The Ministry of Foreign Trade and Economic Cooperation (MOFTEC) issued a notice recently stating that overseas-invested companies in China can apply for A- and B-share listings, but must get permission from the ministry first. Candidates should comply with relevant industrial policies and undergo necessary restructuring to meet the criteria of a domestically listed firm. It is the first time the Chinese authorities have issued a concrete regulation to facilitate domestic listing for overseas-invested companies, opening a new and lucrative channel for their financing in China. This is a major breakthrough in the opening up of China's stock market. Although a handful of overseas companies already hold stakes in A-share companies in China, it is mostly through the purchase of non-tradable stakes held by state-owned institutions. Such purchases are very complicated and often surrounded by uncertainties as they need to be approved by the Ministry of Finance and the China Securities Regulatory Commission (CSRC).

Allowing overseas companies to issue their own shares will save them procedural problems and grant them easier access to China's capital market. Issuing its own A shares or B shares will also greatly improve the financial strength of an overseas company in China. It also means that China's stock market will have more new comers, as it will no longer just serve the interests of state firms. Chinese enterprises raised 150 billion yuan ($18.12 billion) from the A-share market last year, official statistics indicated. There are more than 1,000 A-share companies and more than 100 B-share firms in China. CSRC Chairman Zhou Xiaochuan said earlier that China would encourage overseas companies to issue shares in China and that there would be no major policy obstacles. Some overseas enterprises, including Unilever, have expressed interest in the public offering plan.

Originally set up to help finance state-owned enterprises, many of China's relevant laws do not have rules governing the listing of overseas-invested companies. The new regulation is in line with China's opening up process, and shows the sense of urgency over integrating China's financial activities with the world economy and the requirements of its pending entry into the WTO. More detailed regulations, as jointly drafted by MOFTEC, the CSRC and the State Economic and Trade Commission, will come out later for practical operations, giving overseas-invested companies clearer guidance as to how they can enter the Chinese capital pool. Domestic non-tradable shares held by foreign investors must make up at least 25% of the company's total shares after its listing on either the A- or B-share market, according to the MOFTEC's notice. Non-tradable shares held by foreign investment companies are still forbidden to list on domestic stock markets. While an earlier notice from the CSRC required foreign sponsors of a company not to list its shares in three years, the MOFTEC's notice has written off the differences between overseas sponsors and non-sponsors.

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The Chinese Government is expected to unveil regulations that formally allow social security funds to be invested in stocks before October. The draft regulations will decide how national social security funds should be managed and invested. A certain ratio of the funds could be used for securities investment, including stocks and treasury bonds. The regulations will also clarify the qualification and responsibility of fund managers to ensure proper management and application of the funds. The business would be open to both domestic and foreign institutions. The move marks a great leap forward for the further opening-up of China's financial market before its final entry into the WTO. The to-be-announced regulation will outline a detailed policy for the involvement of foreign fund management companies in the market. Foreign financial conglomerates will be in a terrific position to fulfill their ambitions in the rapidly expanding China market in a few months, when they are permitted management control over China's large pool of social security funds. According to Liu Jiafu, vice-director of the Debt & Finance Department under the Ministry of Finance, the regulation has already been drafted and sent to the State Council for final approval. If everything goes smoothly the regulation will be unveiled before October.

Liu disclosed, a set of rules has been set up to select qualified fund management companies and allow them to manage the pool of funds, which amounts to about $6 billion, and which promises to be a great business opportunity. Foreign and domestic companies will be treated on an equal footing. Management of China's large pool of social security funds, which at present is mostly made up of pension funds, is widely seen as a very promising and profitable market in which a number of foreign conglomerate companies are hoping to take a stake. But currently they are still barred from entry and the funds are lying idle. The involvement of foreign companies will enable the country to increase the value of the funds in a more efficient way.

According to Liu, the to-be-announced regulation will also detail the rules that will allow the funds to be invested in stock markets, which is at the moment regarded as too risky a channel to invest social security funds in. Analysts also say that the new policy would be likely to trigger a new round of fierce competition among giant foreign fund companies anxious to tap the promising market and team up with local firms for joint venture fund management companies. The central government has already established a national management committee which will be responsible for the overall management, investment and supervision of the funds. So far, a number of eager foreign firms are reported to be in position for the launch of joint venture fund management firms already, hoping to expand their stakes in the market. The management of the huge pool of funds by professionals could be a better way of safeguarding better earnings on the funds.

China has mapped out a long-awaited plan to sell off state shares in a move to compensate for shortage in the social security funds, but the policy failed to meet market anticipation in terms of its limited scale and narrow usage. Currently, about 70% of shares in the 1,000 plus listed companies are state-owned shares and are barred from free transaction, often resulting in problems in the market, including limited liquidity and the poor treatment of small and medium-sized shareholders by large shareholders But the process of reducing state shares should be a gradual process and should not pose too much of a threat to the securities market.

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China is working out rules to encourage more foreign involvement in the rejuvenation of its 1.4 trillion yuan ($168.6 billion) in non-performing assets. The government is actively exploring new channels to attract foreign investors in the purchase and restructuring of part of the bad loans, said Premier Zhu Rongji in the working conference on utilizing foreign investment that ended recently in Beijing. The enactment of special regulations to encourage such investment is expected soon. Foreign investors will be encouraged to take part in the restructuring of domestic firms. They can enter domestic businesses through takeovers and mergers as well as being given wider access in getting involved in non-performing loans taken over by China's four asset management companies (AMCs) from the four state banks. The companies were launched in 1999. The AMCs have already been encouraging foreign investors to participate in taking over the management of bad assets by bidding for them or by private negotiation.

Attracting foreign funds and domestic private capital are two major ways to regenerate delinquent assets. The principle has been set and will not change. But China still lacks concrete regulations that designate the details of the involvement of foreign funds in this area, such as how and where foreigners can get involved in projects to buy up bad assets. The rules should come out as soon as possible to clear away obstacles and heighten foreign investors' confidence, said Yi Gang, deputy secretary general of the monetary policy committee of the People's Bank of China (PBOC). Temporary regulations regarding the matter have been jointly drafted by several government departments including the central bank and the Ministry of Finance, which are waiting for final approval by the State Council.

An official with the Cinda Asset Management Co said that they are also expecting the regulations to facilitate further moves, though this might take some time. Nevertheless, the company has already been trying out ways to attract foreign investment. In addition to being encouraged to acquire such assets through leasing, foreign companies have been invited to purchase equity in domestic firms, whose debts owed to the state banks have been transferred to equity held by the AMCs in debt-for-equity swaps. Such purchases should help getting these assets performing again, and a varied shareholding structure should also push domestic firms to improve performance, said Yi.

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China will actively explore new ways of foreign investment utilization, including merger, acquisition, risk investment, investment fund and securities investment, vice director of China's State Economic and Trade Commission, Jiang Qiangui said recently. Large and medium-sized state owned enterprises will be encouraged to conduct stock system reform by means of standardized listing, joint equity, and participating in each other's business through share participation. Jiang said that structural readjustment is a key issue during the next 5 years and no efforts would be spared promoting a strategic adjustment to the economic structure. Industrial trial reforms and regrouping and structural upgrading of the industries are mainly reflected in the following 6 aspects:

l. Increase the benefits of resources allocation and advance the strategic structural readjustment to the overall arrangement of the national economy. Foster and cultivate a number of large enterprises and enterprises groups with independent intellectual property rights, well-established main business, strong core competitiveness in the key sectors and keystone industries of the national economy by means of listing, merge, unification, regrouping and so on. They are expected to become China's backbone forces to compete on the international markets and a new basis to conduct structural upgrading.

2. Introduce high-tech and advanced and practical technology to reform the traditional industries and form group advantages and competitive forces in certain areas of electronics and information, biological engineering, aerospace and aviation, new materials and other high-tech sectors.

3. Accelerate the pace of innovating enterprises¬ğ systems and encourage state-owned large and medium-sized enterprise to conduct stock system reform through standardized listing, Chinese-foreign joint equity, and holding shares of one another.

4. Large enterprise groups are encouraged to cooperate with foreign multinationals so as to realize optimized allocation of scientific resources in the world arena.

5. Conduct administration innovation centering on the promotion of financial management.

6. Avail ourselves of joining the WTO, explore new way to expand foreign investment absorption, including acquisition, merger, risk investment, investment fund, securities investment etc. Implement the strategy of ¡°going global" in an active manner and encourage and support competitive enterprises to conduct multinational operations.

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China's GDP grew 7.9% to 4.2942 trillion yuan ($517.4 billion) during the first half of this year, according to the National Bureau of Statistics. Considering that the slowdown in the world economy may have a negative effect on the Chinese economy, the government decided at the beginning of this year to focus on domestic demand to propel economic development. During the first half of this year, fixed asset investment reached 1.1899 trillion yuan ($143 billion), an increase of 15.13%. Retail sales of consumption goods reached 1.79 trillion yuan ($215.8 billion), an increase of 10.3% year-on-year. Statistics indicate that the country's industrial sector produced 2.3551 trillion yuan ($283.7 billion) worth of products during the same period, an increase of 9.7%. The agriculture sector generated 451.6 billion yuan ($54.4 billion), an increase of 2.4%.

The total volume of foreign trade reached $241 billion, up 11.3%from January to June this year. Exports increased 8.8% to $124.57 billion and imports rose 14% to $116.43 billion. However, China's exports in June declined for the first time after a surge in exports last year. Due to changes in international economic development and trade, exports reached $22.08 billion in June, down 0.6%. Imports in June grew only 4.7% to $21.25 billion. Among all the export companies in China, foreign-invested companies and collectively-owned and private companies reported a higher growth rate for exports. Exports by foreign-invested companies hit $62.26 billion, up 16.9%. Imports by foreign-invested companies increased 12.5% to $60.17 billion. Exports of machinery and electronic products, among all export commodities, showed the biggest margin of increase at 16.7% in the period. Machinery and electronics export volume arrived at $54.97 billion, accounting for 26.4% of China's total exports during the period.

Ye Zhen, a spokesman for the National Bureau of Statistics, said on July 17 that if the nation continues to pursue an active fiscal policy to stimulate domestic demand, the economy may meet or even exceed its target of 7% for the whole of 2001. The spokesman noted that Beijing's winning of the bid to host the 2008 Olympic Games will also add fuel to the country's economy in the remaining months of this year and the coming years. A huge amount of investment will be made in infrastructure construction in the coming months, which is expected to contribute an average of 0.3 to 0.4 percentage points to the nation's economic growth annually.

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Yunnan Province is launching a campaign to develop its ¡°green economy" to bolster its economic growth. The ¡°green economy" refers to the sectors of organic food, traditional Chinese medicine, bio-pharmaceuticals, flowers and other biological products that use natural resources. Yunnan is very rich in natural resources. In the province, there are more than 6,000 kinds of medicinal plants, accounting for 51% of the country's total and making the province the country's largest biological resource development base. As a result, the local government has decided to vigorously develop its ¡°green economy" and choose natural medicinal products and health-care products as pillar industries for its economic growth in the 10th Five-Year Plan period (2001-05). A series of preferential policies have been drafted by the local government to help local enterprises foster brand name products that are competitive in both domestic and international markets. Foreign companies are welcome to invest in the province's ¡°green economy" projects.

The ¡°green economy" campaign is also expected to diversify the economic structure of the province which has long been famous for its tobacco industry. As more people become aware of the hazards of smoking and the external environment for cigarette producers becomes more challenging, Yunnan is encouraging its cigarette factories to invest in the ¡°green economy to diversify their production. Some projects have already been set up by cigarette factories in the province. According to the province's plans, the ratio of local industrial output value that the tobacco industry produces will be gradually reduced while the ¡°green economy" sector will increases its economic growth. To promote cooperation and trade in the sector, the provincial government and the Ministry of Health have approved plans for the Second China International Health Care Festival to be held in Kunming between October 18 and 22 this year. More than 1,000 domestic and overseas health care companies are expected to attend the festival to explore trade, cooperation and investment opportunities.

To further strengthen its relationship with the world's multi-nationals, Yunnan held a recommendation conference recently in Shanghai with the aim of attracting more overseas investment. Representatives from 130 overseas companies attended the conference including big names like Kodak, GE and Worldlink. The investment focused on five main industries: the tobacco industry, biological resource development, mineral development, tourism and hydropower-based energy development. There are 300 provincial-level projects looking for investment listed on the recommendation agenda with a total investment of $10 billion. Among them are 30 key project, hoping for investment of $4.5 billion, which have been proposed for the year 2001. Currently, Yunnan has established economic and trade cooperation with more than 110 countries and regions throughout the world. By the end of last year, the number of overseas-invested enterprises had reached 1,950 with contracted foreign capital topping $2.8 billion. The provincial government has decided to attract a number of the world's 500 largest companies to make investment in the province during the 10th Five-Year Plan period, with actually utilized foreign investment amounting to $2.7 billion. Furthermore, the province plans to set up 7 bases, namely, the largest development and innovation base for biological resources in China, a R&D and production base for safety tobaccos, production base for phosphorous chemicals, an industrial base for non-ferrous metals, a major energy base for transmitting electricity from west to east, a tourism and meetings base, and the largest flower export base in Asia.

Shao Qiwei, vice governor of Yunnan Province announced recently that the province would allow foreign investors to invest and operate in some state monopolized sectors, including development of precious and rare biological resources, exploration, production and processing of mineral resources. The province adopts the administration of ¡°five non-restrictions" over foreign investment in the above-mentioned sectors. Foreign investors will not be restricted in investing in all the areas and sectors in the province except for those prohibited by the State. There is no restriction on the term for the establishment of a foreign invested enterprise, its operational region and ratio held by the foreign investor. There is no restriction on the business scope of the foreign invested enterprise in Yunnan in principle and the enterprise is encouraged to explore the neighboring countries and regions' markets and will be granted the right to conduct border trade and foreign economic cooperation with the neighboring states upon receiving the business license. There is no restriction on the forms of investment of a foreign invested enterprise, either joint equity, cooperation or solely foreign funded. It is also encouraged to reform and regroup the state owned enterprises and enterprises of other forms of ownership by means of purchase, merger, share participation, share holding etc. Foreign investors are also encouraged to set up investment companies according to industries. Moreover, there is no restriction imposed on the ratio of domestic and international sales of their products.

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The Shanxi provincial government will sponsor the 2001 Shanxi International Trade and Tour Week in the provincial capital of Taiyuan on August 10-14. The fair is held every two years. Building on the experience of previous fairs, the sponsors will attach importance to readjustment of the industrial structure, development of the tourist industry and the high-tech products show. Differing from the fairs of the past, this fair will focus on tourism. Rich in unique tourism resources, Shanxi Province has a long history and contains many relics. There are more than 3,240 registered and protected relics in the province. The 450 wooden buildings of Yuan Dynasty (1206-1368) represent more than 70% of those remaining in China. So it is no wonder that Shanxi is honored as ¡°China's ancient architecture museum" and ¡°China's ancient arts treasury".

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1. International Economic and Technology Cooperation Fair. There will be more than 400 projects for investors to choose from, including infra-structure, agriculture, transportation, power, coking, metallurgy, machinery and electronics, light industry construction, building materials, tourism, biomedicine, information and environmental protection. Investors will be able to establish jointly funded enterprises, cooperative enterprises or solely foreign-funded enterprises.

2. High-Tech Products Show and Fair. At this show, the sponsors hope to test potential products developed by local enterprises and domestic research institutes. These high-tech products are designed for use in agriculture, coal mining, environmental protection, information technology, new materials, medicine and other fields.

3. Commodity Trade Fair. The displayed products, more than 800, will include food and oil, livestock products, light industry, textiles, clothing, chemicals, metals, machinery, electronics, packaging, arts and medicine. Many enterprises with foreign trade operation rights, including foreign trade companies and joint ventures, will attend the fair.

4. Yellow River Cultural Show. The show will focus on the culture of the Yellow River in Shanxi, the development of folk arts, tourism resources, and infrastructures. At the same time, the Hukou Waterfall of the Yellow River, Wutaishan Tourism Area, Yungang Grottoes, Yucheng Guan Yu Temple, Pinyao Ancient Town and other sightseeing areas with distinct local features will be presented.

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Shenzhen's mayor recently said that the city still needs a further five years to achieve its modernization. China's first special economic zone announced its ambitious goal of achieving modernization by 2005 when its per capita GDP will reach 63,100 yuan ($7,602). It is planning to become an international metropolis backed by three pillar industries -- information technology (IT), and its logistic and financial sectors, according to the draft report of the city's 10th Five-Year Plan (2001-05). Shenzhen has also set up a long term plan to close the gap with developed countries by 2010. Over the next five years, the city will realize an average annual GDP growth rate of 12%, which will reach 300 billion yuan ($36.1 billion) by 2005. The industrial framework will be adjusted so that the added value from the service industry will contribute 50% to the GDP, while high-tech will account for half of the city's total industrial output value. Convinced that an educated work force is crucial to its success, the municipal government will initiate a series of relaxed and flexible rules to attract professionals from home and abroad. It plans to attract 300,000 skilled people during the 10th Five-Year Plan period. Moreover, the city will guarantee that the influx of educated personnel increase at a rate of 15% annually.

Experts suggested that the city should more clearly define the relationship between economic interests, social development and environmental protection to ensure the progress of the special economic zone. The local government pledged to put 3% of its GDP into environmental protection. A huge investment of 3.5 billion yuan ($421.7 million) will be dedicated to cleaning rivers in particular this year. People's living standard will further improve, with the average disposable income of residents reaching 33,000 yuan ($3,980) by 2005. Furthermore, the local government has promised to streamline the administration and enhance the transparency of government to provide a better investment environment. Shenzhen has witnessed dramatic development over the past 20 years thanks to the country's reform and opening-up policy. But it should now go all out to create a new driving force if it is not to be elbowed out of the international race. The local government will pay attention to the high-tech industry, such as integrated circuitry, software, photoelectronics, computers, communications and digital electric appliances.

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Here is a list of some of Liaoning Province's major projects that need domestic and foreign investment.

1. Production of epoxy resin with an annual output of 10,000 tons. Investment: $21 million (Foreign investment: $16 million).

2. Production of chlorinated rubber with an annual output of 6,000 tons. Investment: $18 million (Foreign investment: $9 million).

3. Production of high quality paint for ships, containers with an annual output of 15,000 tons. Investment: $12 million.

4. Production of Tetrafluoroethylene coating paint with an annual production of 5,000 tons. Investment: $23.8 million.

5. Production of THF/1,4-butanediol with an annual output of 5,000 tons. Investment: $54 million (Foreign investment: $27 million).

6. Production of precision alloy with an annual output of 17,000 tons. Investment: $33.8 million (Foreign investment: $15.6 million).

7. Production of mold steel with an annual output of 40,000 tons. Investment: $34 million (Foreign investment: $17 million).

8. Production of spring wire with an annual output of 3,800 tons. Investment: $7.5 million (Foreign investment: $5.6 million).

9. Production of medium width cold strip steel with an annual output of 60,000 tons. Investment: $14.5 million (Foreign investment: $7.5 million).

10. Production of broad band Internet facilities. Investment: $8 million (Foreign investment: $4.8 million).

11. Production of 200,000 liquid crystal display panels per year. Investment: $29.95 million (Foreign investment: $20 million).

12. Production of 100,000 GPS car navigators per year. Investment: $25 million (Foreign investment: $12 million).

13. Production of 360 million flasky tantalum capacitors per year. Investment: $23 million (Foreign investment: $2.5 million).

14. Production of 100,000 kilometers of AN cable per year. Investment: $12 million (Foreign investment: $7 million).

15. Production of 100 machining centers per year. Investment: $20 million (Foreign investment: $10 million).

16. Production of 50 reach stackers per year. Investment: $15 million (Foreign investment: $7 million).

17. Production of 200,000 light duty automotive axles per year. Investment: $15 million (Foreign investment: $6 million).

18. Production of 120,000 tons of newsprint per year. Investment: $75.45 million (Foreign investment: $40 million).

19. Production of 80,000 tons of kraft cardboard coating per year. Investment: $51.8 million (Foreign investment: $30 million).

20. Production of 20,000 tons of tencel fiber per year. Investment: $72 million (Foreign investment: $32 million).

21. 137-kilometer Dandong-Zhuanghe Expressway. Investment: $416 million (Foreign investment: To be negotiated).

22. 66-kilometer Fushun-Nanza Expressway. Investment: $32.l6 million (Foreign investment: To be negotiated).

23. The second phase of Dayaowan at the Dalian Harbor with an annual handling capacity of 6 million tons. Investment: $325 million (Foreign investment: To be negotiated).

24. A stone port at the Dalian Harbor with an annual handling capacity of 10 million tons. Investment: $196 million (Foreign investment: To be negotiated).

25. Berths for oil and liquid chemicals at the Yingkou Bayuquan Harbor. Investment: $69.9 million (Foreign investment: To be negotiated).

26. Berths for general purpose and containers at the Yingkou Bayuquan Harbor. Investment: $118 million (Foreign investment: To be negotiated).

27. Expansion of Jinzhou Harbor. Investment: $176 million (Foreign investment; To be negotiated).

28. The second phase of Dandong Harbor at Dandong. Investment: $109 million (Foreign investment: To be negotiated).

29. Port at Xianren Island. Investment: $60 million (Foreign investment: $58.5 million).

30. The third phase of Fuxin Power Plant. Investment: $602.4 million (Foreign investment: To be negotiated).

31. Zhuanghe Power Plant. Investment: $2,168 million (Foreign investment: To be negotiated).

32. The second phase of Tieling Power Plant. Investment: $867.46 million (Foreign investment: To be negotiated).

33. Kerogen shale power generating unit. Investment: $116.1 million (Foreign investment: To be negotiated).

34. Power generating unit on the Pushi River. Investment: $743.45 million (Foreign investment: To be negotiated).

35. Garbage treatment plant. Investment: $73 million.

World tourism chief optimistic on China's vast potentials

China is on the way to becoming a top international tourist destination. The tourism industry is expected to explode in the next five years as China integrates with the global economy. Francesco Frangialli, secretary-general of the World Tourism Organization, said recently China has the potential to overtake traditional hot spots such as France, Spain and the United States by 2020. With invaluable cultural and natural heritage, the country is aiming at attracting 33.5 million overseas tourists to overtake the top spot, generating foreign exchange revenues of $75 billion. Domestic tourism, with 111.5 million visitors likely by 2020, is expected to generate 2.7 trillion yuan ($326.5 billion). Tourism revenues could make up 8% of China's gross domestic product (GDP) in two decades. During the past decade, China surpassed all possible forecasts with its spectacular and constant growth of its tourism industry. The country's pristine mountains, extensive river valleys, lakes, beaches, rich cuisine, arts and crafts and, above all, a very warm and hospitable people, form a mighty attractive tourism product -- a product which can appeal to a very wide cross-section of tourist markets and segments within these markets.

He Guangwei, Director of the State Tourism Bureau revealed recently that China will lift all bans on tourism services, allowing Sino-foreign joint equity tourism ventures to be established. So far, this form of tourism undertaking is just in trial operation mainly in Beijing and Guangzhou. By the end of last year, up to 7 Sino-foreign joint tourism service ventures had been established in succession. Among them, three are funded by Hong Kong businesses. After all the bans are lifted, many Sino-foreign joint tourism ventures are expected to be set up one after another. However, the Chinese investor will still control the joint ventures, and its business scope will be mainly limited to handle domestic tourism service, but no limit whatever on the location of joint ventures.

Now China has reached agreements on tourism with more than l0 countries. Under these agreements, Chinese citizens are allowed to tour related countries in groups. Figures from the National Bureau of Statistics show that numbers of overseas tourists were up by 14,3% and foreign exchange income earned from tourism was up by 15.1% last year. A total of 10.5 million Chinese tourists went abroad in 2000, up 32%, while domestic tourism grew by 3.5% with earnings increasing by 12.1%. However, the rapid development has masked the fact that Chinese tourism is still in its infancy. There are several hurdles to overcome before China becomes the world's leading tourism destination. For example, the country is short of marketing that targets high-spending. China also needs to have more tie-ups with domestic airlines which link dozens of tourism promotion programs, such as special festivals and events in various provinces and autonomous regions.

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Hefei Economic and Technological Development Zone is a state class development zone. Located in the south of Hefei, the capital city of Anhui Province, the zone was founded in 1993 with an area of 39 sq km. It is the first development zone with the approval for a nationwide administrative management system and organizational reform experimental zone. An historical and also a rising industrial city, Hefei is placed among China's top 50 cities in term of comprehensive strength. It is also an ¡°A class" open city with over l,000 foreign-funded enterprises and it has established economic cooperation relations with over 80 countries and regions.

Hefei is an important railway hub in Eastern China, and is crisscrossed with highways. The development zone is close to the Hefei Logang airport, and it takes only five hour to drive to Shanghai. The zone follows the principle of laying emphasis on the development of modern industries, the use of foreign investment, earning foreign exchange from export and making great efforts to develop high-tech industries, aimed at turning Hefei into a base of modernized industries. Up to last year, the zone had contracted projects with foreign and domestic investment involving RMB11.99 billion. These include 66 foreign-funded projects with contracted investment of $l.11 billion, $990 million under agreement, and $6l0 million made available. Of these projects 20 involve over $l0 million each, including a number funded by world famous companies including Jia Tong, Hitachi, Coca Cola, Chia Tai. A large part of the projects have begun operation. The total output value of enterprises funded by foreign investment and investment from Hong Kong, Macao and Taiwan account for 97.9% of the zone's total. Some of the famous domestic companies including Haier, Haci and Fenghuan came to the zone last year with investment of over RMB l.3 billion. Jia Tong and Hitachi are planning to expand their investment.

To cope with the situation, it has worked out many preferential policies for the absorption of foreign investment which include: 1. Investors who start advanced technology enterprises or exported oriented enterprises, or agricultural development projects for a term of over ten years, may enjoy reduction or exemption of the portion of local income tax from the date of beginning of operation or from the first profit taking year; 2. High-tech agricultural and tourism agricultural projects enjoy exemption of special farm produce tax for three years starting from the year beginning to make profit; 3. Investors are encouraged to expand production scale and may enjoy tax reduction or exemption for the profit earned with added investment. To further beef up its competitiveness, the zone has started the construction of ten big sub zones including foreign funded industries, export processing, private industries, and farming demonstration.

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China's sugar industry is tasting a sweet bitterness, as the irrationally high price appeases the appetite of some businesses, but alarms the authorities, who fear the trend may thwart the country's efforts to revitalize the industry. To quench the overheating of sugar prices, which surged from 3,000 yuan ($361) per ton at the end of last year to its present 4,300 yuan ($518) per ton in some regions, the country moved more than 1 million tons of its state reserves to the market between August 18 last year and this April, according to Ma Zhanping, from the State Development Planning Commission. The effect of the underselling move is yet to be seen, and the commission has been mulling over putting more sugar on the market this year. The domestic sugar price, driven up by a strained market supply, is higher than that on the global market, fueling speculations that the country may increase imports to balance demand. White granulated sugar processed from imported raw sugar, is usually sold at 3,500 yuan ($421.7) a ton in the Chinese market.

China's likely increase in sugar imports this year will not result in a price hike in the international market, as anticipated by some foreign observers. This is because the odds are low that China will increase sugar imports drastically this year -- given its huge stockpiles, and the country will buy gradually, not all at one time. Last year, China registered a net import of more than 200,000 tons of sugar. Officials attributed the high domestic price partly to the manipulation of some sugar enterprises, which have sought to benefit from the market by either balking at selling or stocking up large amounts of sugar. The rising sugar price, if not curbed, will bitterly affect the country's efforts to cap sugar production capacity and close down redundant facilities in order to stem losses in the sectors. The sugar industry saw poor results through the four years leading up to 2000, with cumulative losses approaching 10 billion yuan ($1.2 billion). To reverse the situation, the SETC decided recently to close 134 small sugar refineries in various provinces and suspend operation of several glucoside makers in Shanghai and in Liaoning Province.

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The world's largest chemical industrial group, BASF, announced recently that it would increase its investment in Asia, and China in particular. It is predicted that Asia will become the largest chemical market in the world by 20l0 with an average annual increase rate of 6%, far exceeding the world's average increase rate of 3.4%. Included is China's chemical market, which is developing the fastest with the growth rate exceeding its GDP increase level and ranks first among countries and regions in Asia. The Republic of Korea ranks second with the speed of the increase similar to its GDP increase rate. In view of the huge increase potential of the Asian market, BASF has decided to expand its investment to between Euro 5-6 billion. Included will be Euro 2 billion scheduled for use in the integrated production of China and the Republic of Korea. Of the funds, 70-80% will be used in China.

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DuPont, a leading international science company, announced recently that it had acquired the Longyun Protein Food Group, in Central China's Hubei Province, as part of its efforts to expand its soy protein business in Asia. The company will spend about $20 million on the deal. The project, which will be DuPont's first food and nutrition company in China, plans to produce 5,000 tons of soy protein a year. Soy protein is a popular nutritional ingredient in food stuff around the world. DuPont began selling soy protein products in China in 1992. The bulk of the project's products will be exported to meet mounting demand from the world market.

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On May 27, Philips opened its second mobile phone speaker production plant in Beijing to cope with the increasing demand for mobile phones and related components in China. PPS Beijing Company, the only production center of mobile phone speakers outside the company's headquarters in Vienna, will get a total investment of $16.7 million before 2005. The company has two production lines running at present and there will be five more by 2004, while the production capacity will grow from 20 million units by the end of this year to 120 million, all of which will be sold in the Chinese market. Company officials also said that as well as the investment of cash, Philips would also bring the most up-to-date technology of PPS to China and tap the brain force of Chinese engineers. The plant in Beijing will be 100% the same as its headquarters in Vienna in terms of competence, technology and quality.

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France-based telecom equipment vendor Alcatel signed a contract worth $80 million with Shanghai Mobile Communication Co for its seventh network expansion. After the expansion, Shanghai Mobile's GSM (global system for mobile communication) network capacity will increase to 6 million subscribers. Shanghai, one of the most developed cities in China with a population of 17 million, is one of the fastest growing mobile phone markets. It already has 3 million mobile phone users. After the expansion, the network traffic jam will be greatly eased in the densely populated city.

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