The China Securities Regulatory Commission (CSRC) recently announced rules regarding new share issuance from domestic listed firms. Compared to the original regulations, the new rules emphasize the appropriate application of proceeds collected during the share issuing and the responsibility of lead underwriters in recommending qualified applicants. They have also reduced interference from the government and introduced more market_oriented practices, which require more participation and supervision from intermediaries, securities houses, accounting companies and law firms, a CSRC circular said. For example, securities firms will have a bigger say than before in recommending firms who have plans to issue new shares. But they must evaluate carefully the quality of the applicants, watch for possible insider trading and ensure proper usage of the newly collected funds.

Those who fail to discover incidences of fraud or are caught concealing irregularities in the process will have to undergo rectification and have their right to underwrite stocks temporarily removed. Accounting firms should also give objective reports of the financial status and inner control mechanisms of listed firms. Those who provide false profit predictions will be required to give public explanations. Meanwhile, CSRC stressed that listed companies should first ensure returns for their shareholders before applying for further offerings. Applicants for share offerings must have a record of dividend payments over the past three years. Moreover, to avoid the misuse of funds, listed companies who have issued new shares must reveal, in their annual reports for three consecutive years, the exact application and outcome of the proceeds. Money should not be invested in financial institutions, including securities firms. The rules are also applicable to B_share listed firms.

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China is busy paving the way for the debut of its long_anticipated law on telecommunications to strengthen the legal muscle of the fast_growing telecom and Internet markets, a move expected to appease global investors and extend legal shelter for domestic consumers. Information industry minister Wu Jichuan said recently that preparations for the drafting of the long_anticipated law of telecommunications are on the right tracks. A team of telecom experts has been set up to give advice and consultations on matters pertaining to the law. Wu pointed out drafting comprehensive legal networks for telecom and Internet businesses is one of the top priorities for the next five years. Besides the law of telecommunications, the ministry will work on a spate of laws and regulations regarding foreign access to China¬šs telecom market, electronics businesses, the protection of online intellectual rights, cyber privacy and Internet crime.

Calls are heating up for the birth of a law on telecommunications in China as foreign investors pin their hopes on it acting as a clear guideline for investment and operation. The growth of China¬šs information industry has been an acid test for the legal sector as the area currently lack a comprehensive law to guide the market. China has long relied on a flurry of regulations mapped out by central and local administrators to govern the information industry. Knitting up a net of laws for the burgeoning markets will help keep the whole market in good shape and create a fair and ordered environment in line with global practices. The information industry in China will continue its fast paced growth at an annual clip of over 20£„, with its fixed_line and mobile phone subscribers exceeding US numbers to become the world¬šs largest within the next five years. Wu said that China is busy constructing a nationwide high_speed broadband information super_highway. However, China still lags behind developed countries in information industry development. Senior officials cited inadequate information infrastructure and China¬šs heavy reliance on key equipment and technology imports as the reasons.

China will comprehensively implement the Telecom Management Regulations and step up the pace of formulating the telecom law and other laws, rules and regulations concerning foreign investment, e_commerce and information security. The government will encourage and direct more home and foreign investors to China¬šs telecom market according to its WTO commitment and related policies and regulations. Through opening the door of the telecom market to the outside world, China will further strengthen international cooperation and gradually narrow the gap with advanced countries. The promulgation and implementation of a series of administrative rules and regulations such as the ”°Telecom Management Regulations" and the ”°Provisions on Internet Information Service Management", indicates that China¬šs information industry is gradually becoming more standardized and legalized, obviously moving closer towards international practices.

According to the minister, China will make efforts to create policies, rules, regulations and a competitive market environment favorable to the development of the information industry and conforming to the common international practice. In addition, it will strive to tighten the supervision of the telecom market, perfect the rules for market access and network inter_connection, and build a scientific and rational telecom tariff charging system, universal telecom service compensatory system and telecom resources paid use system. China¬šs telecom industry has experienced the separation of administrative function and enterprises, industrial restructuring, break of monopoly and introduction of competition in the fields of basic telecom, value_added telecom and information services over the past few years. At present, the country has 7 operators of basic telecom service and more than 3,000 dealers of Internet and other value_added telecom services. The newly emerging telecom operators are seizing more and more of the market.

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For the purpose of expanding capital, Chinese insurance joint stock companies will allow foreign and private capital to hold shares, according to Ma Yongwai, Chairman of the China Insurance Regulatory Commission (CIRC). Companies complying with requirements will also be encouraged to be listed on the stock market, in order to realize diversification of industrial property rights. Ma stressed that joint stock companies must build a standard corporate governance structure, clearly defining the powers and functions of shareholders¬š meetings, board of directors and managers and engaging in standard operation and set up the rules of procedures for shareholders¬š meetings. Joint stock companies should also increase capital funding, improve competitiveness and abilities against risks and the power for future development. When they conform to the standards, the CIRC will allow them to increase subsidiaries. The separation of property insurance and life insurance operations should be continued and the problems revealed after the separation must be resolved.

Ma pointed out that joint stock conversion is an effective way to resolve the system problem with state_owned insurance companies. The request for experiments has been submitted to the State Council and in the future, the CIRC and state_owned insurance companies will study the problem together. Ma warned that after China¬šs WTO accession, foreign insurance companies will enter the Chinese insurance market and the operations and coverage of these companies will be expanded and competition will become fiercer. Chinese insurance companies should seize the two_three_year transitional period to deepen reform, enhance internal vitality and external competitiveness to be ready to participate in international competition.

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Dr. Xie Ping, director of the Research Bureau of the People¬šs Bank of China (PBOC), recently declared explicitly that the ”°Commercial Bank Law" will not be revised during the next 3_5 years, and the principle of split_off management and split_off supervision will not change. The PBOC, China Security Regulatory Commission (CSRC) and China Insurance Regulatory Commission (CIRC) convened joint meetings twice in June and September 2000. They reached consensus on the current pattern of management and supervision. Therefore it is unlikely that the "Commercial Bank Law" will be revised in the near future.

However, rumors of revision of the law do not come out of thin air. The idea of split_off management and supervision started in l993. The ”°Commercial Bank Law" which was promulgated and became effective in l996, clearly defined that commercial banks should engage in deposit and loan business and would not be allowed to handle other business such as insurance and security. Eruption of the Asian financial crisis in l997 deepened this conviction in management circles. Establishment of the CSRC further strengthened the pattern of split_off supervision. Objectively speaking, the pattern is conducive to dissolve financial risks and ensure financial safety. The macro economic situation as a whole then changed. The law, which stresses stability and safety excessively, began to restrict the development and renovation of banking business to a large extent. According to financial experts, the largest risks commercial banks face at present is not financial safety but the restrictions the law has imposed on them.

Commercial banks in China are, at present, gaining 80£„ of their profit from the deposit_loan margin. Lowering the interest rates seven times has made the margin between deposits and loans smaller and smaller. There is also fierce competition and the space left for the development of commercial banks is narrow. In foreign countries, commercial banks are allowed to handle not only deposit and loan business but also investment business. The deposit_loan business contributes to 20_40£„ of the total profit while investment contributes to 60£„. In order to fol_low suit, Chinese commercial banks hope to break through the traditional business barriers to handle fast_yielding investment business. In fact, CITIC Industrial Bank and the Everbright Bank are, at present, concurrently managing investment business. According to experts, the time is not ripe to revise the ”°Commercial Bank Law" under the current conditions. The law has remained effective for only four years. The situation of mixed management does exist in some banks. The attitude, however, of the managerial authority is to acquiesce in the existing and absolutely prohibit new ones. In addition, mixed management will inevitably pose challenges to the pattern of supervision and result in re_distribution of benefits among PBOC, CSRC and CIRC. Although the Commercial Bank Law poses many restrictions on commercial banks, it has not blocked the way to other business completely. The fact is the law always lags behind and this will finally be confirmed.

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The vast under_developed central and western regions of China are expected to receive more capital investment this year than ever from the central government to boost their capacity for sustainable development, according to the State Development Planning Commission. Capital spending is expected to focus on infrastructure construction, improving the environment and science and technology. Investment is expected to increase substantially from last year, when a total of 43 billion yuan (”ē5.24 billion) raised from a treasury bond issue was earmarked for the area. The Commission is expecting a breakthrough in improving the infrastructure and environment in the western part of China in the coming 5 to 10 years. Efforts will be made to ensure that projects launched last year go smoothly and that preparations are made to launch more projects.

Among projects to be started soon is a railway running from Qinghai to Tibet. It will be the only rail link between the autonomous region and the rest of the country. The 1,118_kilometer rail link will be an extension from Golmud in Qinghai to Lhasa, the regional capital of Tibet. Other projects include a ”ē14.5 billion pipeline to transport 12 billion cubic meters of natural gas annually from the Tarim Basin of Xinjiang to Shanghai by 2005, as well as projects to transmit power from the western area to East China. An additional 333,000 hectares of cultivated farmland in the area will be reconverted to pastureland this year. Also high on the agenda are a number of hydroelectric projects in the Guangxi Zhuang Autonomous Region and the Inner Mongolia Autonomous Region, the construction of sections of national trunk roads in western China, a pipeline to transport oil from Lanzhou to Chongqing in Southwest China and projects to improve the infrastructure in major central cities. China began implementing a strategy to develop its western regions in a big way last year to narrow the widening gap between its east and west.

According to incomplete statistics, more than 80 world renowned world enterprises have invested or setup offices in the western part of China and 57 enterprises have had direct investment in Sichuan and Chongqing. It is said that attracted by the vast resources and market, multinationals have already competed for mature markets in Western China. So far, Coca Cola, Pepsi Cola, McDonalds, KFC, Wal_mat, Carrefour and other world renowned corporations in the fields of foodstuffs and beverages and commercial and retailing have established significant production and operational bases in Western China, which has a total population of nearly 300 million. The US UT, ABB of Sweden, and Kobe Steel of Japan have stepped up efforts in exploring the machinery market in that region. Japanese automakers began to set up their bases in western China. Toyota invested nearly ”ēl00 million jointly with Sichuan Province to set up a production base for making high_end traveling vehicles, ”°Coaster". The annual sales turnover of Qingling Auto Company, a joint venture between Isuzu and Chongqing, has reached RMB 3.5 billion.

Many of China¬šs industries have such problems as excessive production capacity resulting in rather fierce competitions among domestic enterprises. To avoid the malignant competitions, multinationals started high striving to occupy the market with high quality and high added_value products. For example, American Standard invested nearly ”ē30 million to produce high level sanitation utensils in Chongqing and Lafarge Building Materials Group of France jointly invested RMB l.3 billion with the Dujiangyan of Sichuan Province to set up a high_quality cement plant, the largest in Western China. In the chemical industry, Yangtze Acetyl Chemicals, a joint venture between BP Amoco of Great Britain and Chongqing, has a production capacity of 200,000 tons of acetyl and become No l in China¬šs acetate acid market within 4 years. SK Company of ROK signed an agreement with Zigong of Sichuan Province in 2000 to invest ”ē600 million by stages to develop straight differentiated dacron stocks and new type packaging materials.

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Beijing will open its infrastructure construction sector wider to foreign investment this year, according to Zhang Mao, vice_mayor of the capital. Beijing began to open its infrastructure construction sector last year. In 2000, a Sino_Canadian joint_venture was set up to sponsor the construction of Beijing¬šs No.5 subway line. Other foreign companies have also taken part in a large sewage treatment plant project in the capital city. Beijing is also encouraging foreign investment in its high_tech industries and wants it to help reorganize state_owned enterprises (SOEs). For high_tech industries, the municipal government will lift some restrictions on market admission and encourage foreign investors to set up investment management companies. SOEs are allowed to attract foreign funds via stock issues, investment funds, venture capital, BOT (build_operation_transfer ) and TOT (transfer_operation_transfer) schemes.

The capital city will create more opportunities for multinational companies after China¬šs accession to the WTO. Beijing will open more areas to foreign businesses and invite foreign investment in urban infrastructural facilities, the renovation of the city¬šs old buildings and the modern service industry when China enters the WTO. A total of 158 of the top 500 companies in the world have invested in Beijing. In the first three months of this year, nearly 270 foreign enterprises have invested ”ē1.1 billion in the city. When the city¬šs No.5 subway line and the No. 10 Water Treatment Plant are completed, the construction of railways, expressways and urban utility networks in the city will be gradually opened to foreign companies. Zhang also noted that Beijing is preparing to launch pilot projects to absorb foreign investment for banking, insurance and export_orientated enterprises. A ”°one_stop" service by the city¬šs administrative departments is expected to be introduced, especially for the Zhongguancun

High_Tech Park, to simplify the procedure of foreign investment. Mutual supervision will be achieved by the municipal government and the foreign enterprises through the government¬šs annual inspection of companies and foreign investors¬š evaluations of governmental services.

In addition to attracting more overseas investment, Beijing is encouraging its enterprises to set up firms in other countries. Li Zhao, director of Beijing Foreign Trade and Economic Cooperation Committee, pledged that, the municipal government will formulate new policies and improve existing regulations to support such moves. High_tech companies might set up research and development departments in developed countries and regions. Overseas investment in some enterprises engaged in traditional industries is expected to stimulate the export of equipment and materials. The municipal government will offer support for domestic firms wanting to set up abroad by offering preferential loans and providing export credit guarantees. During the 9th Five_Year Plan period (1996_2000), the municipal government allowed 95 domestic enterprises and institutions to invest ”ē90 million in foreign countries and regions. Meanwhile, these enterprises and institutions yielded total profits of ”ē75 million, 23£„ higher than in the 8th Five_Year Plan period (1991_1995). To meet the challenges brought about by China¬šs pending entry into the WTO, the municipal government has encouraged enterprises to increase international trade. During the next Five_Year Plan (2001_05), the city will not only support qualified enterprises to apply for overseas operation rights but also strengthen its management of building projects involving foreign companies. A specific international economic cooperation website is expected to be launched this year.

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Shaanxi, an underdeveloped inland province in Northwest China, plans to build itself into an economic powerhouse on the back of the government¬šs western development strategy. The province will lay a solid foundation for the 10th Five_Year Plan (2001_05), said Cheng Andong, governor of Shaanxi. To this end, Shaanxi will further restructure its economy and focus on its opening to the outside world and scientific and technological progress. The province¬šs gross domestic product (GDP) will grow at 10£„ annually in the following five years and is planned to reach 7,100 yuan (”ē855) per capita by the end of the period. In order to meet the target, the province will focus on the following aspects.

1. Strengthening the construction of its infrastructure and the protection of its environment. By the end of 2005, Shaanxi will complete the construction of a high_grade highway network linking the major cities and prefectures of the province and neighboring provincial capitals. Xi¬šan, capital of the province, will be at the center of the network. It will build railways to link it with the developed provinces. The province will also open new international air routes to link it with major cities around the world. It will build a broadband_based modern information network and expand and upgrade the public network platform to build Xi¬šan into an information port.

2. The industrial restructuring will be based on the development of the economy with local characteristics. During the 2001_05 period, the province will build the Guanzhong High and New Technology Industry Development Belt into a world famous state_level industrial belt by garnering a total revenue of 100 billion yuan. It will receive 1.1 million overseas tourists during the period, earning ”ē500 million, and 47 million domestic tourists to earn 21.4 billion yuan. Shaanxi will speed up the construction of its fruit industry, as well as its national defense and energy industries, and turn itself into a key national base of energy and chemicals.

3. To better the urbanization process in central cities and townships. The province will enhance the comprehensive competitiveness of Xi¬šan while giving full play to other cities in the province. It will build Baoji and Xianyang into large cities.

4. To further develop its export_oriented economy. The province will promote the strategic adjustment of its state_run economic sectors and the strategic re_grouping its state_owned enterprises by forming joint ventures, cooperation, assets liquidation, bankruptcies, acquisitions and public auctions. Through the reforms, State capital will be mainly concentrated in key industries, pillar industries and high_tech industries. Shaanxi will make full use of the opportunity of China¬šs entry into the WTO to open up its tertiary industries, attract long_and medium_term foreign investment and bring multi_national corporations into the province.

5. To build Shaanxi into a province known for its high_quality education and a base for professional people in China¬šs west. Shaanxi will expand the scale of education and place stress on the construction of major universities. It will make Xi¬šan Jiaotong University and other universities in the province famous centers of higher learning at home and abroad.

6. To set up a social insurance system and expand employment opportunities. The province will strengthen its construction of a social insurance system.

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Chengdu, capital of Southwestern China¬šs Sichuan Province, is becoming an important strategic spot for foreign investors. The city used to utilize ”ēl00 million of foreign capital a year. However, the amount has increased at an annual rate of over 50£„ in recent years and the actual foreign capital amount used in 2000 topped ”ē265 million. More than 60 of the world¬šs top 500 companies have invested in the city.

Together with the sharp rise in the amount of foreign investment, more large foreign_invested projects, more multinationals, more sole foreign capital firms and more long_term foreign investment projects have emerged, and most of them are industrial, infrastructure construction and high_tech ones. Large projects in construction, at present, include the Dujiangyan Lafarge Cement Plant jointly launched by Lafarge Building Materials Group of France and Dujiangyan City with an investment of RMB l.3 billion, the project of making luxury travel vans jointly launched by Toyota Automotive Co Ltd of Japan and Sichuan Travel Van Manufacturing Plant with an investment of ”ē99.09 million, and the Chengdu No. 6 Tap Water Plant launched by Generale des Eaux of France and Marubeni Co Ltd of Japan with an investment of ”ēl06 million. Of the world¬šs top 500, P £¦ G and Motorola of the United States and Siemens of Germany have invested there. Fairchild, one of the companies starting the Silicon Valley in the US, has launched a high_tech firm in the city. Motorola has opened its second China Research and Development Center in Chengdu. Furthermore, sole foreign capital firms now make up 41£„ of the total foreign related projects.

Rich resources reserve, a vast and still expanding market and low production costs together with land supply have brought high profit, which is an important attraction of the city for foreign investors. The flow of foreign capital to the city is just a terrace movement in accordance with economic rules. While the whole country merges in one voice of ”°insufficient domestic demand," the social retail sales in Chengdu increased steadily from RMB35.7 billion in l996 to RMB55.4 billion in 2000. As the largest commercial and trade center in the west, the city has more than 800 markets radiating all provinces, cities and counties in western China and the annual retail sales of these markets amounts to over RMB50 billion. Several swift_footed foreign commercial firms there, including the Pacific Groceries, have already reported an average annual growth of 75.3£„ in retail sales, which exceeded RMB l billion (about ”ēl20 million) in 2000. The five major development zones around Chengdu downtown area have been providing a better environment for foreign investors to start business.

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Zhejiang Province recently made a strategic decision to accelerate the progress of urbanization within the province.

1. Natural gas utilization project of Hangzhou. To supply 562.34 million cubic meters of gas annually, including 394.42 million cubic meters to Hangzhou city proper. Investment: RMB997 million. Form: Joint stock system.

2. Jiangbei District wastewater treatment project of Ningbo. Capacity: 150,000 cubic meter per day. Investment: ”ē45 million. Form: Joint venture.

3. Land development project in Jiangdong Chemical Industry Zone of Ningbo. Relocation of chemical industries and comprehensive land development within the zone. Investment: ”ē90 million. Form: JV.

4. LG gasification station in Huangdong residential area in Wenzhou. One gasification station for 20,000 households. Investment: RMB11.5 million. Form: Participating stock 49£„.

5. LG gasification station in Shangdoumen residential area in Wenzhou. One gasification station for 12,500 households. Investment: RMB12.6 million. Form: Participating stock 49£„.

6. Gas supply for downtown of Wenzhou. One gasification station for 15,000 households, installation of pipeline of 12.5 km courtyard pipes and household pipes. Investment: RMB30 million. Form: Participating stock 49£„.

7. Gas supply for tertiary education zone and university city. One gasification station for 30,000 households, laying pipeline of 18.6 km. Investment: RMB24 million.Form: Participating stock 49£„.

8. Cangnan Lingxi Power Station by incinerating rubbish. Solid waste incineration and power generation system with a treatment capacity of 300 tons per day. Investment: RMB180 million. Form: JV, cooperation or BOT.

9. Water supply project of Quzhou City. Capacity: 200,000 cubic meters per day. Investment: RMB153 million. Form: JV or cooperation.

10. No. 3 water treatment plant of Huzhou City. Total capacity: 200,000 cubic meters per day. Form: Participating stock. Investment: RMB 180 million.

11. Bayi Road dual line project of Jinhua City. Total length: 4,160 m. Investment: RMB125 million. Form: Sole proprietorship, JV or others.

12. Jinhua Incinerating Rubbish Power Station. Capacity: 150 tons per day. Investment: ”ē11 million. Form: Participating stock 80£„.

13. Sewage treatment project of Donguang City. Capacity: 80,000 cubic meters per day. Investment: RMB130 million. Form: JV.

14. Phase 2 landfill of Dongyang City. Capacity: 150 tons daily. Investment: RMB7.7 million. Form: Cooperation.

15. Water transmission project for Pan¬šan Water Treatment Plant. DN600 water supply pipeline of 7 km. Investment: RMB12 million. Form: Sole proprietorship or JV.

16. Huaxi scenic spot construction and development project of Pan¬šan. Investment: RMB10 million. Form: Sole proprietorship, or JV.

17. Wastewater treatment plant of Pujiang County. Capacity: 80,000 cubic meters daily. Investment: RMB177 million. Form: JV or cooperation.

18. Wastewater treatment plant of Linhai City. Capacity: 120,000 cubic meters daily. Investment: RMB100 million. Form: JV, stock, foreign government¬šs loan (grant).

19. Cang¬šan interchange of Shaoxing City. Three_level cloverleaf shaped interchange, motorized traffic flows separated from the non_motorized. Investment: RMB128 million. Form: Part of stock rights to be transferred.

20. Natural gas utilization project of Shaoxing City and County. To supply gas of 483.5 million cubic meters annually. Investment: RMB580 million. Form: Participating or holding stock.

21. Wastewater treatment plant of Zhoushan. Capacity: 60,000 cubic meters. Investment: RMB90,000 million. Form: Not specified.

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China¬šs commercial sector has been a hot investing point for foreign enterprises. According to official statistics, so far, the number of foreign_funded commercial enterprises has exceeded 300 around the country with a total investment of ”ē2 billion, while their sales volumes have reached 100 billion yuan (”ē12.05 billion) in 1999. A spokesman with the Ministry of Foreign Trade and Economic Co_operation revealed that China is opening up its service trade market to the outside world and lifting restrictions on market admission for foreign enterprises step by step. After introducing foreign capital to the retail sector, trials for attracting overseas investment into the wholesale sector have been carried out in Beijing, Tianjin, Shanghai and Chongqing. After China¬šs accession to the WTO, the country will gradually eliminate limitations on foreign enterprises entering China¬šs wholesale and retail commerce sectors within three years and allow overseas companies to set up subsidiaries in the commodity circulation sector, which will create cut_throat competition for domestic competitors.

In September, 2000, France_based Carrefour, the world No 2 super market company after Wal_Mart of the United States, signed an agreement with Xiamen to open a chainstore in the city by the end of 2000. First_phase investment for the project will amount to 80 million yuan (”ē9.64 million). So far, Carrefour has set up 26 large supermarkets in 15 of China¬šs key cities, including Beijing, Shanghai, Shenzhen and Dalian. Moreover, a group of giant foreign retailers, including Wal_Mart and Price_Mart, have also established outlets in China, preparing to compete with their Chinese¬šs counterparts and further tap the huge market. Experts pointed out, that the increase in foreign_funded retail enterprises will not threaten China¬šs commercial institutions. However the opening up of the wholesale sector, especially the wholesale of imported commodities and products made by overseas companies in China, might threaten domestic wholesalers.

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Urumqi Economic and Technology Development Zone, located at the junction between Europe and Asia, is China¬šs western window open to the outside world. Its special geographical location enables it to cover both the Xinjiang and the international markets. Urumqi ETDZ, the only state_class economic and technology development zone in northwestern China, was officially set up in l994. Its first stage covers a total area of 4.34 square kilometers and is close to the downtown area of the city. The opening of the dual track Lan_Xin¬šs (Lanzhou_Xinjiang) railway line to traffic allows the international railway linking China, Kazakhstan and Western European countries to run through Europe and Asia and become a strong lever promoting the economic development and commodities circulation between Europe and Asia.

To accelerate the development of western China, the State has granted policies to the development zone that are more favorable than those given to coastal development zones. All the preferential treatment extended to the state_class economic development zones in coastal regions are granted to the Urumqi development zone. In addition, the Autonomous Region, in accordance with the National Autonomy Law, has worked out investment policies more favorable than those applied to central and coastal regions, thus, making the development zone a hot investment spot. At present, 79 foreign funded enterprises have been set up within the zone. Foreign funded enterprises within the zone will be entitled to the preferential policies drafted specially by the State Council to encourage foreign investment in central and western China in addition to other common favorable conditions. Investment made by compatriots from Hong Kong, Macao, and Taiwan and by overseas Chinese in the zone is entitled to the preferential policies worked out by the State Council especially for them. New enterprises set up solely, jointly, or cooperatively by coastal foreign invested enterprises in the zone are entitled to the preferential policies granted to foreign invested enterprises. The zone may also work out further favorable conditions according to the Constitution and the Law of the National Autonomy, and subject to approval.

The development zone plans to encourage foreign investment in the following aspects:

1. Machinery and electronics industry: production of electronics equipment, instruments, apparatus and electronics products and high and middle class household electrical appliances; assembling of computers, children learning machines and accompanying products; production of integrated circuit and multifunctional electric meters, information and communications technology, bio__engineering technology; production of integrated machinery and electronics products; assembling of small and medium_sized power tools, new type textile equipment, agricultural and husbandry machinery, petrochemical machinery, building machinery.

2. Light industry and textiles: paper and paper products, leather products, leather garments, synthetic detergent and raw materials, skin_care products, special articles needed by minorities, new type daily use ceramics and enamel products, arts and crafts, traveling articles, materials for packaging vessels, small and medium_sized general machinery; processing and production of cotton, yarn, sesame, flax and fur and silk; new type special chemical fiber and its deep processing.

3. Building and chemicals: new type building materials, non_ferrous metal products, new type fire_resistant materials, building hygiene ceramics and fine petrochemicals capable of substituting imported ones.

4. Pharmacy, agricultural pesticide, food processing and medical and health care products.

5. Science and technology, catering, trade, tourism and other tertiary industries.

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China¬šs silk industry, which is well on its way to restoring its former glory, has set a more moderate export projection for this year. Insiders believe the industry might not match the record sales chalked up last year. The State Cocoon and Silk Co_ordinating Office, the industry¬šs regulator, said recently exports would grow by 20£„ this year. Last year, ”ē2.98 billion worth of silk goods were sold abroad, a jump of 34£„ over the previous year. In January, the silk sector exported ”ē228 million worth of silk products, a rise of 22.1£„ over the same period last year. Playing down the good growth in the first month of the year, the country may not be able to sustain that momentum for the whole year. This is partly because there may be a downturn in market demand after a two_year surge. There are also uncertainties in the global market, particularly with major importers of Chinese silk products such as the United States and Japan. The export of Chinese silk goods to Japan declined by 10.9£„ in January from the same period last year, customs statistics indicate.

China produces and exports 70£„ of the world¬šs silk, but that sector shrank in the five years up to 1999 after which the business picked up. Last year the industry generated sales of 71.2 billion yuan (”ē8.6 billion), jumping 22.7£„ on a year_on_year basis. Officials attributed the results in part to the governments efforts to streamline production, supply and sales of silkworm eggs and cocoons, which in the past was disjointed, causing chaos in the market. As part of its effort to intensify macro_control over the sector, the mulberry growing acreage, which now stretches to 733,000 hectares, will not expand significantly this year. But the country is set to move its mulberry growing area from eastern provinces, where the acreage has shrunk due to urbanization, to central and western regions, which have cheaper labor and more land available. Growing mulberry trees will not only increase the income of farmers in such areas, but also increase the vegetation in provinces such as Hubei, Anhui, Gansu and Shaanxi.

Another move to boost the silk sector has been to upgrade the industry with high and new technology. At least 80 silk enterprises are expected to go bankrupt this year. In total, China has more than 1,000 silk enterprises.

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Two major chemical producers__Germany¬šs BASF AG and the US_based Huntsman Corp__will jointly hold a 70£„ stake in a ”ē885_million chemical manufacturing complex to be built on Shanghai¬šs outskirts. The project is likely to be approved by the Chinese government at the end of this year. The new plant, which will make diphenymethane diisocyanate, or MDI, is expected to start production in 2005. MDI is a major raw material for polyurethanes, one of the most important chemical products used in construction and making refrigeration insulation, seat cushioning and the soles of footwear. BASF declined to reveal details about the ownership of the new complex, which will be built at the Caojing Industrial Park in the Hangzhou Bay area, southwest of Shanghai. The company said 95£„ of the output of the plant, which will be China¬šs first world_class MDI production facility will be sold in the Chinese market. Each year, China spends about ”ē300 million on importing MDI.

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Ford Motor Co, intent on capturing a stake in the growing domestic car market, announced on April 25 the formation of a joint venture with Chongqing Chang¬šan Automobile Group to build a ”ē98 million car manufacturing plant. The 50_50 venture, named Chang¬šan Ford Automobile Corp Ltd, is expected to roll its first model off the assembly line in two years. The venture will have an annual production capacity of 50,000 units. Industry officials said US_based Ford is expected to introduce either its Ikon compact car or Focus sedan to the Chinese market. Ford will likely choose Ikon which is smaller and cheaper than Focus.

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A big change has taken place in the ownership right of China_Schindler Elevator Co Ltd, the earliest industrial Sino_foreign joint venture company in China. The change may turn the joint venture into a wholly foreign owned company. According to a notice on capital reduction issued by China_Schindler, China_Schindler Elevator Co Ltd, founded in 1980, now has registered capital of RMB868,6l8,000, of which 35£„ is held by the Beijing Xinsantwei Science and Trade Company. The board of directors of China_Schindler agreed unanimously that Beijing Xinsanwei would withdraw its shares and give up its ownership right. China_Schindler was jointly established on July 4, l980, by China Construction Machinery Cooperation, Schindler Holding AG of Switzerland and Jardine Schindler (Far East) Holding Inc BVI of Hong Kong. The proportion of the joint venture¬šs shares was the Chinese party holding 75£„, the Schindler Holding of Switzerland, l5£„, and the Jardine Schindler of Hong Kong, the remaining l0£„. The term of cooperation was set at 20 years.

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