Growing urban affluence drives demand for domestic servants
The Ministry of Labor and Social Security has announced that the relatively new employment category of domestic servant has created at least 15 million jobs in large and medium-size cities. (ChinaOnline, 27 November)

Large investment to tap offshore oil and gas reserves
China will invest RMB 120 billion over the next five years to explore offshore petroleum and natural gas, aiming to increase the country's annual oil output to 40 million tons. (China Daily, 27 November)

China plans special bank to help small and medium-sized enterprises
China is considering setting up a special bank charged with lending to small and medium-sized enterprises to fill a gaping hole in its financial system. The SMEs have gained renewed importance in recent years, but the lack of adequate financing has made it difficult for them to expand. (China Daily, 27 November)

Industrial profits up 99%
According to statistics, China's industrial profit for the first 10 months increased 98.7% to RMB 327.5 billion, and sales revenue of industrial enterprises increased 22% to RMB 6.6 trillion. Profits generated by state-owned and state-controlled enterprises increased 160% to RMB 183.9 billion. Tax revenues contributed by the industrial sector reached RMB 401 billion, up 17.3%. (Zhongguo Zhengquan Bao, China Securities, 28 November)

Wind power plant open to foreign investors
The wind power industry in China is expected to open to foreign investors soon, according to sources from the State Development Planning Commission. (China Daily, 28 November)

Philips anti-dumping suit against China TV tube maker turned down
The European Union Council has decided not to impose anti-dumping duties on 14-inch color tubes manufactured by China National Electronics Import/Export Caihong Co. The Dutch-based Philips Electronics Co. had filed suit with the EU last June, accusing Chinese manufacturers of underselling 14-inch color tubes by 48.4%. (ChinaOnline, 28 November)

China's GDP to top USD 1'000 billion this year
China's GDP is expected to reach RMB 8'900 billion this year, and for the first time surpass USD 1'000 billion, according to the State Information Center. The Center also predicted a 8.3% in GDP growth for this and 8.5% for next year. (Xinhua, 28 November)

China's largest stock company emerges
China's largest iron and steel company will become China's largest listed company if it can raise RMB 7.7 billion through stocks as expected. The company will offer 1.9 billion A-share stocks with each share valued at RMB 4.18. Baoshan Stock Co. Ltd. was launched early this year by Shanghai Baoshan Iron and Steel Group Company. (Xinhua, 29 November)

Factory staff's strike pays off
According to the Hong Kong-based Information Centre for Human Rights and Democracy, thousands of employees of Uniden Electronic Company, a Japanese-funded electronics factory in Shenzhen, held a one-day strike to protest against low wages and alleged beatings by a supervisor. The industrial action was called off after the company agreed to increase wages. (South China Morning Post, 29 November)

Auction of smuggled aeroplanes ends in failure
China's first auction of smuggled aeroplanes ended in failure, as nobody placed a bid. The two Russian TU-154M planes had been smuggled into China by the former general manager of Sichuan Airlines in China's first big case of smuggling aeroplanes. (Beijing Morning Post, 29 November)

KFC opens 400th store in China
Kentucky Fried Chicken opened a new outlet in Beijing's Hi-tech Wealth Plaza - the firm's 400th store on the mainland. In 2000 alone, KFC opened 85 new outlets across the country. Menwhile McDonald's is left far behind with less than 300 outlets. In Beijing, KFC has 63 outlets while McDonald's has 53. (People's Daily, 29 November)

Motorcycle exports jump 464% over last year
With their products banned in many major Chinese cities, motorcycle makers in China have been shifting their targets from the domestic to the export market. Between January and September, China exported 689'800 motorcycles worth USD 316 million, a 463.8% increase from the same period last year. According to the National Bureau of Statistics, China is the world's No. 1 motorcycle manufacturer. (ChinaOnline, 29 November)

Banking reform outlook far worse than official picture, says researcher
According to a senior researcher of Standard Chartered Bank, China's banking reform will take much longer than the official rhetoric has it. Asset management companies which have so far bought about RMB 1.1 trillion of bad loans to improve bank balance sheets will face great difficulties to find buyers for those assets. "The current re-capitalisation amounts merely to a transfer of bad debt from the banking system to the public sector." Under the present Chinese system creditors are provided with little legal recourse against borrowers. Only legal reform and a strong law enforcement could break the persistent "no-payback" mentality, which remains a key source of moral hazard in China's banking system. The state banks' excessive exposure to state-owned enterprises is the fundamental obstacle preventing free, cross-border portfolio flows because it inhibits the development of market-driven interest rates. The downside of this scenario is that a fully convertible Renminbi will have to wait until the bank restructuring process is completed - and this could be 10 years away. (South China Morning Post, 30 November)

Cable TV door closing
According to an official with the State Administration of Radio, Film and Television, China has ruled out the possibility of opening its cable-television industry to foreign investment after it joins the WTO. The statement contradicts earlier press reports that the country may allow overseas companies to invest in the sector. The country's cable-television sector boasts 100 million users and generates an average of RMB 8 billion of revenue per year. (China Daily, 30 November)

Foreign B-share investors allowed to sell more shares
China's securities regulator will permit foreign partners of firms listed on the B-share boards to sell previously non-tradable shares. This will make it easier for foreign investors to divest themselves. (ChinaOnline, 30 November)

Implications of the renminbi's full convertibility
The Far Eastern Economic Review of 30 November (page 76) sheds light on the possible impact a fully convertible renminbi will have on the global financial markets. The article expects full convertibility of the renminbi within 5 years and predicts that "the seismic shift in global financial markets caused by the emergence of the renminbi as a tradable currency will be comparable with the consequences of the explosion in yen trading 25 years ago."

China targets economic development in 2001
A three-day Central Economic Working Conference confirmed plans for continued strong economic growth in 2001. Measures to achieve the target include stimulating domestic demand, adopting a pro-active fiscal policy, restructuring the economy, implementing the strategy of developing western regions and boosting exports. It is hoped these measures would help shore up investment, consumption and exports. (South China Morning Post, 1 December) See also the enclosed report on this subject.

Water prices go up first for 11 years
The price of Yellow River water was increased for the first time since 1989. The Yellow River Water Resources Committee said the increase means the river's history of low prices - 1'000 cubic metres of water used to cost the same as a bottle of mineral water - is "over for ever." The price rises will mainly affect Shandong and Henan provinces. They should help to discourage people such as farmers wasting water, and the once popular flood-irrigation method should come to a halt. (China Daily, 2 December)

Telecom sector drives up national manufacturing
According to the National Bureau of Statistics, China's electronics and telecommunication industry has become a major driving force for the country's manufacturing sector. During the first 10 months of this year, the output value by the electronics and telecommunication industry had grown by 20 percentage points more than the country's industrial growth. Sales income has surpassed that of traditional sectors such as textiles, chemicals and power. (China Daily, 2 December)

Confusion over mobile-phone billing
Wu Jichuan, the Minister of Information Industry, announced yesterday that the controversial one-way mobile billing system would not be implemented within the next one to two years. The apparently contradictory messages from officials about telecoms policy over the last few days have unnerved investors and raised concerns about the transparency of the decision-making process in some key sectors. At present both mobile callers and receivers pay for phone calls, but officials have suggested that only the callers should pay their share in the future. (South China Morning Post, 2 December)

Investors hungry for Minsheng IPO
The initial public offering of China Minsheng Bank was oversubscribed 97 times, showing investor confidence in the Bank and Shanghai's A-share index. The strong-investor interest should boost plans for China's three largest commercial banks to list next year- the Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank. The banks aim to increase their capital through a listing to compete with foreign lenders such as HSBC and Standard Chartered. (www.cbiz.cn, 2 December)

Deflation tapers off; threat remains
While exports as well as domestic consumption have increased this year, the overall supply and demand are still imbalanced. More than 90% of the country's products are oversupplied. The consumer price index rose only 0.1% year-on-year during the first 10 months of this year due to price hikes of oil and steel on the international market. (China Daily, 3 December)

Private money for public transport
After five decades of State monopoly, the Beijing municipal government is expected to introduce foreign and non-governmental capital into its public transport sector. Hefty capital demands and the need for a competitive environment which shall improve the city's public transport service leads the municipal government's pledge to introduce new forces into public transport. (China Daily, 3 December)

Railways join telecom fray
Deregulation in the domestic telecom market, in anticipation of WTO accession, moved one step closer to opening up to domestic players as the railway sector received a licence to provide telecom services nationwide. China Railway Telecom, now the country's biggest special communications network, is to be officially established in the coming weeks. The new firm is expected to focus on the country's fixed-line communications market, which is currently dominated by China Telecom. (Business Weekly, 3 December)

Big demand for small aircraft
Strong demand for smaller aircraft expected over the next two decades has given hope to domestic companies which have set their sights on becoming the world's leading aircraft manufacturers. According to government estimates, China needs to add 400 to 500 small aircraft or regional liners to its fleet in the next 20 years to meet the increasing demand for regional flights. (Business Weekly, 3 December)

Enclosure

Mainland declares planning victory and sets goals 
JASPER BECKER

The big economic conference which ended on Thursday declared victory in the last five-year plan and listed six priorities for the 10th five-year plan to steer the economy to 2005.

Despite the failure of the last five-year plan - and the one before it - to predict the mainland's economic growth pattern, China's leaders closed the books with a certain amount of satisfaction. China had weathered the Asian financial crisis better than most of its neighbours and growth rates were up again this year after seven years of continuous decline. 

Somewhat less convincingly, Xinhua reported the assessment that the goal of improving the profitability of large and medium-sized state-owned enterprises (SOE) was basically reached, with a surge in profits and state revenue. Most observers believe that Premier Zhu Rongji's target of turning around the big SOEs still requires a lot of work. Any achievements are largely the result of creative accounting by removing from the ledger the interest payments on debts accumulated by sectors such as coal, iron and steel, railways, and defence industries. China's banking sector and the stock-market evaluations of the thousand or so listed companies still rely on unrealistic assumptions of the future profitability of such giants.

In the next five years, the conference concluded, China would continue to rely on fiscal measures to inflate domestic demand. "Inadequate demand is still a problem for the country. Basing growth on the increase in domestic demand will give the economy more room to manoeuvre and enhance its anti-risk capabilities," the Xinhua report says. Pumping up domestic demand now meant not just putting more money in the pockets of urban dwellers by lifting government employees' wages, but tackling the collapse in the rural economy.

Agriculture is now identified as the economy's "weak link" and the slow increase in farmers' income has "become a big problem", the Xinhua report says. Just what will be done remains unclear, other than keeping state grain purchasing prices high. The report vaguely refers to moving forward "steadily" with urbanisation and "restructuring" township enterprises, many of which have collapsed. While the state wants to boost market forces in the rural economy, the real weapon seems to be more public works, particularly those to save water and preserve the ecology. It is the first time this is being made such a high priority and this is a reflection of Premier Zhu's relatively strong grasp of China's ecological problems.

The conference also appeared to reflect a greater confidence that the government was now ready to shut down bankrupt SOEs and apply "survival of the fittest" principles. Many investors will also be pleased by firm words on the government's desire to introduce competition in areas which still remain monopolies. The Government wants to promote a batch of large-scale enterprise groups with distinctive core businesses, high management standards and a competitive edge, and to establish a modern corporate system by pushing more SOEs to become shareholding companies under a standard corporate structure. The managers of such companies are to be responsible for what the report specifies as "maintaining and increasing the value of state-owned assets".

As reflects the beliefs of President Jiang Zemin, the conference also stressed the importance of boosting the introduction of information technologies. Obtaining high technology and creating the conditions to develop it inside the country is what the report calls "the decisive factor in improving the quality of the economy".

As expected, the conference dealt with a large batch of mega-infrastructure projects - the west-east gas pipeline, south-to-north water project and setting up a national grid to transfer electricity to the coast.

Perhaps most encouraging, the conference voiced a strong determination to prepare China to enter the World Trade Organisation. "The country will introduce profound changes in the mode in which the government handles the economy, the management mechanism of enterprises and the rules and environment for economic co-operation. It is an urgent job to sort out, amend and perfect relevant economic laws and foster a contingent of professional talents who are familiar with the WTO rules," the Xinhua report says. "In order to open to the outside world, China should first break down the industrial monopoly and regional barriers and get rid of all discrimination against non-state economies in terms of market access." This is the most public commitment made inside China that the Communist Party is ready to discard all the former privileges accorded to the state sector and the advantages granted to certain foreign investors. If implemented, Beijing will no longer be able to so overtly favour or threaten, say Taiwanese investors or play off one western country against another. "China will participate in the process of economic globalisation in a wider and deeper scope," the conference declared.

All this talk of non-discrimination and globalisation is, of course, also a code for encouraging de facto further privatisation of the economy and will give hope to those in the private sector now struggling to raise capital.

Lastly, the conference listed as a priority a new social security system covering pensions, unemployment, medical insurance and a system of ensuring minimum subsistence payments. But work in these areas seems likely to continue at a slow pace.

(South China Morning Post, 2 December)
Bold print and paragraphs inserted by Swiss Embassy