CIEC ECONOMIC BRIEF
Sept. 3, 2001
C a t a l o g
Sino-foreign joint ventures now have new legal protections to ensure fair treatment in accordance with China'scommitments to the WTO. The State Council issued on August 1 a decree amending the implementation and regulation of the Chinese and Foreign Equity Joint Ventures Law to improve the environment for foreign investment. According to the No. 311 State Council Decree signed by Premier Zhu Rongji, the revised rules take effect immediately. Altogether, 45 amendments were make to the rules, in line with a decision made by the top legislature on March 15 on revising the joint venture law to better serve the reform and open-up drive and improve the investment environment for foreigners. The amendment removed provisions that require joint ventures to file their production and operation plans to relevant authorities and procure materials from within China whenever possible.
According to the amendment, Sino-foreign joint ventures will be treated the same as domestic enterprises in terms of raw and processed material purchasing and product sales. In a further relaxation, the procedures to establish Sino-foreign joint ventures have been simplified, lessening administrative interference. Experts hail the new regulation as bringing China closer to WTO norms and practices. It is a common practice for the State Council to issue a set of detailed regulations to help implement laws adopted by the National People's Congress. The regulations, with legal power only below that of statutes, are binding nationwide.
Spokesmen from the State Council and the Ministry of Foreign Trade and Economic Cooperation explained that since August 1, Sino-foreign joint ventures are free to buy equipment, raw material, fuel, accessories, conveyance and stationery in China or from abroad. In the past these firms were required to buy Chinese products. They are now also able to pay the same price as their Chinese counterparts for materials and services, as opposed to the old biased pricing system. Restrictions governing joint ventures' sales on the domestic market have also been repealed. The spokesmen said Chinese businesses planning to establish joint ventures can deliver relevant documents directly to authorities in charge of the approval of such enterprises. In the past, they faced a labyrinthine approval system. The regulations are in line with amendments to the law which first took effect in 1990.
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The People's Bank of China (PBOC), the central bank, unveiled on July 9 regulations governing Internet-based banking services in an effort to better police and promote healthy development of the burgeoning banking business. The Provisional Regulations on Online Banking Services aim to í░regulate and guide the healthy growth of online banking services, prevent operational hazards and protect legal rights of customers," the PBOC said in a statement. The move followed the central bank's enactment of game rules concerning intermediary services by commercial banks on July 3, which analysts said was clearly an effort to sharpen the competitive edge of the banking sector ahead of the country's expected WTO entry later this year.
The online banking services, or í░financial services provided through the Internet," include new types of services that are directly related to securities and insurance businesses, which were officially allowed to be conducted by commercial banks in the July legislation. Such online services, among a variety of other unconventional Internet-assisted banking services, should be approved by the central bank before operation, according to the statement. Risk management and safety are stressed in the new rules, which specified requirements on operation safety strategies, encryption technologies in identifying clients and transmitting data, and preventative measures against computer viruses and attacks by hackers.
Chinese banks started to jump on the online bandwagon in 1998, but the promising business approach still lacks momentum due to difficulties in infrastructure construction, supervision systems and risk control measures. China's Internet users stood at 22.5 million at the end of 2000, marking out huge potential for online banking services. It can be expected that the competition in internet banking will be the most severe that China's banking business will face with the country's entry into the WTO. It is imperative, therefore, to speed up internet financing and thus ensure that the whole of the financing sector is more competitive.
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China is expected to loosen control on enterprises including private companies conducting foreign trade in the near future. Starting from this year, the government plans to delegate the foreign trade right to enterprises within three years, it is reported. That means the enterprises will no longer need approval from government departments for conducting foreign trade, and will only need registration in industrial and commercial administration departments.
The country has in recent years stepped up the work of delegating the foreign trade right to enterprises, while making efforts to expand the scope. Currently, there are l60,000 foreign-funded enterprises and more than 30,000 domestic enterprises having obtained the right. Starting from l999, private-owned enterprises were given the trading right and the number now exceeds l,000. China will grasp the chance of the entry into WTO to develop an open economy in an all-round way. The governmental departments are now working on further reform and readjustment of related policies and methods according to the requirements of development of an open economy. For promotion of trade, China will follow the commitments it has made to lower the tariff rate, abolish the examination and approval system in granting foreign trade right step by step, and finally cancel the restriction on import quantities.
China has promised for the accession to the WTO that it will loosen control on import and export of all commodities in the coming three years, except bulk commodities such as crude oil, grain and tobacco which are put under the monopoly of companies designated by the government. All enterprises, no matter what ownership they are, including state owned, joint venture, foreign funded and private owned, can conduct foreign trade. The barrier for private enterprises to conduct foreign trade will be removed. Private enterprises will have to comply with the same standards as the state-owned ones to acquire the foreign trade right, thus creating conditions for the establishment of a registration system for conducting import and export. Documents issued by related departments show that starting from January l, 200l, private enterprises and private scientific research academies and institutes implement the same standards when applying for the qualification to conduct import and export with that of state-owned, collective owned and scientific research academies and enterprises.
The Ministry of Foreign Trade and Economic Cooperation (MOFTEC) issued a circular at the end of last year, saying that enterprises which can apply for the right to conduct import and export include private production enterprises with registered capital exceeding RMB5 million (those in areas inhabited by ethnic groups and central and western regions with registered capital of RMB3 million) and private scientific research academies and institutes with registered capital of more than RMB2 million, high-tech enterprises and enterprises producing machinery and electronic products. At the same time, the standards on sale income and supply volume for export have been removed. Prior to that, private enterprises applying for foreign trade right were required to have registered capital of more than RMB 8 million and the supply volume for export of more than íšl million. Now the standards have been lowered. The required registered capital is cut from over RMB8 million to íš5 million, and sale volume, from the required RMB50 million for two successive years to no requirement.
To delegate the foreign trade right to enterprises may bring about expansion of export business scope. At present, enterprises granted with the right can only export their own produced products and import their own raw materials requirements. They are not allowed to purchase other's products for export and trade on products they import. After the entry into the WTO, the governmental departments will allow these enterprises to conduct agent business on import, with the form changing from operating their own produced products to operating products made by other factories or playing the role of agent.
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The China Securities Regulatory Commission (CSRC) revealed recently a draft of its regulations on securities companies and has invited public comment for further improvement. The draft sets structural criteria for securities companies established within the country and guidelines for enlarging their business scope. Securities companies will be allowed to participate in venture capital business after acquiring approval from the CSRC. They will also be allowed to set up subsidiaries to do online brokering business but will have to first apply to the CSRC to get a license. Online brokers should possess a minimum 50 million yuan (íš6 million) of registered capital, with at least 10 technical staff to ensure the security of online trading. Securities houses will also be able to set up or hold shares of Chinese-invested overseas securities institutions, according to the CSRC draft. They will also be allowed to launch public offerings and issue bonds.
While giving securities firms a broader stage to play on, regulators will also tighten risk control and supervision to protect the interests of investors and keep order in the market. The CSRC said securities companies should engage some independent directors who will have an important say in corporate accounting, audit and assignment of managerial staff. Independent directors should not be employees of a securities company or have any conflicts of interest. On the other hand, all securities companies will be required to post their basic information more regularly and set up sound inner-control and risk monitoring mechanisms. For example, their liability should be kept within four times their net assets volume. Those breaking rules and regulations must bear responsibility for civil compensation if the misconduct leads to losses of investors. Introduction of civil compensation should push securities firms to operate according to set standards and improve management, analysts said.
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Zhang Xiaoqiang, deputy secretary general of the State Development Planning Commission (SDPC), recently proposed in the Second APEC (Asia Pacific Economic Cooperation) Investment Fair in Yantai a list of 228 major projects that involve íš47 billion. Foreign direct investment are welcome to these projects. One third of the projects are related to China's western region, it is known. These projects were first put forward by the provinces, autonomous regions and municipalities as well as some enterprises (groups) directly under the State Council and then put together by the State Development Planning Commission. These, featuring infrastructure and high-tech fields, are all key projects important to the national economy in the future and with strong and excellent market prospects with 29.3% in number involving transport infrastructure construction and 27.2% involving higher technological content chemicals, petrochemicals, and electronics. Those related to the western regions account for about one-third in number and investment amount.
lt. is learned that as these projects fall into the category ofČ state-encouraged areas or involve the central and western regions, they would therefore enjoy preferential government polices as:
1. Energy and transport infrastructure projects will enjoy a 50% cut in income taxes and from the year of profit-making, be exempted from two kinds of taxes and enjoy 50% cuts in three other kinds. Sino-foreign port and wharf construction projects with operation periods of 15 years or longer would be exempted from five kinds of taxes and enjoy 50% cuts in five other kinds from the year of profit-making.
2. Projects that meet government requirements would be exempted from import tax and VAT for equipment imported for their own use.
3. Projects involve coal, electricity, local railways, roads and ports, after approval, could have their operation scope expanded in related fields.
4. Projects in the western region will enjoy a l5% cut in the corporate VAT, and from the year of profit-making, be exempted from two kinds of taxes and enjoy 50% cuts in three other kinds.
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Southwest China's Sichuan Province will invest a total of 11.7 billion yuan (íš1.41 billion) in highway construction by the end of this year. Local sources said during the country's 9th Five-Year Plan period (1996-2000), the province invested 51 billion yuan (íš6.14 billion) in the sector and built 12 major expressways totaling 1,000 kilometers in length. By the end of last year, the province's highway length had reached 90,000 kilometers.
In a move that represents the complete opening of its road construction to overseas investment, Sichuan recently invited public bidding from domestic and foreign businesses for the province'sl0 expressway construction projects with a total length of over l,000 kilometers. By the end of last year, Sichuan had l,000 kilometers of expressways open to traffic, the best performer in terms of road transportation in western China. The two most important expressways, linking Chengdu with Chongqing and Mianyang respectively, both have foreign funding. The Chengdu-Chongqing Expressway Co Ltd raised íšl73 million after it was listed on the Hong Kong stock market. The Chengdu-Mianyang Expressway was financed by Sichuan and Hong Kong capital. According to statistics, Sichuan absorbed a total of íšl.02 billion in overseas contractual funding over the past five years, íš460 million of which is already in place.
According to an official with the province's Development Planning Commission, the latest public bidding involves l0 expressways totaling 1,0l2 kilometers, with an aggregate investment of íš3.423 billion. Three of the expressways, totaling 243 kilometers and linking Neijiang and Yibing, Longchang and Naxi, and GuangČan and Linshui, have already opened to traffic. The eastern section of the Chengdu Ring Road,and the Mojia-Qipanguan, Huima-Shuanglongmiao, Dazhou-Chongqing, Guangyuan-Bazhong, and Linshui-Dianjiang expressways are all under construction. These account for most of the province's highway construction projects. The cooperation parties could, in accordance with the actual situation, decide on the specific mode of overseas funding. Analysts say the l0 expressway projects are expected to have an internal yield of 6.6-12.4% and investors should have their investments recovered in l l-21 years.
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East China's Fujian Province reported an economic growth rate of 9.3% for the first six months of this year, 1.4 percentage points higher than the national average. The province's GDP hit 177.498 billion yuan (íš21.44 billion) in the period. Fujian's investment in fixed assets totaled 29.92 billion yuan (íš3.6 billion), up 8.8%, with infrastructure investment rising 15.6% and real estate investment 16%, respectively. Its primary industry produced an added value of 20.027 billion yuan (íš2.41 billion) in the same period, up 3.2%. The secondary industry produced an added value of 85.069 billion yuan (íš10.25 billion), up 10.6%. The tertiary industry produced 72.402 billion yuan (íš8.72 billion), a rise of 9.6%. Fujian is making efforts to build a standard legal environment for overseas investors. Related departments are amending relevant laws and regulations. All foreign-related laws and policies will be published, providing a clear view for overseas investors over laws and policies issued by the central and local governments. The government will concentrate on standardizing the market order and cracking down on various illegal activities to build a safer and stable market for fair competition.
The province is seeking cooperative opportunities from large foreign companies to update its petrochemical, electronics and automobile industries. Foreign investors are being invited to invest in infrastructure facilities, agriculture, manufacturing, high-tech industries, environmental protection, tourism, finance and transportation.
1. Infrastructure construction: Mainly the construction and operation of roads, harbors and railways, the development of new and clean energy, as well as energy-saving technology, and urban infrastructure construction.
2. Agriculture: Mainly aquaculture, aquaculture processing, special products, irrigation works and high-tech agriculture.
3. Manufacturing: Mainly petrochemical works, software, chip-making, networks and communications terminals, autos and assets restructuring of state-owned enterprises.
4. High-tech industries: Mainly bio-technology, new materials, IT and marine-exploration technology.
5. Environmental protection: Mainly waste water and garbage recycling technologies, clean manufacturing technologies, environmental monitoring technologies and the economization of resources.
6. Tourism: Mainly the exploration of new tourism areas, joint-ventures, tourist facilities and the production of tourist goods.
Cross-straits economic cooperation between Fujian Province and Taiwan will see opportunities in the coming years. The province is currently carrying out an industrial structure readjustment which may bring more opportunities to Taiwanese investors. The Chinese mainland and Taiwan's entrance into the WTO will create more beneficial factors to promote cross-straits economic cooperation. Fujian will further improve its investment environment to meet the standards of the WTO, which will also be helpful in developing a free and stable trade relationship between Fujian and Taiwan. The province has recently made great efforts to attract talent from home and abroad to participate in local development, which is also part of an endeavor to improve the investment environment. Many Taiwanese investors have developed businesses in Fujian Province in the past years, In 2000 alone, 402 cooperation programs were signed between the two sides, up 6.3% on the 1999 scale.
Data shows that by the end of 2000, a total of 6,297 Taiwan-funded program have been approved by Fujian Province. Fujian and Taiwan have negotiated to invest a volume of íš11.5 billion, and íš8.5 billion of the investments have already been realized. To date, the export volume from Taiwan to the Chinese mainland has reached more than íš20 billion. According to local officials, following the gradual lift of the ban on direct cross-straits transport, trade and postal services, the cooperation will be further extended. The province is well prepared for stronger Fujian-Taiwan economic ties and to meet the challenges brought by the WTO entry and an enlargement of cross-Straits cooperation. Fujian has many advantages, the most important of which is that, the province is the hometown of about 80% of Taiwanese people. The tie is already strong and stable for promoting and deepening cooperation.
Over the past 20 years, Taiwan has been sending advanced crop species and agricultural technologies to Fujian in an effort to set up food sources outside the limited confines of the island. Official statistics show the province has introduced more than 1,500 types of vegetables, fruits, rice, flowers, edible mushrooms, aquatic products, and domestic fowl and livestock from the island since late 1980s. Sharing similar geographic locations and common culture, Fujian and Taiwan have been exploiting the potential for agricultural cooperation ever since the mainland adopted reform and opening up policies in the late 1970s. More than 1,300 agricultural firms based in Taiwan have invested in projects in Fujian during the past 10 years. In that period, contracted capital reached íš1.6 billion and capital actually used in projects amounted to íš950 million. At present, a number of new projects of research and development are taking shape. Scientific cooperation in the areas of soil erosion, pesticides and fertilizers is also playing important roles in boosting the local economy.
Since 1990, more than 200 Taiwan delegations involving 1,000 agricultural officials, entrepreneurs and experts have visited Fujian, seeking opportunities for research and cooperation. The number of scholars from Fujian who have visited Taiwan on similar missions has been estimated at more than 200 during the same period. Statistics reveal agricultural exchanges between the province and Taiwan have not only boosted the process of agricultural and economic structure modernization in Fujian, but also enlarged the amount of farm produce from the province in the international market.
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Lying east of the Bohai Sea, on the Liaohe River, Yingkou is one of the key coastal cities in China opening to the world. Convenient transportation, developed industries and rich natural and tourism resources make Yingkou an attractive destination for both investors and tourists. Yingkou is the second largest trade hub in Northeast China. It has two seaports and 28 berths, the largest of which can accommodate 80,000-ton vessels. The ports can handle over 25 million tons of cargo and 200,000 standard containers annually. At present, the ports provide direct shipping service to over 120 ports in more than 40 countries and regions. After the third-phase construction, the Bayuquan New Port will have a better cargo-handling capacity. Yingkou is situated between Shenyang and Dalian, the two most important cities in Northeast China and is thus tied into a convenient transportation network.
The city has 37 industries including textiles, metallurgy, machinery, electronics and petrochemicals. The textiles industry, in particular, is equipped with advanced technologies. Cigarettes, paper making, musical instruments, and salt production are the four backbone branches of light industry. Moreover, brand names such as Panpan, Kelon, Roadside Flower and others have become household names throughout the country and are even popular abroad. Yingkou has a beautiful natural scenery and great potential for tourism. There are many famous mountains, beaches and temples as well as valuable cultural relics such as the Jinniu Mountain Ancient Relics, which draw numerous tourists every year. In addition, Yingkou has abundant agricultural and natural resources. With a mild climate, fertile soil, ample water and an extensive coastal line, The city is rich in fine rice, fruits and all kinds of valuable aquatic products. This land is also rich in minerals, with magnesium reserves that rank it among the top four magnesium areas in the world. The city of Dashiqiao under its jurisdiction is known as í░China's Magnesium Capital." Yingkou is one of the richest areas in the country for minerals such as gold, beron, dolomite and talcum.
Yingkou was among the first cities in China to carry out reform and opening up. It has established economic and trade relations with 140 countries and regions around the world. A great number of foreign enterprises including some Fortune 500 companies have set up over 1,200 enterprises in 13 industrial sectors. By the end of 2000, the city had utilized foreign capital valued at íš626 million. Foreign-invested enterprises contributed 25% to the city's gross domestic product (GDP) and 81% to its total exports.
Facing the new opportunities and challenges presented by China's pending entry into the WTO, Yingkou will speed up its development and open wider to the outside world, creating a broader arena for investment. Priorities will be given to such industries as textiles, light industry, machinery and electronics, agriculture, forestry, animal husbandry, aquaculture and deep processing, infrastructure construction for ports, bridges, roads and sewage treatment facilities, tourism and the service sector. Fifty projects concerning the above-mentioned sectors have been initiated for foreign investment, which have been published on the Internet. To attract more foreign investors, the Yingkou government put forward a series of preferential policies aimed at creating a favorable economic, legal and social environment.
1. FFEs registered in the city enjoy the same treatment as domestic businesses in services such as water, electricity, heat and gas supplies, transport, telecommunications, banking, commercial insurance, legal guarantee, labor, consultation, design and advertising. Within the administrative jurisdiction of the city foreigners pay the same price as local citizens for board and lodging, hospitalization, fares and tourist tickets.
2. FFEs engaged in agricultural comprehensive development, processing of agricultural products and urban infrastructure construction, will be refunded annually 50% of the income tax paid within two years after expiration of the tax exemption period.
3. Projects in the State List of Encouraged Fields of Foreign Investment including agriculture, forestry, animal husbandry, fishery and related industries, light industry and textile industry, are exempt from land use fees for three years.
4. Foreign investors engaged in developing waste lands, beaches and water will be refunded all the agricultural tax and agricultural specialty tax within five years.
5. Foreign investors which set up productive joint ventures and solely foreign-owned enterprises with operational periods of over 10 years, will be refunded 50% of the locally retained value-added tax within three years after the enterprises are put into operation.
6. Chinese partners needing funds for key projects using foreign fund to upgrade local state-owned enterprise, agricultural comprehensive development and township enterprises, will be supported by the city's technical renovation fund, agriculture circulation fund or development fund.
7. For projects in which local industrial enterprises use foreign funds for technological up-grading and the Chinese partners use a factory building as investment, the contract tax will be refunded to the joint venture. For projects in which the Chinese partners use land use right as investment, the locally retained land value-added tax will be refunded to the Chinese partner.
8. Apart from projects banned and restricted by the State, the property right of an enterprise is allowed to be sold partially or wholly to foreign investors. The operational right of bridges, roads, wharves and other facilities are allowed to be transferred partially or wholly to foreign investors, with operational periods of less than 40 years.
9. Foreign investors investing in the renovation of the outdated, residential areas enjoy the preferential policies stipulated by the provincial government.
10. Foreign experts and scholars establishing scientific research institutes are exempt from land service fees and land leasing management fees. Those engaged in scientific research, high-tech development or production may apply for project establishment funds and special technology funds from the State, the province or the city upon verification of the Yingkou Science and Technology Commission.
Project initiated for foreign cooperation:
1. Waste comprehensive treatment plant. Investment: íš5.9 million.
2. Sewage treatment. Investment: íš14.2 million.
3. Development of the Industrial Park of Yingkou Economy & Technology Development Zone. Investment: íš10 million.
4. Honghai Tourism & Vacation Village. Investment: íš10 million.
5. Kangju Garden. Investment: íš50.55 million.
6. Yingkou coastal highways. Investment: íš11.75 million.
7. Moon Lake Park. Investment: íš6.75 million.
8. A stadium in Yingkou Economy & Technology Development Zone. Investment: íš12 million.
9. Water-proof material. Investment: íšl2 million.
10. Shenjingzi Hotel. Investment: íš7.83 million.
11. Synthetic diamond. Investment: íš1.2 million.
12. Sea water and hot spring natatorium. Investment: íš2 million.
13. Bitter ginseng soda pesticide. Investment: íš5 million.
14. Light & heavy-duty engine bushings. Investment: íš6 million.
15. Concentrated fruit juice. Investment: íš20 million.
16. Processing of tussah silk floss. Investment: íš20 million.
17. Crystal resonator base. Investment: íš20 million.
18. Video telephone. Investment: íš20 million.
19. Tantalum capacitors. Investment: íš23 million.
20. Technical upgrading for the production of grand pianos. Investment: íš9.1 million.(to be continued)
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The Ministry of Agriculture is vowing to keep up the fast rise in exports and foreign direct investment to township enterprises. Ministry officials have set a goal of an annual increase in exports of 8% over the next five years. That means by the end of the 10th Five-Year Plan period (2001-05), annual total export volume from factories in rural areas would stand at 1.3 trillion yuan (íš153.6 billion). That figure stood at 867 billion yuan (íš104.8 billion) in 2000, up 10% from 1999. The ministry also plans to incubate at least 1,000 large-scale township enterprises and expects export volume from each of more than 80 million yuan (íš9.7 million). The development of township enterprises is vital to agricultural development. To this end, the ministry held a national conference on promoting the export-oriented economy of township enterprises. Vice-Minister of Foreign Trade and Economic Cooperation Zhou Keren attended the session and hoped village-run firms would help boost the country's foreign trade.
The 9th Five-Year Plan period (1996-2000) witnessed the rapid development in township enterprises. In 2000, township enterprises' direct export volume--or exports that don't rely on any intermediary channels for trade--hit 695 billion yuan (íš84 billion). That's one-third of the country's total. Also in 2000, a total of 25,000 joint-venture township enterprises were set up with about íš30.7 billion overseas investment. Chinese township enterprises also have established more than 1,700 businesses outside China, investing 16 billion yuan (íš1.9 billion). The fast development of township enterprises, which con-tributes up to 30% of China's gross domestic product, has been an important force to solve two tricky issues for China--the slow rise of farmersČ income and the need to find jobs for excess rural labor force. Ministry of Agriculture's figures show much of farmersČ net incomes have been earned through township and village enterprises. In 1996, 29.9% of the average net income per capita for farmers was channeled from such enterprises. In 1999, the rate was up to about 34%, increasing by roughly 4 percentage points. Township enterprises of all sizes in China--more than 20 million last year--have employed 127 million workers, mostly rural residents.
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The Jinan High-Tech Development Zone in Shandong Province is one of the state-level development zones approved by the State Council in 1991. After l0 years of construction, the zone has registered nearly 3,000 enterprises, of which, 236 are high-tech enterprises that are developing or have developed 355 kinds of high-tech products. Since its establishment, the zone has realized RMB28.81 billion in income from technology, industry and trade, RMB23.2 billion in gross output value, RMB9.95 billion in industrial added value, RMB5.38 billion in profits and taxes, and íšl90 million in export.
Over the past few years, the zone has invested more than RMB l billion in the capital construction. It has built a widespread transportation network. In the zone, there are l1 high-grade colleges and universities, 53 scientific research institutes at the provincial or ministerial level, more than l0,000 senior professional technicians, and three state-level labs. It ranks among the country's largest intellectual and technology-intensive zones. In a bid to create fine conditions for the promotion and application of high-tech results of the enterprises in the zone, it has built a perfect service network involving industrial and commercial administration, taxation, finance, lawyer and personnel exchange services, as well as l2 service companies including the customs, comprehensive bonded warehouse and the international business center. The zone has attracted a growing number of foreign investors from more than 20 countries and regions. It has established cooperation with more than 30 renowned enterprises and consortiums in the world, accommodated 136 foreign-funded enterprises (FFEs). FFEs are becoming the most active economy in the development zone.
In addition, it has granted a series of preferential policies to FFEs. For instance, local income tax is exempted for FFEs engaged in machine building, electronics, metallurgical, chemical, building materials, light industry, textile, packaging, medical apparatus and instruments, pharmaceutical, farming, forestry, animal husbandry, processing industry, and building industry. Foreign investors may draw back 40% of income tax levied on the additional investment when they add investment or registered capital to the FFEs together with the profits, or invest the profits in a new FFE with a term no less than 5 years. They may draw back all the income tax levied on the additional investment when they allocate their profits from FFEs to build or expand export-
oriented or high-tech enterprises with a term no less than 5 years. The rebate needs to be returned if they withdraw the investment in 5 years. Foreign investors in export-oriented or high-tech enterprises will be free of income tax levied on remittance when they remit their profits from these enterprises.
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The alcoholic drinks industry in China has a history of thousands of years and has made a great contribution to the civilization of mankind. The China-made white spirit, bai jiu, has a worldwide reputation along with such alcoholic drinks as brandy, whiskey, vodka and rum. Adding medicinal herb into wine and turning it into a health care drink is also a Chinese innovation. After China started reform and opening up in the late 1970s, the alcoholic drinks sector retained strong momentum. China is a large producer of alcoholic drinks, with an output of 28 million tons in 1999. It is also a large consumers' market. The country's entry into the WTO is expected to bring more opportunities and challenges to the development of China's alcoholic drinks industry.
Taking the wine-making sector as an example, the per capita consumption of wine in China lags far behind the world's average level. And China's production of wine is less than half the output of Bordeaux in France. This shows China has a huge market potential. Although such wine brands as Changyu, Dynasty and Great Wall are renowned for their quality in China, most China-made brands have not obtained adequate popularity in the international market. China levies relatively high tariffs on imported alcoholic drinks. However, after it enters the WTO, the tariffs will decrease dramatically and more foreign alcoholic drinks will be allowed into the market. To overcome this challenge, China's alcoholic drinks makers are urged to sharpen their competitiveness through improving quality and enhancing cooperation with foreign counterparts. The China (Zhuhai) International Wine & Spirit Trade Fair to be held in December in Zhuhai will offer a stage to promote technological exchanges between China and the rest of the world. It will also help with the modernization of China's alcoholic drinks industry.
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First Automotive Works (FAW), one of China's top three automakers, is in talks with Germany's Mercedes-Benz about a joint venture to make heavy trucks. The move will help FAW become the world's largest truck manufacturing base. Currently FAW controls half of the domestic truck market. Last year, the company produced about 220,000 Jiefang trucks, ranking third after Mercedes-Benz and Sweden's Volvo Truck Corp. The company sold 83,915 medium- and heavy-weight Jiefang trucks during the first half of this year, an increase of 22% from that of the same period in 2000. Analysts say truck sales in China are expected to increase to 1.5 million units by 2005 with the country's expressways extending and the logistics sector growing. Japan's Isuzu has begun producing its F-series heavy trucks at Chongqing's Qingling Motor Co Ltd. Qingling has set a sales target of 3-5,000 trucks for next year. Volvo Truck Corp is negotiating with the Shandong-based China National Heavy Truck Corp to establish a joint venture. FAW has been exploring overseas markets for trucks. The company has established truck assembling plants in Tanzania, South Africa and Uganda.
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To further expand its presence in China, Eastman Kodak Co signed an agreement with China's oldest camera maker recently to cooperate on manufacturing digital cameras in Shanghai. The agreement signed with Shanghai Seagull Camera Co Ltd is seen as Kodak's aggressive move to take leadership in the country's fast-growing digital camera market. Under the deal, the world's major photographic film supplier will contribute product design, technology and management, while Seagull will assist in manufacturing and marketing. The two companies will start producing digital cameras at Kodak's plant in Pudong District soon, with the first-phase investment estimated at íš4 million and output expected to reach 500,000 units in two years. Made under the Kodak brand, the digital cameras primarily will be sold in the domestic market.
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Japan's second largest fixed-line telecom operator KDDI recently announced that it has signed a cooperation agreement with China's second biggest mobile telecom operator China Unicom. Under the agreement, KDDI will provide China Unicom of wireless Internet communication technology and the two telecom giants will join hand in the R&D of high-speed mobile communication technology. It is learned that China Unicom plans to introduce KDDI's CDMA One mobile phone mode before the end of this year. With this mode, China Unicom will be able to offer high quality voice and data transmission service. KDDI revealed that China Unicom would provide a global roaming service, which will allow its CDMA One mobile phone users to call China directly from Japan. At present China has more than l00 million users and boasts the fastest-growing telecom market in the world.
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ABB, a global technology company, recently launched a wholly owned power distribution transformer facility in Hefei, capital of Anhui Province. The company has invested around íš20 million in the facility, whose products help transmit electricity, with annual production capacity of 12,000 units, making it the largest distribution transformer manufacturer in China. According to ABB Group, the Hefei company will use the most advanced assembly equipment to guarantee quality. It will also reduce the total cycle time from order to final shipment to better satisfy mounting demand for distribution transformers in China. The launch of the Hefei facility was part of ABB's efforts to upgrade its business in China to make it its third largest market worldwide after Germany and the US over the next 10 years, ABB s9ůąÉŞ4)mEEt4(4
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