guiyang, Lhasa, Yinchuan and Xining; and 63 feeder-line airports. By the year 20l5, its airports will be increased to about l00, with two national hub airports in Chengdu and Xi¬ðan, five regional key airports in Kunming, Lanzhou, Urumqi, Guilin and Chongqing, six trunk-line airports in Hohhot, Nanning, Guiyang, Xining, Yinchuan and Lhasa, and about 90 feeder-line airports.

The country is expected to pump RMB50 billion into the western part for building or expanding 20 airports as part of the on-going West Development Drive. According to the State Development Planning Commission, the airports to be rebuilt include Chengdu, Kunming, Urumqi, Xianyang, Gormu, Dunhuang, Luzhou, Beihai and Qiemo, and new airports to be built will be Guangyuan, Mianyang, Panzhihua, Jiuzhaigou and Wanzhou in Sichuan, Tongren in Guizhou, Simao and Lincang in Yunnan, Zhongchuan in Gansu and Alatay and Kuche in Xinjiang. All the airports will be tourist orientated. Funds for the undertakings will come from RMB 800 million of treasury bonds to be issued, RMB 1 billion to be invested by the State Development Planning Commission and several millions of foreign capital arranged by the State and the rest will be raised locally totaling about RMB5 billion.

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The successful construction of various science parks has spurred on the high-tech industrialization of the Changchun High-Tech Development Zone. The zone has established a software park, biological pharmaceutical park, optical and electrical park, auto park, returned overseas Chinese pioneering garden and a university town. From January to October in 2000, 835 million yuan (¡ç100.6 million) of domestic funds and ¡ç82.76 million of foreign investment was invested in the zone. A total of 338 companies were established during the period. Changchun Zone was founded in 1991, as one of the 53 state high-tech development zones. In just two years, the zone was rated as one of the 10 excellent state-level high-tech zones. By last October, its trade income surged to 16.2 billion yuan (¡çl.95 billion), 24.7% higher than the previous year's figure. More than 1,400 companies and enterprises from 26 countries and regions have registered in the zone. A total of ¡çl.3 billion in foreign investment has been attracted.

Most of these parks have enjoyed vigorous growth in the past years. 36 software enterprises have settled in the software park, 23 with a production capability of over 10 million yuan (¡ç1.2 million). More than 60 advanced software products have been developed. Hongda group from the park has successfully developed a public security information managing software. The system initiated China's modernization in population information management. Its fingerprinting locks have been exported to Europe and brought ¡ç30 million in foreign exchange. The biological pharmaceutical park has cultivated a number of China's leading pharmaceutical enterprises such as Changsheng Genetics Corp, and Jinsai Pharmaceutical Corp. 47 enterprises have registered in the park. The park plans to set up a provincial traditional Chinese medicine industrial center focusing on product research, quality evaluation and e-commerce in 2001. Backed by China Changchun FAW (First Automotive Works) group, 52 enterprises have been engaged in auto spare parts production in the park. Many have become suppliers for the FAW Group, a joint venture between the First Automotive Works and Volkswagen. The auto park is expected to increase its annual production value by 40% to 7 billion yuan (¡ç843 million) in 2000. Since its foundation in 1999, 160 overseas masters¬ð and doctors¬ð degree holders have started their research in complex chemicals, tumor treatment and auto GPS (global positional system) navigation systems. 35 enterprises have been established.

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China's construction machinery market will be the biggest in the world within 5 to 10 years. The industry will grow by 10% annually in the 10th Five-Year Plan period (2001-05). The country's construction machinery industry was still quiet at the moment, but had been boosted by booming building projects and the western development program. Projects still under construction include the Three Gorges Project, the West-to-East Gas Pipeline Project - which links oilfields in Northwest China's Xinjiang Uygur Autonomous Region with Shanghai -- a power transmission project from the country's west to east, and a national urbanization program that will dramatically increase the number of cities and townships in China.

Western development, which has entailed the building of railways, highways, airports and other infrastructure facilities, will also bring abundant business opportunities to the construction machinery sector. Building equipment will be needed for all these projects and tens of billions of yuan will have to be poured into the industry. Each year 5% to 8% of building funds will go towards buying equipment. China currently has a total of 1,008 manufacturers in the construction machinery sector which supply 60% of the domestic market demand, the remainder being met by foreign machinery manufacturers. China has imported machinery products worth more than ¡ç1 billion each year for the past five years. New projects will be worth several billion US dollars. Foreign companies are welcome to compete and bid for business opportunities. The government is to work out policies that will provide a much more market-oriented and transparent environment for fairer competition between domestic and foreign manufacturers. The injection of foreign investment in China's construction machinery sector will be much easier after China's accession to the WTO.

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Shanghai's pillar auto industry has been strengthened by an infusion of new blood with the establishment of the Kolbenschmidt Pierburg Shanghai Nonferrous Components (KPSNC) Co Ltd recently. In the ¡ç51.1 million joint venture, the Germany-based Kolbenschmidt Pierburg AG (KP) and the Shanghai Automobile Nonferrous Casting Plant each hold 50% stakes. The new company is the 48th joint venture under the Shanghai Automotive Industry Corporation, which controls approximately 40% of the domestic market with a sales volume of ¡ç10.6 billion in 1999 and which is thus one of China's premier auto conglomerates. The joint venture is expected to grow into a leading Chinese manufacturer of air supply components and modules, pumps and cylinder heads for the auto industry. The new business is KP's second venture with the Shanghai Automotive Industry Corporation. Kolbenschmidt Shanghai Pistons (KSP) has been manufacturing pistons for a mixture of application since 1997. With annual sale of ¡ç15 million, KSP has grown into China's biggest car piston manufacturer

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An agreement of more than 200 million yuan (¡ç24 million) was inked last December between Guangzhou Subway Corp and Motorola Co (China) to beef up automation of the city's transportation systems. The deal is the second largest project Motorola had clinched last year in China to implement its IC services. The first agreement was signed with Nanjing City to develop its city planning. According to the agreement, Motorola is to help the corporation build up an automatic fare checking (AFC) system for the city's subway. The project includes two parts: the reconstruction and introduction of new facilities to the city's No 1 line, and the implementation of AFC system on the No 2 line.

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Canada-based telecom equipment provider Nortel Networks has got deeper into China's telecom network infrastructure with the signing of network contracts worth a total value of ¡ç263 million with major Chinese telecom operators. China Telecom recently signed an agreement with Nortel Networks for China's largest ever optical contract. The ¡ç101-million network will become the most modern fixed-line telecom network in the world. China Mobile and China Unicom have separately awarded Nortel Networks with contracts worth ¡ç130 million and ¡ç32 million for the expansion of GSM networks in Shaanxi, Zhejiang and Heilongjiang provinces.

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