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CIEC ECONOMIC
BRIEF
VOL.174
Nov. 26, 2001
C a t a l o g
China is drafting regulations allowing foreign investors to buy the country's small and medium-sized enterprises (SMEs), a senior official with the State Economic and Trade Commission (SETC) said. The new rules will enable foreign investors control or hold shares in Chinese SMEs or even buy out the shares. However, certain industries will be off limits, though it was not known which. The official said because Chinese SMEs lack the competitive edge of their counterparts in developed countries, it is especially important for the Chinese Government to invigorate these enterprises. Otherwise, the enterprises become vulnerable to mergers and acquisitions. China now has 8 million SMEs that play a key role in the national economy. The gross industrial output, tax contribution and export of those enterprises account for 60%, 40% and 60% of the national total respectively. The government will try to attract foreign investors to the its SMEs by establishing a sound credit system, expanding credit lines to the businesses and allow them to go public on domestic and overseas stock markets. The government will also better regulate its market system to safeguard foreign investors' legal rights.
To encourage the SMEs to compete on the international markets, the government has set up a fund to help them develop the international markets, especially those producing electro-machinery and high-tech products oriented towards the global markets. Assistance will extended in six specific areas: 1. the staging of or participation in overseas exhibitions; 2. quality control systems, environment control systems, and certification of software exporting enterprises and various products; 3. promotion and recommendation on international markets; 4. development of emerging export markets; 5. organization of training and seminars; 6. taking part in overseas bidding.
hina's SMEs have made a great contribution to the national economy and will continue to be main players in the country's economic development in the coming century. China's SMEs began their rapid development in the late 1980s. Although SMEs have make great progress, whether they can maintain the momentum in the future is crucial to the sustainable development of the country's economy. The government will take a number of measures to promote the development of SMEs, such as the establishment of venture capital investment funds, a gradual relaxation of the restrictions on fund-raising and stock issuance in the stock markets, especially for those companies in the new and high-tech sectors.
Nurturing SMEs is one of the jobs listed in the Scientific Development Blueprint for the 10th Five-Year Plan period (2001-05). Starting from this year, the government will allocate 800 million yuan ($96.4 million) annually to fuel technology development in SMEs. The money will be used to help these firms upgrade technology and improve equipment. Accelerating agricultural development through advanced technology is another big section of the science development plan. The Ministry of Science and Technology has allocated 100 million yuan ($12 million) this year to develop new farming techniques and to teach farmers how to apply these techniques in agricultural production. Meanwhile, the ministry will organize regional scientific departments, especially in more developed areas, to focus on such fields as high efficiency use of water resources, and commercialization of herbal medicines, which are crucial to the economic improvement of western areas. To ensure all the investment in these scientific projects pays off, the government will invite experts, including foreigners, to evaluate the feasibility and operation of all aspects of the project.
China will open job intermediation services to foreign investors in December, according to the Ministry of Labor and Social Security. A regulation on the establishment and administration of Chinese-foreign joint talent service companies and Chinese-foreign cooperative talent service companies has been approved by the State and will take effect December 1. According to the new regulation, joint ventures and cooperative ventures will be the forms of businesses, while foreign-owned human resources intermediary companies will not be allowed. The companies should have register capital of at least $300,000 and at least three professional experts who are qualified to be engaged in job intermediation. In addition, the foreign side should be judicial persons with relevant experience in the field.
The establishment of Sino-foreign talent intermediary organizations requires the approval of the provincial labor and social security authority as well as the foreign trade and economic cooperation administration. For foreign firms that have been coveting China's giant human resources market, the promulgation of the new regulation is by all means good news. Actually, foreign investment entered the market long before regulations. Many renowned human resource service companies began their efforts to enter China as early as l0 years ago. After a decade of development, almost all of the world-class companies have established their businesses in the country. However, policy restrictions have forced those companies to behave in a low-key manner. The shaking off of the policy yoke in December is expected to liberate such companies. It will also make competition in the field much more fierce. By 2000, there were more than 4,100 talent intermediary organizations, 630 of them private. With the rapid development of the Chinese economy, more companies are emerging. However, most of the domestic companies operate on a small scale. The coming of foreign companies will initiate a new round of competition, in which weak and small-scale players will likely be eliminated. The opening up of the talent intermediation market will also give Chinese companies opportunities to learn from their foreign counterparts. All these changes are expected to lead to further specialized services and make the market more international, more competitive and more normative.
China is ready to publish new policies for foreign investment. The new policies will allow multinationals to purchase China's large state-owned enterprises, allow foreign-funded projects to raise capital in RMB, and grant western provinces and regions the right to approve foreign-funded service projects.
Main points of the new policies are as follows:
1. Multinationals are allowed to purchase state-owned large and medium-sized enterprises. Foreign investors are allowed to hold over 49% in all other sectors excepting those that are vital to the national economic development where the Chinese side must hold the controlling share.
2. The western regions will further open its service and trade sector to foreign investors.
3. Foreign-funded projects are allowed to raise capital in RMB and to use foreign capital by way of BOT mode on a trial basis in the western regions.
4. Foreign tourists are allowed to apply for visas at destination airports in important tourist cities in western China to encourage border trade.
5. With foreign-invested retail enterprises spreading to all large and medium-sized cities, the foreign trade sector will also begin to absorb foreign capital on a trial basis.
6. The business scope of investment companies launched by multinationals in China will be expanded.
7. Foreign financial institutes are allowed to provide del credere and foreign-funded enterprises are allowed to offer exchanges as mortgage to apply for loans in RMB from designated Chinese banks in China.
The negotiations on China's accession to the WTO has finally come to an end. The content of the 15 year negotiations on China's WTO accession was in fact negotiations on conditions, and the results decide under what conditions the country enters the WTO. All the results are legally effective and will become the trading rules between the members after adoption at the ministerial level meeting. As a result of the negotiations, China has agreed to fulfill a series of obligations that will be beneficial to the development of the whole world economy and provide a predictable environment for trade and foreign investment.
The following are the six major obligations the country has to fulfill after its WTO entry:
l. China will give equal treatment to every WTO member. All individual and institutional foreign investors (including individuals and institutions that have not invested or registered in China) will enjoy at least the same treatment in terms of trading rights as domestic enterprises.
2. Dual price practices and the different treatment towards local sales and export of products will be abolished.
3. Price control is not for the purpose of providing protection for domestic manufacturers and service industry.
4. The existing domestic laws will be revised and new laws formulated in accordance with the WTO agreement in order to effectively implement the WTO agreement.
5. Three years after the country's WTO entry, with the exception of a few particular cases, all enterprises will have the power of importing and exporting commodities and trading within the tariff territory.
6. China will no longer maintain or give any subsidy for the export of agricultural products.
1. Commodities: The results of the negotiations on market access represent China's commitment to gradually abolish trade barriers and open its market to foreign products. When China exercises all its commitments, its average tariff rate for agricultural products will be lowered to l5%. For industrial products, the industrial products will be lowered to 8.9% on average.
2. Textiles: After China joins the WTO, it will become a member of the Agreement on Textiles and Garments, and will perform its own rights and obligations.
3. Agriculture: China agrees to limit the subsidy for agricultural products to within 8.5%.
4. Service industries:
a)Telecom: Foreign service providers will be permitted to set up joint ventures in China, without any limit on quantities, and provide services in some cities.
b) Banking: After China joins the WTO, foreign financial institutions will be permitted to provide foreign currency services in China, without any limit on clients. In five years after accession, foreign financial institutions will be permitted to provide RMB services to all Chinese clients.
c)Insurance: Foreign insurance companies may set up non-life insurance subsidiaries or joint ventures in China. Five years after accession, they will be permitted to set up wholly-owned subsidiaries.
China's foreign trade forecast was shaken by the September 11 terrorist attacks on the United States, but the country will meet its minimum 7% annual overall growth every year until 2005, the foreign trade minister Shi Guangsheng predicted at the World Economic Forum East Asia Summit recently held in Hong Kong. Shi said that the impact will be most apparent in the first half of 2002 before tapering off. The outcome is difficult to assess as yet, but was evident in the lower attendance at the just-concluded 90th session of Chinese Import and Export Commodities Fair. The session saw a drop in both the number of participants and overall contract value compared with the spring session this year as well as the autumn session last year.
China's export growth slowed even before September 11 because of a world economic slow-down. Exports rose by only 7% in the first nine months year-on-year, lower than the 11.3% growth year-on-year for the first half. However, a surge in foreign direct investment, which grew 20.7% between January and September, has helped offset the weakening exports. The Chinese mainland's official admittance as a member of the WTO is expected at a WTO ministerial meeting on November 10 in Qatar, a change that will bring a boost of business prospects for the mainland and Hong Kong. The entry will also bring challenges, but those must be weighed against the vast opportunities ahead. Hong Kong's economic difficulties will not last long, and a healthy post-WTO growth on the mainland will help the special administrative region to regain its footing, Shi vowed. Hong Kong is positioned as a gateway to the mainland for the world. The Chinese mainland's 7% annual growth rate through 2005 will be accompanied by $1.4 trillion in import of equipment, technology and goods.
The mainland's foreign trade is expected to grow rapidly after the WTO entry and bring more opportunities for Hong Kong, which receives or re-exports about 40% of the mainland's total exports. Investment opportunities on the mainland will also abound, with sectors of financial services, insurance, telecoms, foreign trade, commerce, transportation, construction, tourism and intermediary services to be further open to overseas investors. With the slowdown of the US economy, international capitals are seeking ways to find a safer investment place and China is a good choice.
Sichuan Province will take advantage of the nation's ˇ°go west" strategy to develop into an economic power in western China and an ecological screen in the upper reaches of the Yangtze River in one decade. With a population of 86 million and an area of 485,000 square kilometers, Sichuan is a large but economically weak province. Its GDP accounts for one-quarter of the total for western China, but its per capita GDP is only two-thirds of the national average. The province vowed to develop rapidly for its per capita GDP to reach the national average by the year 2010. To meet the goal, the province will accelerate infrastructure construction, improve its ecological environment, readjust its economic structure, develop science and education, deepen reforms and open further to the outside. Sichuan will not sacrifice environmental protection in the process. In September 1998 and October 1999, Sichuan was the first province in the country to ban the felling of natural forests and return farmland to forest. Last year, Sichuan returned 200,000 hectares of farmland to forests. This year, it is returning another 133,333 hectares.
Sichuan has 43 institutions of higher learning with about 1.2 million under-graduate and graduate students. But it lacks a workforce trained in practical technology as well as high-grade talent. The province will accelerate development of higher education and encourage institutions of higher learning to turn the fruits of scientific research into market-able products in order to boost development of the six pillar industries the province plans to cultivate. Sichuan has more than 4.5 million migrant laborers working outside the province. Each year they send more than 20 billion yuan ($2.4 billion) back to their home province.
Since China launched its reform and opening-up drive in 1978, Sichuan has approved 5,188 overseas-funded enterprises, introducing $78.3 billion in actual overseas investment. By the end of last year, Sichuan had established economic and trade relations with 136 countries and regions in the world, established ties of friendship with 36 foreign cities and introduced direct investment from 32 world-famous multinational corporations. Although there is still a big gap between Sichuan and advanced regions in east China, both the government and people in Sichuan have realized the benefits that opening to the outside world has brought to this inland and less developed province.
Sichuan is endowed with bounteous natural resources that add attractions to overseas investors. Its exploitable hydraulic resources register 103 million kilowatts, ranking first in China. Altogether 130 minerals have been discovered there, 8 of which, including vanadium and titanium, rank first in the country. Sichuan boasts a rich variety of biological resources and is dubbed the ˇ°gene bank of natural medicine." It is one of China's three forest areas and five pastoral areas. Its wonderful natural scenery, long history and rich cultural heritage have forged its famous brands as a large tourism province.
The province is creating a more open environment. In recent years, the province has revoked policies hindering opening and development and formulated 38 preferential policies to attract overseas investment. At the provincial-level alone, it has revoked 219 policies. Governments at different levels are urged to simplify approval procedures for investors and improve work efficiency. What is done has been acclaimed by overseas-funded enterprises in Sichuan. To keep up with the trends of economic globalization, the province will be more active in opening to the outside, aiming at attracting not only funds and technology but also changing outdated concepts and mechanisms. Sichuan will attract overseas investment by opening all of its six pillar industries--electronic information, hydropower, pharmaceutical and chemical industry, tourism, mechanical metallurgy and the beverage and food industries-- as well as agricultural industrialization, which is its advantageous sector.
Sichuan has formulated the Incentive Policies and Regulations on Foreign Investment. Excerpts are as follows:
1. Foreign-funded enterprises (FFEs) that purchase domestically made equipment within the investment amount shall be refunded the full amount of value-added tax imposed on domestically made equipment or be used to offset the business income tax, if the import of the same category of equipment is listed as duty free.
2. For FFEs that transfer technology to Sichuan, those involved in advanced technologies or favorable conditions shall be submitted to the tax authority under the State Council for approval of exemption from the business tax and the business income tax.
3. Beginning January 1, 2000, FFEs may pay the business income tax at the rate of 15% for another three years upon the expiration of the legal term of tax reduction or exemption.
4. FFEs with advanced technology may pay the business income tax at 50% of the rate stipulated by the State tax law for another three years upon expiration of the legal tax reduction of exemption term.
5. Foreign investors engaging in agricultural development projects on barren hills, wasteland and waste shallows are exempt from the agricultural tax for five years, beginning from the first year when they make profits.
6. FFEs in state-level development zones and provincial-level key development zones and solely foreign-funded enterprises within Sichuan, which have qualifications and provide complete materials, relevant departments at the provincial level shall complete all approval formalities within 20 working days.
7. Foreign investors are encouraged to invest in Sichuan according to law and engage in independent operation. Enterprises involving foreign investment in the form of equity joint venture, contractual joint venture or wholly foreign-funded enterprises are not--except those for which the State has made special provisions--restricted by industry, category, proportion of shareholding, type of ownership, ratio of domestic to overseas sales or terms of operation.
8. The ˇ°system of fee-list cards for FFEs" shall be exercised rigorously. The provincial government shall not add new fees or raise the rate of fees on FFEs within two years and shall investigate and impose severe punishment on wanton fee collection.
9. One-stop service shall be provided to foreign investors. Constant efforts shall be made to improve service in international hospitals, schools and clubs and FFE service centers.
Fujian has witnessed great progress in its agriculture since the country launched the reform and opening-up drive in 1978. Fujian, one of the earliest provinces open to the outside world, has established economic ties with 50-odd countries and regions around the globe. To date, a total of $3.5 billion overseas investment has been injected into agriculture, with the setting up of 3,800 overseas-funded enterprises. Last year, farm produce exports earned foreign exchange of $1.3 billion. To further expand its cooperation with the international community in agriculture, the province has recently initiated some major agricultural projects that need overseas investment. The projects cover an array of sectors, including development of barren mountains, tidal-flat areas, improved breeds, highly effective pesticides, concentrated fertilizers, water-saving irrigation, and environmental protection.
Lying along the country's southeast coastline, Fujian is endowed with rich natural resources. It is one of the major suppliers of fruits, tea, fungi, bamboo and marine products, Its output and sales of tea and fungi rank first in the country in consecutive years. Fujian's coastline extends 3,324 kilometers with sea water area of l36,000 square kilometers. Its annual average temperature is 17.8-21.5C. Its annual precipitation is 1,400-2,000 millimeters.
The agricultural delegation of Fujian Province contracted 19 projects valued at $147 million at the China International Fair for Investment and Trade which was recently held in the province. The contracted projects involved are based on fields of crop production, marine products, fishery and processing of agricultural products. At the signing ceremony, more than 200 new agricultural projects for cooperation in Fujian were introduced to foreign investors with a total investment of $750 million. It is a sign that the agricultural industry in the province is fully fledged and has become a favored destination of foreign investors. Fujian's agriculture industry offers great potential and prospects of quick returns. Forestry, for example, is one of the pillar natural resources and industries of local people.
Located in the coastal area of southeast China, Fujian is rich in forest resources. Wooded areas have expanded to around 9 million hectares. At present, Fujian's rate of forest cover ranks top in the country at 60.52%. In 2000, the total production value of the forestry industry hit 53.23 billion yuan ($6.4 billion)--22 billion yuan ($2.65 billion) above that of the previous year. Local flower and vegetation industries are also booming. To promote local ˇ°green" industries, the International Fruit and Vegetable Exhibition was held in Xiamen in October. With the theme ˇ°developing green industry, creating a green century", the fair highlighted the latest developments of the fruit and vegetable industry in the tropical and subtropical regions around the globe. The fair is expected to enhance cooperation between China and foreign countries, while stepping up industrialization and globalization of the sector. During the exhibition, seminars on international fruit and vegetable technologies were held, attracting both domestic groups and delegations from more than 20 countries and regions.
1. Low-temperature store-house. Investment: $1.4 million. Capacity: 3,000 tons. Form: Cooperation.
2. Aloe production. Investment: $6.8 million. Annual output value: $24.2 million. Form: Joint Venture.
3. Pickles production. Investment: $1.2 million. Annual output value: $3.6 million. Form: Solely overseas-funded.
4. Xingtai Orchard in Xianyou. Investment: $4.3 million. Annual output: 200,000 tons. Form: Joint venture.
5. Oolong Tea processing. Investment: $960,000. Annual output value: $100,000. Form: Joint venture, share holding.
6. Tea production. Investment: $360,000. Annual output value. $120,000. Form: Joint venture.
7. Bamboo shoots processing. investment: $120,000, Annual output: 30,000 pots. Form: To be negotiated.
8. Orange production. Investment: $84,000. Annual output: 200,000-500,000 tons. Form: To be negotiated.
9. Cleaned vegetable production line. Investment: $180,000. Annual output: 2,000 tons. Form: Joint venture.
10. Planting and processing of high yield cassaba. Investment: $1.2 million. Annual output: 100,000 tons. Form: Joint venture.
11. Mushroom drinks. Investment: $180,000. Annual output: 400 tons. Form: Joint venture.
12. Huanghua pear processing. Investment: A. $96,000 for canned Huanghua pears. Annual output: 4,000 tons. Form: Joint venture; B. $180,000 for fruit vinegar and wine made from Huanghua pears. Annual output: 2,000 tons. Form: Joint venture.
13. Kiwi fruit processing. Investment: $240,000. Annual output: 4,500 tons. Form: Joint venture.
14. Lemery processing. Investment: $700,000. Annul output: 10,000 tons of lemery and 12,000 tons of hydrochloric acid. Form: JV.
15. Fruits and vegetables preservation and processing. Investment: $480,000. Annual output: 1,000 tons. Form: Joint venture.
16. Canned fruits and vegetables. Investment: $240,000. Annual output: 300 tons. Form: Joint venture.
Lanzhou, capital of Northwest China's Gansu Province, has a history of more than 2,000 years. The city has made great efforts to turn itself into one of the country's leading trading centers over the past years. The city currently has 323 markets, covering a total area of 3.52 million square meters. There are 33 markets with annual trade volumes of more than 100 million yuan ($l2.1 million) each. Five markets were inaugurated as state-level markets by the State. Eight shopping areas have taken shape. The city has established economic ties with more than 80 countries and regions. In 1999 the city's total export and import volume registered $322 million. The export volume reached $251 million. The city has set up 28 representative offices and enterprises across the world.
Lanzhou is a transport hub in Northwest China, with four railways crossing each other in the city--the Lanzhou-Xinjiang, the Lanzhou-Qinghai, the Baoji-Lanzhou and the Lanzhou-Lianyungang railways. The new runways at the Zhongchuan Airport have been put into operation. The airport's air routes connect 38 cities in the country. The city's telecommunications is developing rapidly. Five trans-provincial optical cables lie cross the city.
The city's comprehensive economic strength is among the top 50 in the country. In 2000 the city's GDP registered 30 billion yuan ($3.63 billion). Per capita GDP exceeded 10,000 yuan ($l,209). The citizens' annual disposable income reached 5,700 yuan ($689) and farm workers'¬đ annual disposable income 2,000 yuan ($241.8). Lanzhou is also one of the most important technological and scientific research centers in Northwest China. The city has about 700 research institutes, 9 state-level key laboratories, 13 state-level and provincial level laboratories. It has 13 academicians from the Chinese Academy of Sciences and the Chinese Academy of Engineering. In a bid to promote the economic development of the country's western region, the government is expected to establish a state-class economic and technological development zone (ETDZ) in Lanzhou before the end of this year.
Now that foreign companies have invested in China's auto and autoparts industry on a large scale, foreign investors are beginning to focus on the potential of China's auto-repair market. 35 of the 50 largest autoparts makers in the world have set up joint ventures in China. After China's entry into the WTO, limits on the importation of autos and auto parts will steadily decline. The international auto industry sees China as one of the most hopeful markets in the world. Based on international experience, one job on an auto assembly line creates seven employment opportunities in auto services, such as maintenance and auto-cleaning. With the increase in the number of car owners in China, a large service market will appear.
After dozens of years of development, China's auto service sector has become a large industry employing more than 2.4 million people and generating 30 billion yuan in GDP. Domestic enterprises have developed high-tech auto-testing equipment, but the general level of the industry is low and the ability to develop new technology is poor. Currently, only a portion of service enterprises have quality equipment in keeping with environmental protection regulations, and service and technology still lag behind that in advanced countries. Confronting the challenge of foreign enterprises, the domestic industry will have to accelerate self-improvement.
In the first six months of this year, China had posted large growth in major economic indicators in its 43 state-level economic and technological development zones (ETDZs), with GDP, tax revenue, and utilization of overseas investment all higher than the national averages. These zones have become the most robust area in China's economy. The 43 state-level development zones approved before the end of last year now cover a total of 428.51 square kilometers, scattered in both the eastern and western parts of the country. They have not only become the earliest to participate in international competition in their respective regions, but also grown into quality state assets with great potential.
The latest figures from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) indicate that the 43 ETDZs created a total of RMB l05.2 billion in GDP in the first half of the year, up by 29.4% over that of the same period last year, 21.5 percentage points higher than national growth and accounting for 2.45% of the country's total GDP. One feature is that the 11 state-level ETDZs in the central and western regions posted RMB9.844 billion in GDP in the first half of the year, an increase of 36.29% over that of the same period of 2000, of which the Zhengzhou and Shihezi ETDZs witnessed astounding growths of 258% and l25% respectively. Changsha, Chengdu and Xi'an ETDZs registered GDP values exceeding RMB l.5 billion.
Guided by a strategy of orientating towards industry, overseas investment and exports, most state-level development zones have become the most robust manufacturing areas in their respective regions. In the first half of this year, the 43 state-level development zones recorded RMB274.838 billion in industrial output value, up 30% over the same period last year and 50% higher than the country's average growth rate, and accounting for 6.l6% of China's total industrial output value. Eight of these state-level ETDZs industrial output value exceeding RMB 10 billion during the period.
These state-level ETDZs have all along been the priority targets of overseas investment. In the first six months of the year, these zones approved 736 new overseas-funded enterprises, involving $6.184 billion in contractual investment, accounting for l8.41% of the country's total in the period and went up by 34.85% over the same period last year. Actual overseas investment during the period stood at $2.865 billion, up by more than 56%. The 1l state-level ETDZs in the central and western regions have become the new attraction for overseas funds, garnering $746 million in contractual investment in the first six months, seven times more than that of the same period of 2000. With China on the threshold of the WTO and against the backdrop of mounting globalization, these state-level ETDZs will face new opportunities and challenges, especially after China joins the WTO. Although the advantages brought by preferential policies will disappear, the ETDZs¬đ relatively sound investment environment will be more conducive to attracting funds from the international manufacturing sector, and China could well become one of the world's advanced manufacturing centers. Meanwhile, investments in the tertiary industry, such as service trade, will greatly increase after the WTO accession, so these state-level ETDZs, which were accustomed to utilizing industrial investments, will face new challenges in attracting capital.
The shipbuilding industry anticipates strong development after China's entry into the WTO, but certain obstacles must be removed. The worldwide shipbuilding industry is expected to flourish in the new century with global shipping transportation predicted to grow about 40% in the next 15 years, according to experts. China's water transportation capacity is expected to see rapid growth during the 10th Five-Year Plan (2001-05) period. More than 1.35 billion tons of cargo are expected to be transported by water this year, up about 8% from last year, according to official statistics. The handling capacity of major ports in China will reach 1.87 billion tons this year, a 10% increase over 2000. China's entry into the WTO offers a big boost to foreign trade, which will in turn bring great opportunities for the development of the shipbuilding industry.
However, while China's shipbuilding industry takes credit for these opportunities, it cannot ignore the serious challenges and negative effects brought about by the WTO entry, experts warned. After China enters the WTO, some foreign countries--where the shipbuilding industry is advanced but labor is expensive--may accuse China of dumping ships in their countries. In any case, the situation will be complicated. Foreign capital can flow directly into China's shipbuilding industry after the country's entry into the WTO. And China's outstanding technical personnel will be hiring targets for foreign shipbuilding companies. Most Chinese enterprises engaged in activities related to the shipbuilding sector do not currently possess their own intellectual property rights, relying instead on production certificates issued by foreign companies. After China's entry into the WTO, foreign enterprises can set up plants directly in China and customers can make global purchases. Foreign companies engaged in shipbuilding activities may not be willing to continue issuing production certificates to Chinese enterprises. To solve the problem, the Chinese enterprises engaged in industries related to the shipbuilding sector must actively cooperate with their foreign counterparts, or prolong the effective period for production certificates, in order to survive future competition in the industry.
Electrical engineering giant Siemens is expected to expand its business in China with the nation's entry into the WTO. The company has recently decided to further invest in Shanghai, and will establish a gas turbine manufacturing joint venture with Shanghai Electric Corp to supply China with power generating equipment. It will provide new technologies with higher efficiency and will be more environmentally friendly. China's power industry is expected to increase its installed capacity to 390 million kilowatts from the current 319 million kilowatts in five years. Meanwhile, it also plans to increase its gas consumption to 10% of the energy mix from the current 2.1% over the next 10 years, which means more gas will be used in power generation to improve the environment. The set-up of the Shanghai joint venture will also be the best way for Siemens to supply gas turbine power equipment to customers that use natural gas from the west-east gas pipeline. The company is now exploring various possibilities for the development of such gas-powered plants.
The Shanghai Little Eagle Science & Technology Co (SLEST) is to link up with US company Sikorsky Aircraft Corp in a joint bid to make helicopters. Qin Weidong, vice-general manager of SLEST said, it is the very first time that a private enterprise in China has cooperated with Sikorsky, the world's leading helicopter manufacturer. SLEST began negotiations with Sikorsky this April and has just reached an understanding with the company to exploit the international market. In the next two years, SLEST and Sikorsky will produce at least 20 four-seat helicopters. Within five years, SLEST is expected to gain the intellectual property rights of various light helicopter models. Most insiders believe this is a big leap for the Chinese helicopter manufacturing industry to keep up with their foreign counterparts. Although pre-investment for the helicopter market in China is huge, the potential of the market is extremely promising. Statistics show that by 2013, the nation's need for civil helicopters will add up to 1,867 helicopters.
Japanese electronic giant Hitachi plans to more than quadruple its business in China by 2005. More Hitachi products will be made in China, and the local purchasing will increase by folds, Hitachi President Etsuhiko Shoyama said recently. The company hopes for $4.5 billion in revenue in 2005, up from $1.2 billion last year. Hitachi plants in China aim to produce $4 billion in goods in 2005, up from last year's $520 million. China is now Hitachi's fourth biggest overseas market after the United States, Europe and non-China Asia. Hitachi, the first Japanese company to invest in China, has plunged $200 million into the country since 1981. Now China is playing a more important role in Hitachi's development blueprint. Hitachi has directly invested in 26 companies in China, including factories producing televisions, elevators, air conditioners, vehicle-related products, power factory equipment and washing machines. Hitachi is transitioning from traditional electronic products to information technology. The company plans to focus on three areas in China: information telecoms, electronic equipment and digitalized home appliances. Hitachi may also set up manufacturing base for computer hardware and software.
China's leading wine brewer Zhang Yu Group in East China's Shandong Province and the French wine brewing giant Caste Group recently announced a strategic cooperation. Main contents of the alliance are: 1. Sharing of marketing network by both; 2. Mutual holding of shares and coop in management of the production and sales of wine and mineral water; 3. Joint technical efforts to develop wine series products to cater to the European and Asian markets; 4. Opening of goods flow distribution system to each other. The first step for the strategic cooperation of the two companies is both to hold shares of each other. Zhang Yu will invest and hold 49% of the stake of the Red Castle wine production of Caste in Langfang City, Hebei Province while Caste still holds a 5l% stake. Meanwhile, Caste will hold 30% of the stake of the Zhang Yu Wine Village by investing capital and technologies to the winery, while the Zhang Yu group will hold 70% of the stake. Total investment in the two joint ventures will reach $8 million, of which $5 million will go to the Zhang Yu Wine Village.
Rolls-Royce aims to
be a key partner with the Chinese shipbuilding industry by supplying different
marine products to shipyards in Shanghai, said chief executive officer John
Rose on his tour to the city recently. Rolls-Royce is supplying a range
of marine equipment for five of seven supply vessels ordered by the China
Offshore Oil Corporation. It will also deliver $40 million worth of anchor-handling
winches, bulk handling systems and steering gears to the five high performance
anchor handling tug supply vessels at Yantai Raffles Shipyard in Shandong
Province, which are ordered by the US-based Tidewater Co.
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