Oct. 29, 2001
C a t a l o g
The Law of the People's Republic of China on Trust, which went into force on October 1, will boost the development of China's economy while protecting the interests of investors, said recently Cheng Siwei, vice-chairman of the Standing Committee of the Ninth National People's Congress (NPC). The new law on trusts is expected to give a shot in the arm to the development of trust business. A trust is essentially a financial arrangement in which an individual (or trustor) gives fiduciary control of property to a person or institution (or trustee) for the benefit of beneficiaries. The law marks the legal establishment of the trust trade and provides a powerful legal guarantee and code of practice for it.
Trust companies returned to China some 20 years ago when the country adopted the economic reform and opening-up policy. However, the absence of legal rules or guidelines for the trust business created problems. The country's first Trust Law was initiated eight years ago and only approved by Cheng's committee in April of this year after hot debate. The law governs basic trust relations to protect the rights of all parties, including trustees, trustors and beneficiaries. Chen regarded the trust law as an important footstone for legislation regulating the market economy. The law is not only a fundamental legal principle to regulate trust relations but also basic prerequisite for trust-related business such as specific types of investment funds. Chinese lawmakers are now busy working on the draft investment fund management law. Implementation of the law will also help renew the concept of property management among the Chinese and better protect the interests of investors, especially small ones.
The trust business is burgeoning in China as more individuals and institutions ask trust companies to help them manage their properties. However, Chen urged wider publicity on this law in a bid to raise awareness among more people and draw more clients to the fledging business. The inclusion of regulations for trust firms has remained a focal point of arguments during the law's deliberations. The final version of the law barely touches on the trust industry -- a situation now being rectified by the State Council. Many of the trust companies are actually involved in banking business -- strictly banned by the State Council. The People's Bank of China, the country's central bank, promulgated a rule governing the administration of trust companies early this year. The implementation of this rule could help the law regulating the trust industry, while new rules on related businesses would be worked out when the conditions are right.
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China is busy drafting a law on tangible property rights to meet the requirements of the market economy that the country is striving to build. The draft law was intended to complete the Chinese legal system of property laws, better protect possessions of different ownership by making a clear definition on them, and safeguard the trade security and market order. The National People's Congress Standing Committee has enlisted the property rights law among its legislative plan. China has made a series of property laws including the General Principles of Civil Law and laws on guarantees, land management, grasslands, water, mineral resources, patents, trademarks and copyright since it implemented its opening up and reform policies two decades ago. However, a sound tangible property rights law is in urgent need when current legislation can barely meet the increasing demand of the market economy to guarantee a clear-cut property rights division as well as smooth and safe transaction.
The legislators are urged to make the law mirror the real situation in China and follow international standards at the same time so that the nation can meet the challenges of entry to the WTO. Lawmakers are also requested to consult more with experts to make the law more practical and forward-looking. The main purpose of the property rights law is to define and specify rights of possession in China. Moreover, it is the basic rule for the regulation of a market economy because the prerequisite for any transaction is the ownership of property and the result of the transaction is the shift of property rights. The lack of basic rules in tangible property rights has hampered the functioning of current legislation such as the Contract Law and the Guarantee Law. The law on tangible property rights is the core of a civil code that Chinese legislators have been pursuing for more than two decades. It is expected to encourage and stimulate people to create more wealth for society by giving equal protection to property under different ownership.
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China will quicken the pace of mining reform to encourage more foreign capital to flow. In the coming 5 to 10 years, substantial progress will be made to improve the sector including new laws and ways to explore and evaluate mineral developments, recently said Shou Jiahua, vice-minister of land and resources. The Chinese geological exploration system has been greatly changed and more, foreign geological exploration companies are investing in accordance with market principles. China's mining market has become active thanks to these measures. In 2000, 80 applications of exploration licenses from foreign investors were approved, 10 times as many as in 1999.
The Chinese government will encourage overseas business persons to come to China to prospect and extract mineral resources and due protection will be provided to them in the undertaking. It has also extended an invitation to foreign expertise, especially in the non oil sector. The country had greatly improved its investment climate since 1999 when the Chinese mining market started to open up to the outside world. China has come up with positive policies and opened areas toward overseas investment in mineral resource development to a better environment for overseas investment in the area and also for cooperation of domestic minerals enterprises with overseas partners.
The preferential policies include:
1. Overseas investors are allowed to cooperate with the Chinese side as non-corporate cooperative bodies in the prospecting of mineral resources. Foreign-funded enterprises and non-corporate cooperative bodies, after discovering minerals resources with commercial values are guaranteed their right to extract the resources as long as they meet conditions for such operations in accordance with related laws and regulations.
2. Overseas investors are encouraged to enter into joint-equity or cooperative ventures with China's domestic mines. The government encourages overseas investors to prospect and extract mineral resources in the central and western regions.
3. The local governments at various levels and related government agencies must not participate in the establishment and operation of joint-equity or cooperative mines. They are also barred from demanding shares or profit dividends in any form from overseas investors. They are also not allowed to conduct arbitrary inspections or collecting arbitrary fees. Local governments at various levels and related government agencies shall actively improve the environment for overseas investments by enhancing their supervisory roles and maintaining order in the mining industry so as to safeguard the legal interests of overseas investors.
4. The country will strengthen legal construction and enhance policy guidance in utilizing overseas capital to prospect and exploit local mineral resources. Formalities that overseas investors have to undertake will be more transparent, simpler and standard. Various information services will also be provided.
The country will also encourage domestic enterprises to go abroad and prospect and extract overseas mineral resources, adjusting the mix of mineral export and import, exercising control over the total export volume of such minerals as tungsten, tin, stibium, rare earth, fluorite, and barytes, all of which enjoy export advantages.
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China's first rules on the administration of franchise business are on the drafting, it was unveiled recently by the State Economic and Trade Commission (SETC). The rules will come as a revision to the ˇ°Rules on the Administration of Commercial Franchise Business" published in l997, and the contents involved will include the rights and obligations of the two sides of franchising, the basic model for contracts of franchised business, transparency of information disclosed, ads as well as penalty for illegal activities of the business. Contents concerning limits for information disclosure, ads and penalty are newly added.
Franchising has long been a popular business in the world, but it is still a new comer in China, and even the Asia and Pacific region, with a history of less than 10 years. By the end of 2000, there had been more than 400 enterprises with l,000 plus shops doing franchised business in China. The business involved more than 30 sectors. However, as the number of enterprises with franchised rights increasing rapidly, many problems cropped up, and one of the most serious is the infringement of intellectual property right. For example, the Malan Noodles, which opened 38l chain stores in four years, is now seriously troubled by infringements to its brand.
Meanwhile, the Little Swan Group has also found serious infringements to its trademarks during its expansion to provinces and regions outside Chongqing. Illegal pyramid sales have also been engaged by enterprises with franchised rights, all to a great breakdown of the market order.
Insiders pay great attention to the upcoming publication of the rules. What in their mind is development of the business concerns not merely a play out of the concept, but also a lowering of costs and then to give benefit to both customers and managers through development of name brands, economy of scale operation and industrialization. So, the urgent task at present is to standardize and legalize such a business.
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The Government recently announced a list of 228 major projects in urgent need of overseas investment. Officials from the State Development Planning Commission said that the listed projects are key projects to be launched in the development of national economy in the coming years, most of which are in infrastructure and high-tech sectors. The projects will enjoy preferential policies granted by the State in foreign investment, and utilizing foreign funds in the development of advantage industries in western and central parts of China. Of the 228 projects, l6 are projects of agriculture and water conservancy; 23, light and textile industries; 68, communications and transportation; l5, energy industry; 79, raw materials and engineering; l8, machine-building and electronic industries; 3, urban public facilities; and 6, tourism industry.
The l6 agricultural and water conservancy projects include a high-tech grass industry project in Inner Mongolia, a comprehensive development project of the Dongtai coastal tide land in Jiangsu Province, a chinaberry planting and development project in Sichuan, a saffron crocus planting base project in Tibet, a development project of forestry industrialization system in Tibet, a technical project of transforming export-oriented orchards in Shaanxi, a project of quality wine grape production base in Gansu, a grape planting project in Ningxia, and a modern agricultural demonstration park project of no soil planting of Hami in Xinjiang.
The 23 light and textile industrial projects include a coated paper production project in Tianjin, a corn processing project in Inner Mongolia, a newsprint project for color offset printing in Jilin, a corn processing project in Heilongjiang, a project of manufacturing twin-screw compressors for central heating systems in Jiangxi, a forest-pulp integration project in Shandong, a popular timber paper-making project in Henan, a corn bioengineering project in Sichuan, a fuel alcohol producing project in Ningxia, and a castor engineering project in Xinjiang.
The 68 communications and transportation projects including a project for expansion of container harbor in the north of Dongtu dike of the Tianjin Port, the No.2 harbor project of the Hebei-Beijing-Tangshan Port Administration Bureau, the expansion project of the Jinzhou Port in Liaoning, a project for expansion of the Dalian Port in Liaoning, a project for construction of the Dafeng Port in Jiangsu, a project for the Miaoling third phase construction of the Lianyungang Port in Jiangsu, a project for the construction of No. l3 and 14 berths of the Fangcheng Port in Guangxi, the second phase construction project of the Haikou Port in Hainan, a project for the construction of the Chengde section of the Beijing-Chengde expressway, the Shijiazhuang-Cangzhou express-way project in Hebei, the Fushun-Nanzaimu expressway construction project in Liaoning, the expansion project of the Jiamusi-Harbin section of the Tongjiang-Sanya state trunk road in Heilongjiang, the around-the-city expressway construction project of Ningbo in Zhejiang, the Simao-Xiaomengjie expressway construction project in Yunnan, a project to construct the Sanming section of Sanming-Quanzhou expressway in Fujian, the Luoyang-Jiyuan expressway project in Henan, the Zhoushan island-linking bridge project in Zhejiang, the Xiamen-Zhangzhou bridge project, across-the-Yangtze tunnel in Wuhan, railway between Jining of Inner Mongolia and Zhangjiakou of Hebei, and the Naxi-Shuyong railway project in Sichuan.(to be continued)
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The Daqing Oil Field in Heilongjiang is expected to be eclipsed by Xinjiang, which boasts three major oil fields. ˇ°Consolidating oil production in the eastern part of the country while developing that in the west" is a recognized strategy in the development of the country's oil and gas resources. China plans to turn Xinjiang into the backup base for the country's petroleum industry. Li Licheng, vice director of Xinjiang Petroleum Academy stated that in eight years time Xinjiang will become China's largest petroleum and natural gas base. 60.9% of the economic growth of Xinjiang last year was from the petroleum and natural gas industry.
In 1990s, alongside the discovery of large oil fields in the Junggar, Tarim, and Tu Ha Basins, Xinjiang's economy has registered rapid growth powered by the petroleum and natural gas resources. Xinjiang boasts 20.86 billion tons of petroleum reserve, accounting for 22% of the country's total, or 30% of its total reserves on land. The reserves of the Junggar Basin make up for 71% of the total petroleum resources known in Xinjiang. The region's reserves of natural gas are 10.3 trillion cubic meters, accounting for 27% of the country's total or 34% of its total on land. In February this year Xinjiang Oil Field Company announced that a new breakthrough has been made in the oil exploration in the Junggar Basin, and a large oil field with output reaching l million tons has been found. Obviously, the newly found oil and gas fields are fueling the economic growth of Xinjiang. At present 47.5% of the region's industrial output, 46.9% of the region's sales profits, and 6l % of profits and taxes paid are from the oil and gas sector.
China is the 5th largest oil producer in the world. In 2000, the country produced 160 million tons of oil, 30 million tons of which were exported. China also imported 72 million tons of petroleum during the same period, consuming a large amount of the country's foreign exchanges. To solve the petroleum shortage, China is developing its domestic production while considering the potential of Central Asia, which is rich in oil resources. Xinjiang, in the inner part of Asia and bordering a region rich in oils and natural gas with the Caspian Sea (Lihai) at the core, has a geographical advantage as a transit point for petroleum. Utilizing the surplus output of oil and gas of countries in central Asia will help solve China's shortage of oil and gas. As early as 1997, China signed a package petroleum agreement totaling $9.5 billion with Kazakhstan, including rebuilding the Wujin Oil Field, and laying two oil transmission pipelines from Kazakhstan to the western part of China and to Iran. Moreover, the country invested $325 million in obtaining a 60% stake in Akejiubing Oil and Gas Field and committed to invest $4 billion into oil and natural gas development of the joint venture over a 20 year period.
Last year Kazakhstan and China reached a consensus on jointly exploring petroleum and laying oil transmission pipelines, and supporting export of crude oil to China. The projects include construction of a 3000-km petroleum pipeline from western part of Kazakhstan to China, with capital needed for pipeline construction amounting to $3-3.5 billion, and annual transmission of petroleum of at least 20 million tons. It is said that China is also conducting active consultations with Uzbekistan, the largest natural gas producer in Central Asia, and the two sides are very likely to reach an agreement on exporting natural gas to China.
Xinjiang will become a freight station for transmitting oil and natural gas coming from Central Asia after China begins importing petroleum and natural gas from the five countries in Central Asia. The tens of billions of US dollars input will, no doubt, boost the employment and economic development of the region. It is expected that by 2005, the amount of crude oil going by way of Xinjiang will reach 25 million tons. The amount of crude oil transported from Xinjiang to other parts of China will reach between 35 to 40 million tons when the crude oil produced in Xinjiang is included.
The project of transporting gas from west to east in China will be formally launched soon. Some experts anticipate that the project will enable the production of oil and gas in Xinjiang to realize a ˇ°triple jump" in the coming 10 years. According to the current plan, the first stage of the project is to be completed by the year 2003 and by then the gas transmission of Xinjiang will reach 12 billion cubic meters. By 2005, Xinjiang's output of crude oil will increase from the present 18.5 million tons to 25 million tons. By 2008, 20 million tons of crude oil will come in from Kazakhstan. The overall structure of oil and natural gas distribution in Xinjiang follows the pattern of oil in the northern part and gas in the south.
It is reported that the total investment in the project to transport natural gas from west to east is RMB 146.3 billion, with the backbone pipeline passing through nine provinces, autonomous regions and municipalities. The projects will use 1.74 million tons of steel, 5,100 tons of welding rods, and dig and fill over 30 million cubic meters of earth and rock, as well as a large amount of cement, wood, pumps, instruments and devices, and automation equipment. The project, ranging from development of gas fields, laying of pipelines, building materials to equipment and related industries, will constitute a vast investment-intensive market. Provinces and autonomous regions in the west are expected to absorb RMB 33.8 billion among the total investment and RMB 28 billion out of the RMB 33.8 billion will go to Xinjiang. 67% of the pipelines of the projects to transport natural gas from west to east will be built in the western part of the country and the fixed investment in Xinjiang's oil and gas fields is expected to be no less than RMB 20 billion. This vast amount of investment will, no doubt, bring along a great development of the economies in the western part of the country.
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Tianjin is opening its doors wider to the outside world and building itself into a modern harbor city as well as an important economic center for northern China. Overlooking Bohai Sea, This coastal city was among the first group of cities that the central government decided to open up to overseas investment and trade two decades ago. Now, as the nation stands at the brink of accession to the WTO, the city anticipates further cooperation with multinational companies. To meet this challenge, the municipality is working to improve its investment environment by installing urban facilities and transportation and by reforming its foreign trade rules. The city has worked out a dozen preferential policies to back up foreign investment and has recently established two special funds to support technological renovation and development of high-tech.
Tianjin has worked out a string of new measures to attract foreign investment. High-light of the new measures include:
l. In the wake of the country's entry to the WTO, the municipality will open its finance, insurance, securities, telecom, commerce, foreign trade, tourism, consultancy, accountancy, auditing and other intermediary services to overseas investors at an all-round way.
2. The municipality will spend 3-5 years establishing a high official visiting system with the world's top 500 well-known multinational corporations and their headquarters in Asia-Pacific region and R&D institutions as well for the municipality to work as an investment base and R&D base of multinational corporations.
3. Tianjin, which takes the lead in drawing up the modern logistics development outline in China, will invite domestic and overseas capitals widely through its advanced communication and transportation network and e-platform to build a modern logistics system, which will work with the western part of the country and integrate with Northeastern Asia to make the municipality a logistics center in China and Northeastern Asia. In the near future, it will initiate five logistics centers in the development zone, bonded zone, airport and multi-functional port economic zone at the lower reaches of Haihe River.
4. The municipality will devote major efforts to build foreign small and mid-sized industrial enterprises investment parks, and overseas Chinese industrial start-up parks, and agricultural start-up parks. The former will foster modern type administration of properties and provide a complete range of supporting service to investors to help them to start their business under a low cost and reach the professional and massive operation as soon as possible. The latter will provide free offices to production enterprises and representative offices set up by overseas Chinese in Tianjin within a certain period of time, and also give them guidance in laws, regulations and policies concerned and the most preferential treatments in land use, tax reduction and exemption.
5. The municipality will readjust and formulate a series of new preferential policies to encourage foreign investment. For instance, it will encourage multinational corporations to set up R&D organs, send in venture capital and establish foreign-funded high-tech enterprises by building up high-tech industrial development funds and risk investment funds in the locality. It will also offer IT projects with special preferential treatments in land price, taxation reduction and exemption, discount interest of loans.
6. In the light of the requirements for China's participation in the WTO, the municipality will check up various laws and regulations involving foreign investment at an all-round way so as to simplify the examination and approval procedure, transform the government functions, provide better services, normalize market orders, and adopt total international practices. Meanwhile, it will make greater efforts to the urban construction and upgrade the basic facilities and necessary supply capacity, aiming to provide an easy and comfortable environment for the production, management and living of investors.
Tianjin proposed recently l47 projects to introduce foreign investment through a release of information for major projects opening for foreign investment in the 10th Five-Year Plan period (2001-05), ranging from high-tech, renovation of traditional industries, commerce and trade services, infrastructure, to farming, forestation and water conservancy, and social projects, a total of 6 fields anticipated to introduce a total of RMB l39.3 billion. It is said that more than 20 renowned large enterprises from the United States, Japan, Spain, HKSAR and other countries and regions and over l00 famous enterprises and financial institutions from inside the country participated in the release and signed 9 projects including the Tianjin International Automobile Exhibition and Trade Center, the Subway No. l Route, the Pumping and Energy Storing Power Station of Taohuasi, the lithium ion cell, the expansion and renovation of local railways, the Nanjiang Bulk Cargo Physical Distribution Center of Tianjin Port, the deep processing of neodymium, iron and boron, and the industrialization of phosphofluoric acid neodymium, water recycling in Tianjin Development Zone.
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21. Clinker cement production line. Investment: $23.9 million.
22. Production of standard structure members. Investment: $40 million.
23. Joint venture for the production of U-PVC plastic profile. Investment: $12 million.
24. Metal surface vulcanization. Investment: $198.8 million.
25. Development of software application system. Investment: $10.8 million.
26. Conference and exhibition management software. Investment: $20 million.
27. Production line for intelligent ticket and card. Investment: $14.5 million.
28. Satellite remote sensing data receiving and processing system. Investment: $36 million.
29. Development of 3S platform and software. Investment: $7.8 million.
30. Production line for concentrated kiwi juice. Investment: $5.9 million.
31. Production line for Huanggui brand rice wine. Investment: $9 million.
32. Expanding the production of furniture. Investment: $18 million.
33. Production of high-quality planography plate. Investment: $30 million.
34. Central heating project in Lintong District. Investment: $15.7 million.
35. Yanliang District Sewage Treatment Factory. Investment: $11.7 million.
36. Construction of the Yanliang section of the l07 Provincial Highway. Investment: $24.4 million.
37. Water supply project in Yanliang District. Investment: $29.8 million.
38. Construction of 15 automobile natural gas filling stations. Investment: $13.4 million.
39. Development along the Chanhe and Bahe rivers. Investment: $24 million.
40. China Western International Auto City. Investment: $14.4 million.
41. Xi'an Western Plastics City. Investment: $22.5 million.
42. Upgrading of tourism and trade facilities in Town God's Temple Area. Investment: $48 million.
43. Xi'an Air Business Center. Investment: $78.2 million.
44. Xi'an Aero-Power Real Estate. Investment: $14.4 million.
45. China Western Electronics and Information Base. Investment: $301 million.
46. Oriental Cherry Garden. Investment: $45.8 million.
47. Qing¬đan Commercial Building. Investment: $24 million.
48. Anxinyuan Green Garden. Investment: $48 million.
49. Xi'an Tang Dynasty Garden. Investment: $111 million.
50. Development of Lintong Lishan Hot Spring. Investment: $27.1 million.
51. Xi'an Wangshunshan National Forest Park. Investment: $24.9 million.
53. Xi'an Yuyuan Garden. Investment: $144.6 million.
54. Construction of Xi'an International Football Exchange Centers. Investment: $101 million.
55. Minsheng Hotel.
56. Xi'an Jiefang Department Store.
57. Xi'an Tumen Shopping Mall.
58. Ankinyuan (Xi'an) Steel Co Ltd.
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China is drafting the nation's first development program for the marine economy which is expected to boost the sector over the next 10 years. The State Council has called for the plan to be released as soon as possible, said Wei Guoqi, deputy director of the Planning Division of the State Oceanographic Bureau. The 10-year plan governing coastal provincial regions, as well as the related fields of agriculture and transportation, will be submitted to the bureau by late October. The marine sector will be a major growth engine for the economy in the future. Total output value of China's ˇ°blue economy" which consists of sectors including fishing, sea transportation, ports and the salt-making industry has increased 32 times during the past 20 years. Over 80% of the country's exporting industries are located along China's coastline, while over 80% of foreign trade is carried out by sea shipping. Preliminary estimates indicate that last year's total output value of the blue economy was about 400 billion yuan ($48.3 billion), excluding 100 billion yuan ($12.1 billion) in revenue from domestic tourism.
A unified program is needed to tackle worsening problems like environmental pollution, resource depletion and low efficiency in resource exploitation. For example, over 200,000 square kilometers of China's coastal sea waters suffer from pollution, of which about 30,000 square kilometers is considered severely polluted. 80% of China's coral reefs have been destroyed and nearly 70% of the coastline has suffered serious erosion. There have also been more than 20 large-scale red tides since 1990. The exploitation of seabed oil and gas, sea water, tidal energy and sea-related tourism has been limited. Chinese fishery has also suffered severe setbacks because of resource depletion. The planned program will govern the exploration and exploitation of marine resources, the development of marine industries, and the protection of the marine biological environment. The program will give emphasis to promoting the marine economy by encouraging coastal regions to develop appropriate industries suited to their environmental conditions.
The central government will improve the legal and market mechanisms to support the marine economy and establish and maintain an environment of fair competition to attract more domestic and foreign companies to participate in marine industries. The program will produce specific goals for the country's marine economy over the next 5 to 10 years. Wei predicted a big increase from the blue economy's current 2% contribution to the nation's GDP. The national program fits in with the blueprints of related local governments and industries, which have expressed high expectations about the future of the marine economy. For example, Guanzhou, capital of south China's Guangdong Province, has vowed to establish itself as ˇ°a city with a powerful marine economy" within the next five years. The contribution of the marine economy to the local GDP is expected to increase from the present 7% to 11%. The drafting of the program is being carried out by the State Development Planning Commission and the State Oceanographic Bureau. Some coastal governments have had considerable success with their marine development program, including those in Liaoning, Shandong and Guangdong provinces. These provinces have laid a solid foundation for the launch of the national program.
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After opening Shenzhen and other three coastal cities in South China as special economic regions and then dozens of economic and technological development zones in the 1980s, the country introduced free trade zones in the early 1990s in 15 coast cities, including Shanghai, Guangzhou, Shenzhen and Tianjin. These specially carved out cities and zones served as the country's centers to embrace foreign investments and international way of economic and trade practice. Often located around major seaports, free trade zones are said to be ˇ°inside the territory but outside customs",--companies registered there are exempt from complex customs regulation and tariffs and value-added taxes; they also enjoy a series of preferential treatment as in other special economic areas. Since the local governments spent about 40 billion yuan to build the free trade zones, a large number of domestic and overseas companies have settled down there. By now, the contractual investments have amounted to more than $16 billion.
But people are worrying that when China enters WTO and gradually lowers the high tariffs to a moderate level, the free trade zone's duty-free policies may lose their edge. The zones are facing challenges when the country gradually lifts quotas of various imported goods and brings the tariff to a relatively low level. The companies might reconsider where their investment should go when preferential policies on duties or taxies are no longer too much different.
Officials from the free trade zones said the tariffs are not the major element for free trade zones to attract foreign investments. The meaning of free trade zones' existence lies in their efficiency in processing goods, the speed to finish the customs procedures, the capability of cargo flow distributions. China's entry into the WTO will not mean the end of its 15 free trade zones but a chance for their improvement and perfection. Free trade zone is still a popular thing in the world, and it will play a more important role in China as the country completely opens up to the outside world.
The free trade zones, which often have convenient geographic advantages and long been good at cargo processing and distribution, will develop themselves into distribution and trade centers for imports and exports. It is true that the decade-old free trade zones in China still has much to do as the country lacks experience and a set of laws were still not in place. In the developed countries the free trade zones are directly administrated by the national governments, and all activities are governed by law. While in China, the zones are watched by local governments, and what can be referred to are only some policies and regulations. It is urgent for the central government to draft a law regarding free trade zones so as to adjust the domestic trade zones onto the international track when the country joins WTO.
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China's farm machinery industry, which enjoyed significant development in the past decade thanks to a rapid rise in demand, will continue to plow ahead on the modernization drive of agricultural sector. China's farm machinery is competitive in the global markets because during the last decade, the State has accomplished quite a few advanced research achievements which are now being translated into production. Indeed, exports will be key as other nations work to modernize their agricultural practices, too, experts said. A new plan from the Center of Farm Technology under the Ministry of Science and Technology predicted China will export more than 80,000 tractors and 12,000 transport trucks in the coming five years. China earned $500 million from such exports in 2000, a figure expected to soar to $660 million by 2005. Yet domestic needs will account for most of the industry's business. In most parts of China's rural areas, agricultural mechanization is quite lagging, which means huge potential for development.
China has about 130 million hectares of arable land, but its rate of tractors and reaping machines per hectare lag far behind developed nations. The past decade has seen China step up the construction of dikes and key water conservancy projects as well as the dredging of major rivers and lakes and the reinforcement of decaying reservoirs. These infrastructure constructions will certainly contribute a lot to the farm machinery, because tractors are used for transportation during such work. These upgrades will improve water use efficiency and help rural people have more drinking water and water for farming. Farm machinery will play a big role in helping promote proper agricultural development. China's ambitious campaign to develop its western regions will bring more opportunities for the industry as well. In the western regions, the State plans to develop large production bases for commercial grain and other high-quality products and expand wholesale markets for farm products.
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Shanghai's first overseas-funded joint venture involving traditional Chinese medicine debuted on August 8--carving its herbal remedies niche ahead of competitors. The new company, Shanghai Hutchison Huangpu Pharmaceutical Co Ltd, is 50-50 jointly held by Hong Kong-based Hutchison Whampoa Ltd and Shanghai Traditional Chinese Drugs Co Ltd. The two sides also announced they will invest 220 million yuan ($26.5 million) in the new venture to renovate and convert Shanghai No. l Traditional Pharmaceutical Chinese Factory. The new venture plans to quadruple its annual herbal export volume to 600 million yuan within three to five years. In addition, the venture plans to team up with Fudan University's Unite Gene Co Ltd to adopt cutting-edge technology to sieve and test traditional Chinese medicines.
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The Beijing Guotong Company, one of the largest household electrical appliance chain store enterprises in China, and the Asia Financial Service Company of the International Enterprise Service Group of the United States recently reached a package agreement on jointly launching a household electrical appliance chain store as the first of such kind of joint ventures in China. According to Dai Yunhua, board director of Guotong Company, the foreign side can hold only 30% of the stake of the venture under current state policies. The ratio may be increased after China enters into the WTO. It is reported, the amount of capital involved this time is huge that may be several times the total capital amount of several Chinese national household electrical appliance chain stores. After China's entry into WTO, multinational household electrical appliance chain store enterprises with each owning 200-300 and even 500-600 stores, are very likely to enter into the Chinese market.
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The Shanghai No. 1 Department Store (Group) Co Ltd and Japan's Marugeni Co Ltd have recently set up China's first wholesale joint venture. The new firm with a temporary name of Baihong Commerce and Trade Co Ltd becomes the first foreign-funded wholesale enterprise in China. An official with the State Economic and Trade Commission revealed that China would have more Sino-foreign wholesale joint ventures in the future. Japan's Marubeni Co Ltd, founded in 1958, is one of the five largest comprehensive trading houses in Japan. Ranked as 12th among the world top 500 by the Future magazine in 1998, it has so far set up 130 investment companies in China, with total investment reaching $3-4 billion annually. With a capital of RMB80 million, the new joint venture has 51% of its investment committed by the Chinese side and 49% by the Japanese investor. Its specific business is to purchase all kinds of articles of every use from productive enterprises including foreign-funded enterprises in China, then wholesale them to home retailers. In addition, it owns a limited import-export operations right to deal in overseas goods.
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The world famous German
Hellmann Company has set up a joint venture (JV) in Pudong Shanghai. The JV
Shanghai Jinqiao Hanhong Cargo Freight Agency Company is the first Sino-Foreign
JV of material flow in the Jingqiao export-oriented processing zone with the
qualification of first class cargo freight agent. With annual income of DM3.5
billion, the German company has 341 offices, 103 solely owned subsidiary companies
and l11 JVs in l34 countries and is renowned for accuracy, safety, reliability
and quality. New Jinqiao International Material Flow company is the Chinese
partner of the JV and the business of which covers the whole process of modern
international material now. The JV reflects the combination of first class
modern international material flow and Pudong's economic development.
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