Chinese law makers are considering adding clauses concerning the payment of civil compensation by fund managers and custodians into the proposed investment fund law which is expected to come out next year. This means that investors could be compensated for their financial losses caused by mistakes or misconduct of fund managers or custodian banks, including false information disclosure, said Li Yining, head of the law's drafting panel, led by the Financial and Economic Committee of the National People's Congress (NPC). Such terms would exert more pressure on fund managers to act more professionally and to follow standards. Moreover, the money used for compensation should come from assets owned by the violators themselves instead of from the entrusted funds. If the clauses are formally written into the law, it will plug the legal gap, ensuring civil compensation in cases of irregularities in fund management and custody.

In the existing Securities Law, law breakers face administrative punishment, including fines that should be paid to the State, when irregular operations or the dissemination of fake information is discovered. But that is certainly not enough for investors, whose interests are dependent upon the upright behavior of the fund managers, said Li. Irregular trading by domestic fund managers, such as the cases disclosed by the media and market regulators recently is pushing law makers to add more clauses to protect investors¬ð interests in the latest draft of the Investment Fund Law. The draft stipulates that fund managers should organize general meetings of investors regularly to make important investment decisions, and senior executives of the fund managers, trustees or custodians should not take posts in different companies within the circle at the same time.

The draft, which has been revised for the fourth time, is scheduled to be submitted to the Standing Committee of the NPC in June. The review will take months and the law could formally come out as early as next year. The law will also be applicable to Sino-foreign joint venture fund management companies, which will be allowed into the Chinese market when China joins the WTO. It will also cover privately collected funds, which could boost the development of venture investment funds and set standards for the business. China's fund industry is facing more innovations. The first open-ended fund is expected to be launched by the Hua'an Fund Management Co soon.

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Sales of foreign companies in special economic zones will no longer be exempted from taxes in their first five years of business. The Ministry of Finance (MOF) recently received an okay from the State Council to adjust its policies on taxes for foreign-invested companies, foreign financial companies, entertainment facilities and consumption taxes for cigarettes, and alcoholic beverages. A press release from MOF on April 6 said the ministry is revoking its five-year tax exemption for foreign-invested companies' and foreign financial companies' sales in special economic zones. It said the special economic zones are the cities of Shenzhen, Zhuhai, Xiamen and Shantou, as well as Hainan Province, the Pudong New District in Shanghai and the Suzhou Industrial Park.

MOF also decided to levy an across the board sales tax of 20% for all entertainment facilities such as golf courses, bowling alleys, nightclubs and billiard halls. Tax rates were previously different depending on the industries' sales volumes. For every case of cigarettes, or 50,000 pieces, 150 yuan (¡ç18) in consumption tax will be levied. Consumption taxes were formerly imposed on cigarettes only on the basis of price. MOF also decided to impose an extra 1,000 yuan (¡ç120) consumption tax per ton on wine, in addition to 15% and 25% taxes based on price. The consumption tax on beer will be either 250 yuan (¡ç30) per ton or 220 yuan (¡ç27) per ton if it is priced over 3,000 yuan (¡ç360) per ton at the factory. MOF said it will not renew tax rebate policies for value-added taxes from state-owned and collectively-owned wholesalers of meat, poultry, eggs, aquatic products and vegetables and for turnover taxes from some import and export companies. It will also decrease rebates for value-added taxes paid by companies that collect garbage and scrap.

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The chairman of the China Insurance Rregulatory Commission (CIRC), Ma Yongwei, revealed recently that in order to meet the requirements of a WTO member, the Commission has submitted to the State Council the drafted ¡°Foreign Insurance Company Management Regulations", in which, related insurance rules and regulations not in compliance with the WTO practices have been removed. The pace of opening up the Chinese insurance market was accelerated last year, with two insurance joint ventures and two branches of foreign insurance companies approved to operate in China. To date, China has had 32 insurance institutions solely or jointly funded by foreign investors.

The CIRC has set up 31 offices in 30 provinces, regions and municipalities all over the country. A national insurance regulatory organization system has taken shape. China further improved the insurance laws, rules and regulations and formulated the insurance regulatory indicator system last year. Apart from that, it expanded the business scope of the insurance branches, allowing them to take trans-regional large commercial insurance and blanket policy services and thus promoting the service development and market competition. CIRC also made greater efforts in investigating and prosecuting violations of laws and regulations, and it punished 38 insurance branches and two professional insurance agencies, deprived some violators of the concurrent insurance agency qualification, and canceled three foreign insurance offices that violated related regulations.

Thanks to the effective measures on strengthening the regulations, all the operation indicators of Chinese insurance companies became better, with the growth in the premium income of property insurance l.5 percentage points higher than the previous five years. Some insurance companies marketed such products as investment link and dividend, and their premium income has made up 29.6%of the total from the personal life insurance policy in the pilot area. In addition, China also accelerated fostering and developing the insurance intermediary market, approving the establishment of 8 insurance broker companies, 33 insurance professional agency companies and 3 insurance assessor companies last year alone. The main pattern of China's insurance intermediary market has initially been shaped.

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China's central bank recently promulgated the Administrative Rules on Trust £¦ Investment Companies, which for the first time positioned by law trust and investment companies as financial institutions engaging in the business of property management on trust. The promulgation of the rules reflects the requirement for trust and investment companies to return to the industry they should engage in, solves the positioning problem that has long been puzzling trust and investment companies, and is favorable to healthy development of the trust industry. Trust is now an important property management system in many developed nations. It is regarded as one of the 4 pillars of the financial industry together with banking, insurance and securities. China's trust industry has engaged in mixed operations for many years, and real trust business accounted for only a small part, thus accumulating some problems and risks.

The newly promulgated rules provide that in the future trust and investment companies, which take rewards in the form of commission, are non-banking financial institutions that accept trusted property and handle trust business in a trustee's capacity. Their business scope covers: 1. operating capital trust business on trust, trust business for movable, immovable and other properties, and investment fund business that is permitted by the state law; 2. engaging in investment fund business as initiators of fund management companies; 3. operating such intermediary services as reshuffle, merger and acquisition enterprise assets, project financing, property management for companies, and financial advisory service; 4. operating on trust treasury bond and corporate bond underwriting business as approved by related departments of the State Council; 5. undertaking property management, operation and disposal on agency; 6. operating custody, credit testimony, credit status investigation and economic consulting services; 7. providing guarantee with own assets. Trust and investment companies may also accept welfare trust in the interests of the public.

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China plans to establish a National Gold Exchange (NGE) this year, another step towards reforming its gold trading market. A nine-member panel has been formed in the central government to lead and plan details for the establishment of the exchange. The other preparatory committee will be formed soon. Shanghai is the most likely location for the exchange, though the People's Bank of China (PBOC) would not confirm this last month. For years, gold trading has been strictly controlled by the central government. PBOC monopolizes the purchase and allocation of gold. Gold prices are separated from the international market and rarely fluctuate. Pressure is mounting for opening the market.

The NGE, which will mainly target gold producers and wholesalers, will introduce market prices to China's gold trade. PBOC will gradually withdraw from its monopoly position. The retail market for gold will then be established. Mayor of Shanghai Xu Kuangdi ranked it a top priority in his speech about the 10th Five-Year Plan (2001-2005). Sources from the PBOC's Shanghai branch and Shanghai Economic Commission said their preparatory work is progressing. People inside the industry also are excited about the future of the NGE in Shanghai. Experience in other countries indicated that a stock market, a concentrated group of banks, futures and foreign exchange trading centers as well as a gold exchange center are essential for a city to become an international financial hub. China produced about 173 tons of gold and used about 207.5 tons last year.

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During the 10th Five-Year Plan period (2001-05), China will enter a new stage of development in its utilization of foreign capital. Details are as follows:

1. Capital market is expected to become main source of foreign capital. There are three main ways for China to use foreign capital loans, direct foreign investment and capital market. At the beginning of reform and opening up, foreign investors, knowing very little about China, dared not make investment. The main source of foreign capital during the period was foreign borrowing. In the l3 years from 1979 to 1991 the amount of foreign borrowing was more than direct foreign investment every year and the conditions were not right for raising capital from the capital market. The total growth of direct foreign investment in the l3-year period was ¡ç23.35 billion while the amount of foreign borrowing was ¡ç52.74 billion. The situation, however, began to change towards the 1990s. During the 8 years after 1992, the main source of foreign capital was direct foreign investment and the total amount absorbed during the period was ¡ç282.57 billion and the amount of foreign borrowing was only ¡ç84.6 billion. However, funds raised from the capital market were small. In the 10th Five-Year Plan period (2001-05), with the deepening of reform and further opening up, especially when the country becomes a WTO member, the sources of foreign capital will be diversified. Apart from the original ways, there would be long and medium-term investments by way of purchasing, merger, investment fund and securities investment. It is anticipated that capital market will become the main source of foreign capital for China during the period.

2. Western China will become main areas for using foreign capital. There are obvious gaps in the utilization of foreign capital between western and eastern China. By the end of l999, the l2 provinces and autonomous regions in western China had used a total of ¡çl6.8 billion foreign capital, accounting for only 5.5% of the nation's total. One of the main thrusts of the Western China Development Strategy is to use more foreign capital and open up more areas to foreign investors. The main areas where foreign investments are encouraged include agriculture, ecology, water conservancy, communications, energy, municipal construction, mineral resources development, tourism and environmental protection. The service trade will be opened wider and foreign investment is allowed in the banking and retail trade and foreign trade in capital cities. Foreign capital banks will also be allowed to handle renminbi business and to invest in telecom, insurance, tourism, accountancy, legal firms, engineering design, railway and road transportation, public utilities. The ways of using foreign capital will be extended to cover BOT and TOT, the issuance of stocks, project financing, transfer of equity, transfer of management power, merger and purchasing. Foreign funded enterprises in China are encouraged to reinvest in the western regions and if the reinvestment part exceeds 25%, they will enjoy the treatment of foreign-funded enterprises. Foreign capital may also be introduced into such areas as industrial funds and risk investment fund. There are also tax incentives. Foreign investors investing in communications, power, water conservancy, postal service, radio and TV manufacturing will enjoy two-year tax exemption and three more years of 50% tax reduction in business income tax. The same treatment will also apply to investment in high and new technology enterprises.

3. More foreign capital is to be used in the transformation of state-owned enterprises. In the past, as the private sector is small, it was difficult to become shareholders of large and medium-sized-state-owned enterprises. It was equally difficult for foreign capital to get involved, as the capital market is not open. In the next five years, with China's accession to the WTO, large multinational corporations will set foot in China and will become involved in the joint stock conversion of large and medium-sized state enterprises. There will be no limit with regard to equity except major enterprises that concern the state security and economic backbone.

4. Service trade is expected to become major area of foreign investment. What China is following is a path of incremental progress in opening up, starting from the first and second industries. Even in the tertiary industry, such general services as tourism, dogmatic trade and everyday services will be opened first, before other areas such as banking, insurance and telecom. The influx of foreign capital will remain the same. In the next five years, although foreign investors will continue to invest in the primary and secondary industries, the focus will be shifted to the tertiary industry, especially banking, insurance, telecom and foreign trade.

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Starting from this year, Tianjin will prioritize the growth of the high-tech industry, infrastructure construction and real estate during the 10th Five-Year Plan period (2001-05). The city will build a wideband Internet service, set up a public database to include information on government departments, individuals and enterprises, and push for the development of computer, telecom and TV systems. Tianjin plans to increase the number of fixed phones to 5.2 million, mobile phones to around 4.8 million, and Internet users to 20% of households by 2005. It will try to expand information technology development in the fields of online banking, trade and medical services. As the largest port city in the north, the local government will strive for a distribution center. The government has been encouraging research and development of gene technology, new materials, high-yield and export-oriented agriculture, nanometer technology and biotechnology. It will also concentrate on constructing water-conservation projects, ecological protection facilities, and energy and public transportation systems.

Tianjin will also back the development of the service industry, such as financing, tourism, accounting and law. Development of service and overseas processing industries have been put at the top of the agenda in the city's 10th Five-Year Plan. The port city plans to become a modern international economic center focusing on information, trade, banking and real estate industries. Li Chenglin, city mayor, said speeding up the development of the service industry is a major way to restructure and upgrade the local economy. During the 9th Five-Year Plan period (1996-2000), the city witnessed enormous changes, with its service industry amounting to 46% of the local gross domestic product (GDP) in 2000, compared with 38.8% in 1995. Meanwhile, the annual cargo handling capacity of city ports has reached 95.66 million tons, the number of local Internet users has exceeded 300,000, the real estate sector has boomed, and the local tourism industry has become a new money-maker. Tianjin is to accelerate development its tourism industry by making use of local advantages, including natural resources and historical sites.

Moreover, the city will also expand modern services, such as accountancy, consultancy and entertainment businesses. Monopolies in some service fields are to be broken and more new services -- chain supermarkets, logistics centers and e-business -- will be developed. International business groups are welcome to open outlets in Tianjin. In addition, the city plans to foster markets for technology, personnel and property rights and sponsor more trade fairs at home and abroad. By 2005, the local service industry is hoped to make up more than 50% of the city's GDP. Tianjin is expected to have a service system compatible with its status as an international harbor city by then. In another move to optimize Tianjin's industrial structure, the municipal government will encourage local enterprises to explore overseas pro-cessing industry markets. The measure is also expected to help increase the city's exports of machinery technology and raw materials. All kinds of enterprises, including joint ventures, private and state-owned enterprises, will be allowed to invest overseas if they meet the set requirements.

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Southwest China's Yunnan Province expects to see many more tourists by the time 2005. According to the province's 10th Five-Year Plan (2001-05), Yunnan will be host to 1.5 million overseas tourists and 55 million domestic sightseers in the year 2005, the result of an average yearly growth rate of 9.5% and 8.3% respectively, said Shao Qiwei, vice-governor of the province. At an average growth rate of 11.4% per annum, the province's foreign exchange tourism revenues will reach ¡ç550 million in 2005 while domestic tourism revenues will hit 28 billion yuan (¡ç3.4 billion) for an average yearly growth rate of 9.2%.

The provincial government will seek more channels to enlarge investment in tourism, one of the province's pillar industries. State-owned tourism enterprises will be reorganized or directly turned into share-holding corporations. An increasing number of tourism companies will go public in two years. Foreign cooperation is being encouraged to boost tourism. Yunnan wants to become a major Asian international tourist destination, and draw a hefty economic boost from this. During the 9th Five-Year Plan period (1996-2000), the province saw booming growth in tourism with an average yearly growth rate of 10.9% for overseas tourists, 3.2 percentage points higher than the country's average overseas tourism growth rate. In the past five years, the province's foreign exchange revenues from tourism reached ¡ç1.4 billion with a per annum average growth rate of 15.5%, 3.9 percentage point higher than the country's average growth rate for the industry.

Yunnan will also develop its tea industry and promote its comparative advantages as part of the 10th Five-Year Plan period. The province launched its first Spring Tea Trade Fair in April in its capital Kunming, showcasing a variety of quality green, red and organic tea. Yunnan, which boasts the most tea plantations, is determined to fast-track the development of tea production as a pillar industry. With China's western development, Yunnan should take the opportunity to develop its tea industry, presenting its tea to the whole country and the whole world, said Huang Bingsheng, vice-governor of the province. In its 10th Five-Year Plan (2001-05), the provincial government has pledged to invest 6 million yuan each year to create 6,667 hectares of new tea farms using organic fertilizers and pesticides to produce organic tea. A 1,300-hectare demonstration zone will be established. Another 3 million yuan will be used to promote famous brands. Yunnan had 164,000 hectares of tea plantations at the end of 2000, accounting for 14.8% of all tea farms in the country. Growing tea plants and making tea has been a traditional industry for the rural people of the province for thousands of years. The best known teas are Dianhong, Pu'er and Tuo Tea. Although the three names may not be as well-known in China as Longjing and Wulong, the red tea Dianhong used to be a best-seller in Western European countries and the United States in 1970s and 1980s.

Exports declined in the late 80s when the European countries imposed stricter standards on chemical remnants allowed in tea products. Other tea-producing countries, including India and Kenya, took a large share of the world market by producing organic tea. The export of China's red tea fell from about 100,000 tons a year at its height to less than 30,000 tons last year. Experts said Yunnan has natural advantages in producing organic tea for the world market. The province's altitude between 1,200 and 2,000 meters, temperatures between 12 and 23C, and good soils make Yunnan a better place than many other countries and regions to produce red tea. More importantly the mountainous tea farms of Yunnan are in an unpolluted environment, and most of the farmers are still using the traditional organic fertilizers and few chemical pesticides. According to test by the Chinese Academy of Agricultural Sciences, the residue of chemicals and pesticides in tea produced in the province is low enough to meet European Union's standards for imports.

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Wuhan, Hubei Province's capital, is trying to establish itself as an economic leader in Central China. Located in the middle reaches of the Yangtze River, Wuhan vows to become a prime player in the region in the next five years, and a major multi-functional modern city within 15 years. The city plans to contribute more to economic cooperation across the region. Wuhan, the largest city in Central China, has already become a booming economic powerhouse in the region. The city is a historical thoroughfare in China with convenient transportation facilities and a trading port. It is one of China's key heavy industrial bases with well-developed iron, steel, textile and tobacco industries. A hub of communication since ancient times, Wuhan is a key link for China's internal trade. And the city is a converging point of Beijing-Guangzhou, Beijing-Kowloon, Wuhan-Kowloon and Hankou-Danyang railroads and two national motorways.

Since China implemented its opening up policy in 1978, Wuhan has made remarkable progress. In 1992, the city was opened up to the outside world as part of China's drive to accelerate the development of the Yangtze River Delta. Now of the 221 municipal cities in China, Wuhan ranks sixth in terms of economic strength. In recent years a good momentum has been maintained in the Yangtze River region. This creates a favorable environment for Wuhan to accelerate economic development. And the city concentrated its efforts on turning itself into a center of scientific research, commerce, finance, trade and information in Central China, and in the country as a whole. In the 10th Five-Year Plan period (2001-05), the city will bring its advantages into full play by grasping the opportunities of western development; ushering in new and high-tech projects, attracting more domestic and foreign investment; speeding up the development of its five pillar industries--optical and electronics information, modern manufacturing, steel, pharmaceuticals and environmental protection. Wuhan plans to become more open in the coming 10 to 15 years.

In 1999, a UN Industrial Development Organization report said Wuhan is at the forefront of Central and Western China's vast market and is the region's center of trade and commerce, finance and technological information. And the report described the city as the first place to be looked as China shifts its focus to the western regions because of its important location, rich natural resources and well-developed industrial structure. Wuhan has long been a leader in scientific research. It has 687 scientific research institutions, 450,000 research and engineering personnel and 43 academicians of the Chinese Academy of Sciences and the Chinese Academy of Engineering. There are 34 institutes of higher education with 204,000 students. Wuhan's abundant fresh water, including 21.9 million hectares of water areas makes it a leading player in the country. Since the city's high-tech industry is regarded as a powerful engine for economic growth, the municipal government plans to construct a ¡°digital Wuhan" and make the city the ¡°Optical Valley of China."

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31. GMP Production Line for Jingdaining Capsules. The annual output will be 25,000 boxes. Form: Cooperation. Investment: ¡ç8 million.

32. Changpoling Forest Park. A province-level forest park will be built. Form: Land leasing and auction or JV. Investment: ¡ç6.1 million.

33. A wholesale market of wine and liquor. The market will cover 4.33 hectares. Form: JV or cooperation. Investment: ¡ç11.85 million.

34. Zunyi Road Hotel. Redecoration and equipment purchase. Form: Co-operation. Investment: ¡ç10.84 million.

35. Developing modern agricultural technology. There is a 30-hectare plantation in Guiyang, producing fruit, vegetables and non-staple food. Form: JV or sole proprietorship. Investment: ¡ç11.43 million.

36. Complex of Yan'an West Road Bus Station. Form: Sole proprietorship, joint venture or cooperation. Investment: ¡ç21 million.

37. Technological upgrading of precise and efficient abrasive materials and tools. To produce 3,000 tons of zirconium steel, 2,300 tons of heavy-load abrasion tools and 760 kilograms of artificial diamonds a year. Form: JV or cooperation. Investment: ¡ç13 million.

38. Guiyang Sanqiao Freight Transport and Bus Station. Form: sole proprietorship, joint venture or cooperation. Investment: ¡ç6.5 million.

39. Production line for carbonal carbonyl synthesis ethy1ic acid. To make use of advanced technology to produce ethyic acid. Form: Sole eq-uity cooperation. Investment: ¡ç120 million.

40. Production line for formaldehyde of low-degree polymerization. The annual production will be 20,000 tons. Form: JV or technology introduction. Investment: ¡ç12 million.

41. Development of Bauxite. Reserves in Maochang Bauxite Mine is 210 million tons. Form: JV or cooperation. Investment: ¡ç482 million.

42. Light vehicle and special-purpose vehicles. Main work-shops and garages will be constructed. Form: JV. Investment: ¡ç12.8 million.

43. Production line for turbo supercharger for sedan. Form: Cooperation, introduction of technology or compensation trade. Investment: ¡ç14 million.

44. Reconstruction of the production line for Aifuning mixture and capsules. Form: JV or cooperation. Investment: ¡ç10 million.

45. Expanding the production of high-strength and high-alumina oil fracturing propping agents. The agents are a new type of material. Form: Joint venture or cooperation. Investment: ¡ç10 million.

46. Construction of Wenquan Road (2,755 meters long) in Wudang Xintian City proper. Form: Land exchange. Investment: ¡ç10 million.

47. Construction of Yunfen Avenue in Baiyun District (563m x 60m). Form: JV or cooperation. Investment: ¡ç17.8 million.

48. Highway between Jiuchang and Kaiyang (38 kilometers). Form: BOT or sole proprietorship. Investment: ¡ç49.4 million.

49. Production of methanoic acid. To produce methanoic acid by using advanced technology. Form: JV. Investment: ¡ç10.7 million.

50. Chip laminated inducer production line. The annual production capacity will be 1 billion pieces. Form: Joint equity or technology and equipment transfer. Investment: ¡ç16.85 million.

51. An aluminum oxide ceramics production line. The annual production capacity will be 50,000 aluminum oxide shells and 100,000 SQM. Form: JV or technological transfer. Investment: ¡ç10 million.

52. Students¬ð Dormitories. To build 10,000-square-meter dormitory in two universities. Form: cooperation. Investment: ¡ç12 million.

53. Jinzhu Agriculture High-Tech Exhibition Park at Xiaohe, Guiyang. The Park will combine sightseeing, entertainment and education. Form: JV or cooperation. Investment: ¡ç5.6 million.

54. Nanmu Ferry Bridge in Kaiyang (404m x 9m). Form: Sole proprietorship, JV or cooperation Investment: ¡ç132 million.

55. Yongle Ecological Agricultural High-Tech Exhibition Park. Form: JV or sole proprietorship. Investment: ¡ç5.45 million.

56. Yangzhuang Power Station in Qingzhen (annual output: 50 million kwh.) Form: Sole proprietorship or cooperation. Investment: ¡ç2.41 million.

57. Reconstruction of the production line for Guilingshou Wine. To produce 8,000 tons of Guilingshou Wine, 6,000 tons of Guilingfushou Wine and 24,000 Guilingshou Capsules per year. Form: JV or co-operation. Investment: ¡ç16 million.

58. Production of pure gallium and high-purity gallium. To produce 2.5 tons pure gallium, 2 tons high-purity gallium, superfine AL(OH), 1,200 tons powder, 2,000 tons potash fertilizer, SCaOSiO, 10,000 tons compound building materials. Form: JV, cooperation. Investment: ¡ç6 million.

59. A freight transport system. Various goods will be transported. Form: Joint venture or cooperation. Investment: ¡ç4.82 million.

60. Developing fiber flax acid series products. New products will be developed with fiber flax acid as the raw material. form: Joint venture. Investment: ¡ç1.81 million.

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Zhang Chunxian, vice-minister of the Ministry of Communication, said the ministry will open its water transportation market as of May 1. The opening process will be carried out step by step, though the country's pending WTO entry may push the steps to happen faster. Zhang indicated that China will open transports along all major rivers, including the Yangtze and Yellow Rivers, in the near future if China is granted a smooth entry into WTO. The ministry has decided to build Shanghai into a major deep-water port throughout the next five years, with the hope that it develops into an international shipping center. In addition to Shanghai, Dalian, Tianjin, Qingdao and Shenzhen will also undergo renovations or upgrades to become modern deepwater ports by 2005. China welcomes overseas companies to join the bidding process of harbor construction. All the harbors will be open to overseas investors, under China's related investment regulations.

The country's waterways and transport facilities will undergo a massive overhaul in the next five years, including the building of new container ports. Some 135 deepwater berths will be built and 45 existing ones will be overhauled to add 250 million tons and 16.5 million twenty-feet equivalent units of handling capacity. By the year 2005, the total port handling capacity will reach 1.43 billion tons, During the time, container ports will be built in major coastal cities as key projects, including Shanghai, Ningbo, Dalian, Tianjin, Qingdao and Shenzhen. Construction of specialization iron ore ports and crude oil ports in the northeast, north, and east will also be speeded up. The handling capacity of the country's harbors reached 2.35 billion tons in 2000, with Shanghai's capacity surpassing 200 million tons. Over the last five years, China poured 42.1 billion yuan to coastal ports, and 23.1 billion yuan to inland waterways.

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Beijing Economic-Technological Development Area (BDA) had attracted 817 domestic and foreign enterprises involving ¡ç2.68 billion in investment by the end of last year. Sources from the BDA's administrative committee said foreign enterprises engaged in information, electronics, bio-technology and new materials industries are finding homes in the area. Some 222 area businesses are exclusively foreign-owned companies, Sino-foreign joint ventures or cooperative businesses, with total investment amounting to ¡ç2 billion. 25 of the world's top 500 firms, including GE, Nokia, Unilever, Lucent and ABB, have set up joint-ventures or subsidiaries in BDA. According to the general program, the pillar industries for the area should be bio-technology and bio-pharmaceutics, digital technology and electronic information, optical-mechanical-electrical integration as well as new materials and energies. Experts say assembling closely related companies will boost profits for all.

Serious competition and close cooperation spur the development of the industries and technology upgrading. Li Fengling, director of the committee, attributed the BDA success to its favorable environment concerning law, policy, infrastructure and location. According to the committee, in line with the regulations for BDA approved by the local government, the area has formulated over 20 specific regulations. They include industrial and commercial registration, customs examination and supervision on charging. It would standardize the administrative behaviors of various departments of BDA, increase the transparency of laws and provide perfect services for the enterprises, Li said.

Meanwhile, a series of preferential policies, involving preferential tax breaks for overseas firms, encouragement of foreign investment in the high-tech and exported-oriented enterprises, as well as specific funds for domestic companies engaged in high-tech industries, have been adopted in BDA. So far, BDA has pooled nearly 10 billion yuan (¡ç1.204 billion) for infrastructure construction, such as sewage treatment plants, a two-line electricity supply system and internationally standard workshops. Besides the hard infrastructure, BDA has paid much attention to information infrastructure construction. It cooperated with Beijing Telecom to establish the capital's first digital port last December, providing a high-speed broadband network for local enterprises to transfer multi-media information.

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China will cap its steel production at a level lower than output for 2000 despite a forecast rise in demand this year. Shi Wanpeng vice-minister of the State Economic and Trade Commission, said the steel output this year will be kept under 115 million tons, slightly less than the 128 million tons in 2000. The steel industry suffered slumps in prices of steel products and profits from 1994 to 1999 mainly because of an oversupply on the home market. To hit the target, efforts must be strengthened to close small and low-level steel plants this year. The Commission has planned to close 103 small plants this year. Already 73 have been shut down or have stopped production. Shi said the government would continue to keep close tabs on the production of the large and medium-sized steel enterprises to ensure output control. According to an industrial report of the State Council-affiliated Development Research Center, domestic demand for steel is expected to increase by up to 6% this year from around 140 million tons in 2000 as the government will invest more in infrastructure especially in the vast western regions.

During the fourth quarter last year, steel prices began to fall because of the oversupply on the market. Steel exports do not have great potential to rise this year as demand on the world market is not on the bullish side. The growth rate of global demand is expected to decline to 2.3% this year from 5.8% in 2000. Shi said domestic producers would face more difficulties in exporting steel because of a dumping charge put in place by the United States and Europe. China aims to export at least 11 million tons of steel this year. The steel exports amounted to 11.3 million tons in 2000, an increase of 108% from the previous year. The government will strictly control steel imports to alleviate pressures on domestic steel producers. In recent years, cheaper steel products from Russia and Ukraine put a squeeze on domestic enterprises. China's steel imports increased by 22.5% last year to 20.7 million tons. The efforts of steel output control played a key role in the industry recovery from difficulties. The average price of steel products increased by 300 yuan (¡ç36.30) a ton from April to the end of last year, thanks to the efforts. The industry reported a profit of 13 billion yuan (¡ç1.6 billion) last year against 3 billion yuan (¡ç361 million) in 1999. Shi said the industry had set the target for a profit of at least 13 billion yuan (¡ç1.6 billion) this year.

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Motorola, the multi-national telecom giant from the US, announced recently in Chengdu that it will add ¡ç100 million worth of investment to the Leshan-Phoenix Semiconductor Co in Sichuan Province. It is Motorola's 4th additional investment in the western area of China in two years. The investment will be used to set up a major plant to manufacture CMOS chips. The Leshan-Phoenix Semiconductor Co, which was set up in 1995, is Motorola's first joint venture in China. So far, the company has invested ¡ç4 million in Sichuan to set up a joint venture, a research and development center, a software development center and a branch company. The company has also carried out cooperation projects with other provinces and autonomous regions in the west.

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The France-based Michelin Group, a global giant in the tire industry announced recently that it is joining with Shanghai Tire and Rubber Co Ltd (STRC) to establish a ¡ç200 million joint venture to make and sell radial passenger car tires, steel cord and rubber mixing. The new company, Shanghai Michelin Warrior Tire Co Ltd, is viewed by both parties as an initial step towards a long-terms strategic cooperation in such fields as radial passenger car tires, radial truck and bus tires and steel cord. It is also expected to be a significant move for the city's auto industry, which takes a more than 40% share of the domestic market. With Michelin and STRC holding a 70% and 30% stake respectively the new company will acquire the radial passenger car tire production facilities and steel cord factory currently owned by STRC as well as the corresponding granted land use right. The company is expected to continue to produce Warrior tire, a leading brand in China, and will produce, as soon as possible, Michelin products.

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Bayer, the German chemical giant, is investing in the production of polyurethane to coat raw materials in Shanghai, a company official said recently. A total of ¡ç110 million will be invested in Shanghai for new production facilities. Construction is scheduled to start this spring. The first phase of the construction will create an annual production capacity of 11,500 tons for polyisocyanates, an ingredient of polyurethane, due on stream in 2003.

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