Chinese officials and experts have more or less reached an agreement to adopt a unified tax system to replace the current system which offers preferential policies to foreign investors. The new system will allow domestic and foreign firms to compete on an equal footing. Tax officials and experts are now discussing the details of the new tax system. But it is difficult to say when the new scheme will come into force since it has yet to be approved by the Standing Committee of the National People's Congress. Zhang Peisen, a senior researcher with the Taxation Research Institute under the State Administration of Taxation, said the timetable for implementation of the new system would depend on China's accession to the WTO. The sooner the country enters the world trade body, the earlier the system will be put into practice.

The system will not endanger China's efforts to attract foreign investment. The Chinese Government has offered preferential income tax policies to foreign investors to encourage them to invest in China since 1978 when the country initiated its reform and opening-up policies. Chinese enterprises pay around 22% in income tax while foreign-funded firms pay just 12-15%. These tax incentives have played an active role in attracting foreign investment, improving the country's technological level. Statistics indicate that China had approved 373,766 foreign-funded enterprises by the end of May this year, involving ¡ç702.7 billion in contractual investment and ¡ç363.7 billion in actual investment. Last year, taxes paid by foreigners rose 41% to 232 billion yuan (¡ç28 billion), accounting for 18.3% of this country's total tax revenues. But tax incentives have also led to a slowdown in domestic investment, a restriction on the purchasing and manufacturing of domestic equipment and a serious loss of tax income. Generally speaking, the tax incentives have resulted in more advantages than disadvantages because the incentives co-existed with such non-tax trade barriers such as higher tariffs and import quotas from which domestic companies could benefit.

However, Chinese companies will be at a disadvantage if the government continues to practice preferential tax policies because the country will have to gradually remove trade barriers when it enters the WTO. The WTO accession is prompting an overall tax system reform designed to bring China in line with other countries. The country's current tax system, which relies heavily on indirect taxes, including value added tax, makes tax revenue more vulnerable to evasion and other problems. Indirect taxes now account for more than 60% of China's tax receipts. Direct taxes could play a more effective role in fueling the economy and their proportion of the total tax revenue should be improved to at least 50%, which is still lower than in developed countries.

Back to index

The State Council unveiled rules aimed at reducing State holdings in companies in order to finance social security funds on June 13. The long-expected regulation, which took effect on June 12, covers transferring or selling of State shares in listed firms. It said companies launching IPOs (initial public offerings) or additional share issuing should at the same time sell their State holdings equivalent to 10% of the offering value to public investors. The money raised will be put into the social security funds. The rules also apply to firms seeking an overseas listing. Pricing of the shares sold will be based on demand in the market. In addition, a handful of listed companies will also be selected to place or buy back State shares on an experimental basis, depending on the funding needs of social security funds and the condition of the market. Listed companies which transfer State shares should also contribute a certain ratio of income to the social security funds, but the exact ratio is still to be decided. The Ministry of Finance will design rules for the management of social security funds later. And the China Securities Regulatory Commission (CSRC) will also come up with regulations on information disclosure in the selling of State shares by listed firms.

Minister of Finance Xiang Huaicheng said the reform is not only a timely cure for the fund-thirsty social security sector, but also very positive news for the stock market. While helping relieve the fund-shortage pressure for the social security sector, it should also push listed companies to lower the ratio of State holdings and diversify their shareholding structure. More participation of private shareholders would enhance public supervision in the management and operation transparency of listed companies. CSRC Chairman Zhou Xiaochuan said it would help listed companies improve corporate governance and upgrade quality.

Moreover, the government will invite professional fund managers to operate the social security funds and some of the funds will be reinvested in the stock market to ensure a benign recycling of capital. Presently shares owned by the State and corporations account for about two-thirds of the total stocks in domestically listed companies and are still non-tradable as the result of the lingering influence of the planned economy. They totaled 252.7 billion shares by the end of March, according to a report by the Finance and Securities Institute of the Renmin University of China. The reform to cut State holdings is closely connected to the entire economic restructuring in China.

Back to index

China is stepping up efforts in streamlining its preferential tax policies. A program submitted by the Ministry of Finance, the State Taxation Administration and the General Administration of Customs on adjusting the preferential tax policies that had expired by the end of 2000 was recently approved by the State Council. The three government departments will issue circulars one after another on whether or not the 43 preferential tax policies due at the end of 2000 will be retained, abolished or adjusted. According to the program, three methods, i.e. stopping implementation, retaining after adjustment and continuing to implement without making adjustment, will be adopted. The 43 policies involve 55 documents. The program states that the policies will be stopped after expiration if there is no need for them to be implemented as the external environment has changed or the enterprises can already sustain themselves, or if the policies need to be given overall consideration instead of formulating provisions for specific cases, or if they apparently do not comply with the WTO rules or industrial policies. Other policies will either be retained after proper adjustments or be implemented further.

1. l0 policies will be stopped after expiration. They include the policy of refunding VAT on the wholesale business of meat, poultry, eggs, aquatics and vegetables done by state-owned and collectively-owned enterprises.

2. l2 policies will be retained after adjustment. They include the policy of refunding 70% VAT on enterprises engaging in waste and used goods recovery business, which is adjusted to exempting VAT for enterprises engaging in waste and used goods recovery business and at the same time allowing other enterprises to withhold a l0% purchase tax when buying tax-free waste and used goods; the policy of refunding VAT and turnover tax for relocated enterprises, which is adjusted to VAT only instead of turnover tax under the precondition of basically maintaining the original total tax refunding scale; and the policy of immediately refunding VAT on production and processing of products by making comprehensive use of leftovers and sub-standard and small fuel wood in forest areas for state-owned forest industrial enterprises, which is adjusted to all such enterprises in forest areas.

3. 2l policies will be implemented further basically without adjustment. They include the policy of exempting VAT, turnover tax and enterprise income tax on production and sale of rockets and rocket parts for launching foreign satellites and the business of launching foreign satellites; the policy of refunding and exempting VAT on county- and lower-level state-owned nationality trade enterprises and supply and marketing cooperatives in nationality trade counties; and the policy of reducing agricultural special produce tax on state-owned forest enterprises in Northeast China and Inner Mongolia.

Back to index

China is drafting the e-commerce law, which will be completed and submitted to the State Council for approval soon, according to the Financial and Economic Committee of the National People's Congress (NPC). The Ministry of Information Industry (MII) and related ministries and commissions are undertaking the draft work. An official with the Financial and Economic Committee of the NPC said, in a bid to promote the development and application of e-commerce, China should build up a solid policies, laws and regulations framework to create an environment favorable to the development of the sector, and the current law and regulations concerned must be in compliance with provisions of the new law and those which are not in compliance must be revised and improved. The official noted that now the conditions required for direct e-commerce legislation have not been ready, as the e-commerce has just started in the country with a much small business volume, lacking a suitable e-payment system and a still immature e-commerce framework. But related ministries and commissions under the State Council are studying and drafting some advice on the development of e-commerce.

With regard to the Internet security, the State Council has examined and approved the Provisions on Internet Information Service Management not long ago. It is urgent to draw up a law concerning e-commerce and network information security, based on the provisions. MII and related ministries are speeding up drafting the law and striving to submit it to the State Council soon. The Financial and Economic Committee of the NPC has suggested that, while undertaking the work mentioned above, MII and the related departments should put greater efforts in the study of e-commerce law and making preparations for e-commerce legislation. It has also suggested that the Standing Committee of the NPC should put e-commerce law into its legislation plan at a proper time.

Back to index

China has made a good start in carrying out the western area development strategy. Zhao Ai, deputy director of the Comprehensive Planning Department of the Office of the Leading Group for the Western Region Development under the State Council, said there has been a good start in the development of China's western region since the Chinese Government adopted the go-west campaign at the turn of the new century. The pace for infrastructure construction has sped up, investments in western areas are increasing rapidly and work on protecting and improving the ecological environment has been strengthened. Economic restructuring is making steady progress.

Deng Zhan, deputy director of the Foreign Investment Department of the Ministry of Foreign Trade and Economic Cooperation,said that in the first four months of this year, 500 foreign-invested enterprises have been set up in China's western area, representing a 19.33% increase over the same period of last year. Contractual foreign capital reached ¡ç1.294 billion, rising by 19.37% over last year, and actual paid-in capital amounted to ¡ç335 million. In the period between 2001 and 2005, the emphasis of the go-west campaign will be to intensify investment in infrastructure and improve the environment.

The western region is increasingly tapping into foreign brain power to sustain its economic growth. More than 1,400 foreign professionals were involved in agricultural and ecological projects in the area last year. The number is expected to increase as the western region begins to seek more foreign expertise in the fields of infrastructure, agriculture, industrial restructuring, education and environmental protection. The region also needs professionals skilled in urban planning, transportation, telecommunication, energy resources, water conservation and corporate management. Wan Xueyuan, director of the State Administration of Foreign Experts Affairs, said the western region will receive the majority of a government-sponsored funds for the employment of foreign professionals. The funds are listed in the annual State budget plan. The western region is expected to increase its contribution to the national economy through the go-west campaign. The campaign is the centerpiece of China's economic activities over the next five years.

Back to index

Revisions to an industrial catalogue which helps foreign firms choose investment opportunities in China will soon be completed. Further revisions will be made when appropriate in the future. The Chinese Government issued the catalogue in June 1995 to give guidance to foreign investors about industries which it encourages, allows, restricts and forbids investment in. The first revisions were made to the catalogue at the end of 1997, expanding the scope of industries with encouraged entrance for foreign investors and favoring China's less-developed central and western areas. It is necessary to revise the catalogue to cope with the demands of China's economic development and restructuring, said recently Ma Xiuhong, Assistant Minister of Foreign Trade and Economic Cooperation.

Ma did not disclose the specific contents of the latest revisions, but stressed that the revised catalogue would stick to the following three policies: 1. The category of projects to be encouraged is more liberal. 2. It closely revolves around the economic restructuring targets in the next five year plan period, industries and projects encouraged in the plan are reflected. 3. It is geared towards opening wider and deepening of reform. The assistant minister added that even though China has not entered the WTO, the catalogue allows for wider opening of the service sector. Even if the newly revised catalogue is publicized before China's entry, further revisions will be made according to changes in the economic situation and China's commitment.

Back to index

South China's Guangxi Zhuang Autonomous Region will construct a 267-kilometer highway along its coastline during the 10th Five-Year Plan period (2001-05). This was learned from a symposium held in Beihai on the implementation of a regional development plan in coastal areas of Guangxi, which sits on the northern shore of the Beibu Gulf. According to an official from the regional Development Planning Commission, the coastal highway will start at the city of Beihai in the east, and end at the city of Fangchenggang in the west, going via Qinzhou, another coastal city. The projected highway will be constructed in sections. The 15-kilometer-long section connected with Yintan Beach at Beihai will be finished within this year. The entire project will cost 3.3 billion yuan (¡ç398 million). Besides waterways, Beihai, Qinzhou and Fangchenggang are linked only by a railway line. Li Zhaozhuo, chairman of the Guangxi regional government, has urged leaders of the three cities to pay great attention to the protection of farmland and the environment while constructing the coastal highway.

The Longtan hydropower project on the Hongshui River and the Bose key water control project on the Youjiang River have been included in a State plan and construction is scheduled to begin this year. In addition to the two hydropower projects in Guangxi Zhuang Autonomous Region, the State plan lists six other major projects that will also start construction this year. Repeated discussions have been held in preparation for these hydropower projects, and construction on the key parts of the projects is about to begin.

Planned to be one of the ten tiered hydropower stations on the Hongshui river, the Longtan hydropower station will be located in Tian'e County of Guangxi. The station will have a total installed capacity of 5.4 million kilowatts and will cost more than 20 billion yuan (¡ç2.4 billion). So far 1 billion yuan (¡ç120 million) has been spent on preparatory construction of the Longtan hydropower project, including infrastructure for transportation and supply of materials, relocation of residents from the reservoir area and acquisition of land. The Bose key water control project will be built on the upper reaches of the Youjiang River in Bose City. The project is designed to be a large multiple-function water conservation facility, capable of power generation, and offering irrigation, navigation and water supply potentials. It is designed to have a total installed capacity of 540,000 kilowatts.

Back to index

Shanghai is developing a series of tax incentives, special land deals and other measures designed to encourage foreign and domestic private investment in more than 50 billion yuan (¡ç6 billion) worth of rail transport projects. The funds sought for the projects--including the world's first commercial application of magnetic-levitation train technology--represent half of the total earmarked for rail construction over the next five years. The lines, which will have a total length of 212 kilometers, will all be built during the 10th Five-Year Plan period.

Last year, to reduce costs and improve efficiency, the city set up four separate companies to take care of investment, construction, operation and supervision. There are also two project companies to take care of the Yangpu Line and the Shensong Line. If all goes according to plan, by the end of 2005, the city will have built the 10 lines with a daily total traffic capacity of 3 million people, up from the current 700,000. The expected daily traffic capacity of the railways is expected to account for 25% of the city's total public traffic capacity by 2005 with the completion of the plan. There are also plans to extend the total length of the city's railway lines including the Pearl light railway line and underground lines.

Shanghai will introduce foreign capital to actively support the development of six new pillar industries--information, financial service, commercial circulation, auto manufacturing, complete sets of equipment and real estate--in the next five years. Compared with the six old pillar industries (auto manufacturing, information equipment, power station equipment, petrochemicals, iron and steel and electric appliances) defined in the l980s, the six new ones tend to be high tech and high service industries. In addition, the city has labeled modern bio-medicine, new materials and modern logistics as the most promising and fast-growing industries and encourages the development of urban-type industry, agriculture and tourism. As for basic industries represented by iron and steel production and petrochemical processing, technological advances and product upgrading based on total output control and distribution adjustment will be the main concern.

Shanghai has reported two-digit growth for GDP for nine years running. Last year, the city approved more than l,800 foreign-invested projects, up 23.2% year-on-year. The contractual foreign capital involved was ¡ç6.39 billion, up 55.7%, and the amount of foreign capital actually used, ¡ç3.l6 billion, up 3.7%. In addition, foreign-funded enterprises invested another ¡ç2.297 billion in the city, accounting for 35.5% of the contractual foreign capital. Some 101 foreign-funded enterprises even increased their investment by over ¡ç5 million each.

Shanghai has witnessed a rapid growth in foreign trade in the first three months of the year, with trade worth about ¡ç6.5 billion, 28% up over the same period last year. Exports to Asia, Europe and America all showed high growth. Exports to Europe took up 58.3% in the total amount of goods sent abroad. In addition, foreign investment in the city rose sharply in the first quarter, with contractual capital amounting to ¡ç2.1 billion, up 1.13 times from that of the corresponding period last year, with actual input of ¡ç899 million, rising 39.8%, and ranking high in the country in terms of growth. The city signed a total of 546 contracts with foreign investors, 154 more than that in the same period of 2000. Of the newly approved contracts, 382 are solely foreign invested, accenting for 70%. To date, a total of 7,171 solely foreign funded enterprises have been set up in the city, with contractual value of ¡ç16.83 billion foreign investment. Shanghai's GDP also increased steadily in the first quarter. The city's GDP grew at a faster than expected 9.8%, hitting 108.2 billion yuan (¡ç13.1 billion). Added value produced by industry surged by 13.8% to 51 billion yuan (¡ç6.2 billion).

Shanghai has achieved substantial success in bringing capital in, but so far it has failed to exploit the realm of outgoing investment. The outward-bound part of the mix is especially important for industries--such as electronic appliance--that face a saturated domestic market and are looking for a new set of consumers to buy their wares. The Shanghai Overseas Investment Board, which was set up last year, will collect information from foreign shores, conduct feasibility studies and other research and help select appropriate projects.

Shanghai's participation in overseas projects will help companies exploit their full potential. Among the main overseas targets is Africa, where the Overseas Investment Board is expected to set up a liaison office this year. Other potential markets include Russia and western Europe. Textiles and televisions are two of the prime candidates for foreign expansion. Shanghai-based Worldbest Group, a leading textile maker, has spearheaded the move to land overseas projects. The company has set up a ¡ç90 million plant in Mexico and manufacturing base worth ¡ç29.7 million in Canada. Bright as the prospects may be, success is a long way off. So far, the city has drawn up only the guidelines for new group, detailed measure are still to come. But the fact that the board was established at all reflects the municipal government's resolve to accelerate development of its outgoing foreign investment. Shanghai will focus on spotting new overseas projects for its out-bound investment at the fifth China International Fair for Investment and Trade which will be held in Xiamen, Fujian Province, in September. The fair is the country's largest event designed to attract overseas funds. Shanghai hopes the fair can also help it tap the potential of outgoing investment.

Back to index

Yantai in East China's Shandong Province witnessed fruitful economic cooperation in the fast-growing Asia-Pacific region in the Second APEC Investment Mart which closed on June 15. The exhibition aims to encourage economic and technological cooperation among APEC economies. It also serves as a good opportunity for Yantai to progress on its own opening-up policies. Yantai will speed up the implementation of its strategy to internationalize its economy through the increased contact with APEC members. The exhibition in Yantai attracted more than 30,000 business people from home and abroad. Governmental and business delegations from APEC members and delegations from 28 domestic provinces and municipalities attended the exhibition. They brought information on about 20,000 projects and sought potential cooperative partners and investors. The APEC enterprise hall displayed high-tech products and investment projects offered by enterprises from the Asia-Pacific region. The fields of priority included electronics, information technology, bio-technology, agricultural development, development of marine resources, new materials, pharmaceuticals, green food, textile, infrastructure construction and tourism development. During the 7-day event, participants signed 396 cooperation contracts or letter of intent, involving ¡ç2.64 billion in foreign funds.

Holding the Second APEC Investment Mart in Yantai is helping the city gain easy access to APEC members and enterprises to conduct economic cooperation. APEC members are major cooperative partners in Yantai. Their investment in Yantai constitutes 87% of the city's total actual foreign investment. Yantai Economic and Technological Development Zone, Yantai High-Tech Industrial Zone, APEC Technological Industry Park and nine export-oriented processing zones have become the platform for the cooperation. The city is promoting more than 1,000 projects, with a total investment volume of ¡ç6 billion. These projects mainly cover information technology, machinery, automobile parts, new materials, bio-pharmaceuticals, marine fisheries, food and beverages, textiles, agriculture, tourism, transportation and energy.

Yantai is an important coastal city with a gross domestic product of ¡ç10.6 billion last year. The economic strength, infrastructure construction and investment environment of the city have laid a solid foundation for cooperation with APEC members. Yantai is regarded as one of China's most attractive cities by foreign investors. Statistics show that the city has approved 5,826 foreign investment projects, with a contracted investment volume of ¡ç7.67 billion and an actual investment volume of ¡ç4.63 billion by the end of this April. In 2000, Yantai approved 371 foreign projects and 143 projects involving increases in capital investment. The contracted investment volume reached ¡ç700 million, a year-on-year increase of 82% and the actual investment volume surpassed ¡ç495 million, rising 48.4% year-on-year. About 27 multinational companies have located branches and plants in the city. Yantai's foreign trade is an important part of its economy. The import and export volume last year reached ¡ç3.14 billion, a rise of 37.2% over that of the previous year.

Back to index

1. Technology updating of copper smelting. Adopting the Ausmelt copper smelting process to reform current blister copper equipment to produce 35,000 tons of coarse copper and 140,000 tons of sulfuric acid per year. Investment: ¡ç45 million. Form: joint venture.

2. Rapid automobile body-making. To introduce foreign investment and technology to build an annual production capacity of 400 sets of models. Investment: ¡ç13.25 million. Form: joint venture.

3. Joint production of automobile inner trimming parts. To introduce foreign investment to expand the current production capacity. Investment: ¡ç15.7 million. Form: joint venture.

4. HIFU.U.R. tumor treatment machine. Investment: ¡ç2 million. Form: joint venture.

5. Production of automobile electric generator and motors. Investment: ¡ç10 million. Form: joint venture.

6. Production of touch screen conductive glass. Investment: ¡ç2.8 million. Form: joint venture.

7. Introducing 10 CD-R production lines. To add 10 more CD-R production lines based on the present phase I project, making 40 million pieces of CD-R per year. Investment: ¡ç16 million. Form: joint venture.

8. Construction of one session of a local railway from Longkou to Yantai. To attract foreign fund to build a local first class railway with a total length of 127.11 kilometers. Investment: ¡ç141.7 million. Form: joint venture.

9. Cooperation in RO/RO transporting services. To introduce foreign funds to kick off vehicles & passengers transportation in two water routes, including Yantai-Dalian and Yantai-Xingang. Investment: ¡ç10 million. Form: joint venture.

10. Construction of Changpeng highway bridge. To introduce foreign funds to build a 7-kilometer-long highway bridge between Changdao and Penglai. Investment: ¡ç250 million. Form: other than joint venture.

11. Yantai Water-wonders Park. As one of the eight major tourism development projects of Shandong Province, the project involves an area of 340,000 square meters, with a total investment of ¡ç189 million. Investment: ¡ç22.8 million. Form: joint venture.

12. Infrastructure construction of Yantai Sino-Russian High-Tech Industry Cooperative Demonstration Base. Investment: ¡ç24 million. Form: joint venture.

13. Infrastructure construction in Shengquan Industrial Zone. Investment: ¡ç15 million. Form: joint venture.

Back to index

China's medical service has carried out the state monopoly policy for a long period of time. Hospital, serving as an institution, has been run by the government and state-owned enterprises without any foreign funds involved. The iceberg of the policy began to melt in l989, when the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation jointly issued ¡°A Number of Stipulations Concerning the Opening of Hospitals and Clinics for Foreign Guests and Overseas Chinese and Foreign Doctors Practicing Medicine in China", and allowed the opening of Sino-foreign joint venture and cooperative medical institutions in China on a trial basis. Since then, the number of Sino-foreign joint venture and cooperative medical institutions has increased at an annual speed of more than ten. By the end of l997, the two ministries also jointly issued a supplementary stipulation on the establishment of foreign-funded medical institutions. It sets principal stipulations concerning the service objects of Sino-foreign joint venture and cooperative hospitals, the proportion of stock of the Chinese joint venture cooperator, the appointment of the board chairman, and the term of operation. By the end of l999, China's l9 provinces and cities had about 200 foreign-funded hospitals and clinics. Many overseas businesses have avoided the sanitary supervision departments to directly set up hospitals and clinics with the acquiescence of local governments. Once China joins the WTO, these foreign-funded hospitals will emerge.

Of the Sino-foreign joint venture medical institutions in China, foreign investors mainly come from the United States, Japan and China's Hong Kong, Macao and Taiwan. The investment of 90% of the projects is between ¡ç200,000 and ¡ç50 million each. About half of them each have an investment of less than ¡ç2 million, and only 10% of them each have an investment surpassing ¡çl0 million. Aiming at the chaotic state of jointly funded medical institutions, the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation jointly issued an ¡°Interim Provision for the Management of Sino-Foreign Joint Venture and Cooperative Medical institutions" last year. Starting from July l, foreign medical institutions and enterprises, which plan to open joint equity and cooperative institutions in China, should follow the newly released provision on application, practice and tax payment. The gross investment of a joint equity or cooperative hospital must be more than RMB20 million, and the Chinese side will hold at least 30% of the shares.

At present, most hospitals in China are government-funded. Limited by the state finance, the financial expenditure accounts for 3.6% of the gross national product. To tackle the investment shortage, the government has to seek financial support from individuals, the society and overseas. Between 60% and 70% of hospital income in China come from the sales of medicines, compared to about l0% of the income of hospitals in western countries. The drawbacks of state-owned hospitals have offered a good opportunity for foreign capital to flow to the Chinese medical market.

Back to index

Heihe City, in Northeast China's Heilongjiang Province and bordering Russia, is one of the first border cities to open to the outside world. The city boasts vast areas, rivers, fertile land, and rich resources in forests and minerals. The climate is cold, with long winters but short summers and a big difference in the temperature between daytime and night. It is suitable for growing high-sugar and starch containing and fiber crops. The city now has cultivated land of l.255 million hectares and 986,000 hectares of natural grassland. The Heilong and Nengjiang rivers run through the city, bringing the natural water areas to 640,000 hectares. The city's forest coverage reaches 40.9%, boasting more than 1,500 kinds of plants and over 200 kinds of birds and animals. The city is a land free of pollution, with unique advantages of ecological environment and natural resource for development of environment-friendly agriculture. Foreign trade is the most specialized and potential industry for the city. The city was the first to open the Sino-Russia border trade in l987, and later it launched an all-round border cooperation with Russia in trade, economic and technological cooperation, telecommunications, culture, sports, tourism and finance. By the end of 2000, the border trade of Heihe City reached ¡ç2.09 billion.

At present, Heihe has l27 foreign-funded enterprises with a combined investment of ¡çl70 million. The investment is from l2 countries and regions, and is spread amongst the food, textiles, electronics, metallurgical, building materials and real estate industries. The city has signed l53 contracts on engineering and labor service projects, with cooperation scope covering agriculture, construction, forestry, medical care and catering. lt. now has six enterprises granted with the right of conducting foreign trade, one enterprise with the right to conduct foreign economic and technical cooperation, and l84 companies with the right to undertake small border trade. The city has established steady economic and trade relations with about l,000 enterprises in Russia.

While giving priority to extension of its market to the inland areas of Russia, the city has made efforts to develop economic and trade ties with eastern European countries, ROK, Japan and the southeastern Asian countries. Based on the market needs, it has adjusted the structure of import and export commodities in border trade to expand trade scale. It has strengthened construction of an export-oriented production base for Russia. The city will continue to implement the policy of developing the tourism industry, trade, forestry industry and green food industry. It will step up development of textiles, building materials and household electric appliance export-oriented processing enterprises according to the need of the Russian market.

Back to index

China's industry is being urged to forge links with internationally known brands and to move away from an over-reliance on mass produced cheap exports. Zhang Shuhua, deputy chairman of the China Leather Industry Association, said the industry is expected to boast between three and five international brand names within 10 years. The country is short of really famous brands for its leather products, although it dominates world leather production after two decades of rapid development. China has become a world-recognized center for leather processing and sales. The country's leather products exports totaled ¡ç14.35 billion last year, 24% up over 1999. The output of leather shoes made up more than one-third of the world yield. The industry is now in transition from a focus on quantity to an overriding concern with quality. The domestic leather manufacturers are urged to attach great importance to achieving high added value through fashionable designs and advanced technologies, even if that leads to a smaller output.

China's leather exports may be the cheapest in the world. The average price for leather shoes stands at ¡ç6-8. Leather garments produced in China typically cost only ¡ç40--compared with the United States where famous brand names can change hands for thousands of US dollars. The leather makers are urged to depend on brand names which result from popular design and upgraded manufacturing techniques. Production of environmentally friendly leather products will be a good way for Chinese leather makers to foster links with the rest of the world and break into new markets. The leather industry is one of the largest pollution producers in the world. There is a growing body of opinion globally in favor of environmentally friendly products. If domestic leather makers achieve pollution-free production, their products will lead to high added value and be popular throughout the world.

Back to index

Japan's Matsushita Co Ltd has recently made an additional Japanese Yen 2 billion investment for expanding the production scale of electronics products in Tianjin. The Tianjin Matsushita Electronics Product Co Ltd is a joint venture built by Matsushita Group's two subsidiaries and the Tianjin Zhonghuan Electronics Co Ltd at the end of l995. It mainly produces mobile phone, pager, computer, TV, radio-recorder, program-controlled switching system, DVD, CVD, instruments and meters and other electronics elements and devices, with 75% of its products exported to Japan, Europe, the United States, Oceania and Southeast Asia. Its element products have become the necessary supplies of many international reputed companies such as Nokia, Motorola and Ericsson. Registered capital is, at present, Japanese Yen 8 billion, of which, 93.5% is from the Japanese side. The Tianjin Matsushita Electronics Product Co Ltd has performed well since its establishment. Its sales income is predicted to climb up to RMB l.3 billion this year.

Back to index

A new Sino-US deal to look for oil in an area of the South China Sea has been signed. The China National Offshore Oil Corp (CNOOC) and the US-based Santa Fe Energy Resources inked a contract on May 10. It is the first oil contract signed between CNOOC and an overseas company this year. The area, named the 27/10 contracted block, is located in the Pearl River Mouth Basin of the sea. It covers 6,546 square kilometers. Under the contract, Santa Fe will shoulder all exploration risks and conduct well-drilling undertakings during the exploration period. If any valuable findings are achieved in the seven-year exploration period, CNOOC will have the option to take up to a 51% equity stake in the area being explored. The production period could last up to 30 years if oil is discovered. The new contract is the eighth oil exploration contract between the two companies. Santa Fe said the new contract is of great significance for the long-term cooperation between the two companies.

Back to index

Samsung Fire & Marine Insurance, the largest non-life insurer in South Korea, announced in April the establishment of its first branch company in Shanghai. Named Samsung Fire & Marine Insurance Shanghai, the new company is the first South Korean insurance company to operate in China and is the seventh foreign non-life insurer in China. In the initial stage, the new company will focus on offering property and liability insurance services to Sough Korean-funded enterprises in Shanghai. With China entering the WTO and loosening control on foreign insurers' operations, the company will consider expanding its service scope later. Samsung excels in auto insurance applications and wishes to bring its advanced technology and management know-how to China. China's insurance industry enjoys rosy prospects with its strong economic growth.

Back to index

Finland-based Nokia Oyj said its worldwide profit rose 15% in the first quarter of this year, while other telecommunications giants, including Lucent Technology, Ericsson AB and Nortel Networks, reported losses. Nokia attributed its profit growth to strong demand in China's mobile phone market. Analysts, however, warned that a gap between Nokia's share in the Chinese market and those of newcomers, such as Germany-based Siemens and South Korea's Samsung, is narrowing. Analysts estimated that Nokia at present holds one-third of the China's cellphone market. The company currently occupies 32% of the global market. Company official said China has become Nokia's second largest market, next to the United States. Last year revenues from its Chinese operations hit ¡ç2.8 billion, compared with global sales of ¡ç30.1 billion.

Back to index