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ABB to increase presence in China
See attached article from Business Weekly (20 February) which we include in full length.
The gentle art of lobbying in China
The Economist published an interesting, if hardly surprising, article on how foreign companies are learning to influence the government. The author presents two examples of lobbying efforts (one recent success, on ongoing struggle) and tells how some companies tackle the subject. (The Economist, 17 February)
B share opens to domestic investors
China's hard currency B share market is now open to domestic investors. According to China Securities Regulatory Commission the widening range of B share investors is a response to changes in the capital movement of foreign currencies in China. There are a growing number of foreign currency holders in the country and larger foreign exchange deposits at banks. The move is an important step toward the merger of the A and B share market. But a final merger of the A and B share market still takes time and depends on the convertibility of renminbi under the capital account, says the CSRC. (China Daily, 20 February)
Analysts expect the B shares to rise 20% to 30%. This comes in handy, as it may erase recent losses caused by a broad regulatory crackdown on price rigging. Some believe that opening the B-share market to domestic investors will greatly challenge the exchange rate of the renminbi because it will create a huge need for foreign currencies. Since there are few legal ways to obtain foreign currencies in China, many investors may choose to evade forex controls or try various forms of arbitrage or the black market. New forex controls have been announced.
Consecutive loss-making listed firms to be de-listed in China
China will soon suspend or de-list firms recording consecutive figures in the red, the China Securities Regulatory Commission announced. China's Securities Law and Company Law both have provisions on the de-listing of stocks, but in practice such provisions have never been enforced. (People's Daily, 20 February)
Premier Zhu vows to improve farmers' incomes
Premier Zhu Rongji said that the principal task of this year's economic work is to promote China's agricultural sector and improve farmers' incomes. He pledged that the country will continue its current stable monetary policy and proactive fiscal policy, further deepen the reform of State-owned Enterprises, and accelerate the pace of perfecting China's social insurance system, so as to better prepare for the implementation of the country's 10th Five-Year Plan (2001-2005). (People's Daily, 20 February)
Foreign exchange deposits up
Last month China's combined foreign exchange deposits increased to USD 130.7 billion. The figure is 25% higher than January of 2000. In January forex deposits increased USD 1.31 billion, a rise of USD 40 million over the same month last year. Corporate forex deposits declined, but individual forex savings increased 32%. (China News Service, 20 February)
Foreign direct investment surges
Actual foreign direct investment to China rose a strong 21.23% year on year last month to USD 2.22 billion. The new numbers are more proof that China is drawing funds away from its neighbours as investors bet on Beijing's WTO entry later this year and an economy less affected by the Asian crisis and political uncertainty. (Reuters, 20 February)
China considered 2nd best place for FDI, displaces the U.K.
Executives of the world's 1'000 largest companies expressed renewed confidence in China as the country for their foreign direct investments, according to a recent survey by consulting firm A.T. Kearney. China gained the spot as the second most attractive target for FDI (up from third rank). The United States retained 1st rank. (ChinaOnline, 20 February)
Investment fund law moves closer
Leading legislators have reached consensus on a draft of the country's first investment fund law, paving the way for a parliamentary debate this year. The draft covered stock investment funds, industrial investment funds and venture capital investment funds. China has 30 closed-ended funds, worth about US$10 billion, and has promised to allow minority foreign-owned ventures into fund management after it joins the WTO. (SCMP, 21 September)
B-to-b transactions dominated China's e-commerce in 2000
According to a survey released by the Ministry of Information Industry, China's e-commerce volume in 2000 totaled RMB 77.16 billion of which only RMB 390 million were b-to-c transactions. China's Internet service market was valued at RMB 5.3 billion in 2000, registering a 72.6% growth over the previous year. The total output value of China's computer industry last year was RMB 280 billion and total sales were RMB 215 billion. Forecasts for 2001 remain high with China's Internet service market expected to grow by 20.8%, b-to-b trade volume by 22.8%, total output value of the country's computer industry by 36.8% and the computer market's total sales by 27.9%. (ChinaOnline, 21 February)
China targets foreign investors in loan problem
The China Huarong Asset Management Corporation, China's largest such company, has appointed Ernst & Young as its sole financial advisor to bring to the market a portfolio of Huarong's non-performing loans and assets of over USD 3 billion. The two sides will work together to establish an "objective" assets evaluation system based on international practices, to realize the transfer of its equity and shareholding rights to foreign investors. (Xinhua, 22 February)
The Asian Wall Street Journal (21 February) comments: "..the pact sets in motion what many regard as mission impossible: selling Chinese bad debts to foreigners."
China passes Japan as top contributor to U.S. trade deficit
The U.S. trade deficit with China ballooned to USD 83.8 billion last year from USD 68.7 billion in 1999, surpassing the U.S. deficit with Japan for the first time. U.S. exports to China increased by USD 3.1 billion to USD 16.3 billion. (Bloomberg News Archive, 21 February)
Foreign-funded insurance firms open nearly 200 representative offices
By January 2001, foreign-funded insurance firms have opened nearly 200 representative offices in the country, while 17 insurance companies from the United States, Britain, Japan, Canada and Switzerland have obtained approval to do business in Shanghai, Guangzhou and Shenzhen. Although many insurance companies have entered the country, most do not offer insurance yet, but concentrate on market liaisons and surveys. (ChinaOnline, 22 February)
Aluminium Corporation of China (Chinalco) established
China collected all its alumina assets to form a State-run integrated aluminium giant. Aluminium Corporation of China (Chinalco), which is composed of the six largest alumina manufacturers in the nation as well as research institutes and construction firms, has thus become the third largest alumina producer in the world. The company is expected to stage a dual listing on stock markets in Hong Kong and New York in the middle of this year. (China Daily, 24 February)
Carrefour under fire for breaking State regulations
French retail giant Carrefour is under investigation from the State Economic and Trade Commission on allegedly breaking regulations to open stores. Apparently Carrefour had failed to secure SETC approval to open stores. According to some source the government is undecided about how to tackle this affair. While tough handling may discourage foreign investors from the retail industry, other foreign retailers and domestic firms will complain about unfair treatment if Carrefour is not punished. (Business Weekly, 20 February)
This seems like a classic case where a company has been lured into the grey zone of business operations which are not quite legal according to P.R.C.'s rules but quietly accepted or even encouraged by local authorities. Once the company falls out of favor with those authorities or becomes too successful for the competitors to bear, grey zone arrangements come back to haunt the company with a vengeance. In 1992, the central government had opened the retail sector to foreign investment, but only allowed six cities and five special economic zones for such investment. Nevertheless cities and provinces encouraged foreign firms to invest, leading to the proliferation of stores, most of them without approval of the government. Thus, foreign investment in this retail sector has grown faster than the central Government intended, and last November SETC ordered foreign investors in the retail sector to make additional registration for their businesses, because 273 of more than 300 foreign-invested retail outlets were illegal. Carrefour has 28 outlets nationwide, with sales last year of RMB 8 billion, ranking it among the top three retailers in China. Local companies, who fear the foreign competition, now are using the media and administrative measures to attack it.
Pension system needs USD 850 billion lifeline
According to a research report by Bank of China International, the investment banking arm of Bank of China, the country needs USD 850 billion (80% of its 2000 GDP) to reform its pension system. The report also says that selling state assets was the only viable option to avert a pension crisis. (SCMP, 23 February)
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Enclosure
ABB to increase presence in China
Asea Brown Boveri (ABB) Group aims to build China into one of its three largest markets in the next 10 years, according to the company's president and chief executive officer Jorgen Centerman. The group sees China as one of its most important markets after the United States and Germany, Centerman said. "We have massive opportunities in China as it is a market with tremendous potentials," he said in an interview with Business Weekly.
At present, China is not one of ABB's 10 largest markets. The group reported a revenue of about US$750 million in China last year against a global total of more than US$22.96 billion, Centerman said during an annual press conference last week. To fuel its business expansion in China, ABB plans to increase its investment in the country to US$1 billion in coming years from the current level of US$600 million, he said. ABB's business in China is expected to grow much more rapidly than the group's global average, Centerman said. The group has set a target of 6 per cent average revenue growth annually from 2001 to 2005, he said. Markus Bayegan, ABB's chief technology officer, had said earlier the group plans to have 8 to 10 per cent of its total orders and revenue come from China by 2010. What differentiates ABB from its international competitors in China is its ability to add value locally, Centerman said. "We are committed to creating value through manufacturing, engineering and after-sales services in China," Centerman said.
The group has launched 25 joint ventures and wholly-owned companies in China. Peter Leupp, president of ABB (China) Ltd, said the group's major rivals for the market were other technology companies, such as Siemens and Alstom. ABB is prepared to transfer its state-of-the-art technologies and share them with business partners in China, Centerman said. "We will offer cross-border co-operation with Chinese research and academic institutions," Centerman said. The group, for example, will finish transferring equipment worth US$1.5 million from its corporate research laboratories in Switzerland to Tsinghua and Tianjin universities by April. The equipment will be used to investigate greenhouse gases to reduce pollution. Bayegan had said more than 100 scientists were expected to engage in ABB's research and development projects in China within the next two or three years. Centerman said ABB would continue to implement its strategy without major changes in China after the country's accession to the World Trade Organization. "At the same time, we need to deepen our value-added chain and become more cost effective," the CEO said, adding that he believes the group has found a win-win fomula in China.
During the press conference, Centerman also said ABB would broaden it offering of industrial information technology to drive further growth. The group's earnings before interest and taxes increased by 23 per cent to nearly US$1.39 billion in 2000 from that of the previous year.
(Business Weekly, 20 February)
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