Early retirement swells China pension-fund deficit to RMB 36 billion
China's pension fund deficit nearly doubled last year reaching RMB 36 billion, partly because thousands of workers are retiring early, increasing the pressure on the pension system. Under the planned economy, people received a pension directly from their work units. In the past 10 years, the government has switched to a system whereby individuals and their work units contribute towards the pensions in a national scheme. (South China Morning Post, 25 June)

More trade wars feared after WTO accession
As a country of cheap labor, and thus cheap exports, China is regarded as a threatening trade competitor by many countries. And entrance to the WTO won't make things any better: the WTO-members will be even more confronted with China's cheap goods and huge competitiveness. China will be in a better position to defend itself against unjustified high benchmarks. Worries are especially rising over the potential conflict with poorer countries, like India, Brazil, and South East Asian countries. (Asian Wall Street Journal, 25 June)

Land misuse comes under spotlight
The Ministry of Land and Resources issued a warning about the nation's dramatic loss of agricultural land and vowed to take all necessary measures to protect the remaining cultivated land. Last year, land authorities nationwide looked into 170'000 cases of land use irregularities. The investigations led to 348 officials being punished. They also handed over 107 cases involving serious violations to judicial departments. (China Daily, 25 June) Companies may want to check the status of their land use rights.

High-tech products dominate Beijing's export
In the first five months of 2001, high-tech products have taken up half of the city's total export representing a year-on-year increase of 78.8%, 32 percentage points higher than the national average. Computers and telecommunication facilities, realizing an export volume of USD 754 million stand out prominently. Life-science products and bio-science products also reported high growth rates. (Xinhua, 25 June)

Online SOE asset auction aborted when bidders back out
The first online auction of assets in a state-owned enterprise - the Tianjin Jinqiao Hotel - had to be canceled when several bidders announced their withdrawal from the auction. (ChinaOnline, 25 June)

China Netcom networking with Singapore Telecom
China Netcom Corp. established an extensive partnership relationship with Singapore Telecom. The two companies will cooperate to provide specialized network services, to be used by companies in Singapore to connect their business units in China with their headquarters back in Singapore. China Netcom's target markets include East and Southeast Asia, the United States and Europe. (ChinaOnline, 26 June)

SOE restructuring saves RMB 33.35 billion since '98
Since the Chinese government began overhauling state-owned enterprises in 1998 by closing money-losing firms and encouraging corporate mergers, acquisitions and bankruptcies, accumulated losses at large and medium-size SOEs have declined by RMB 33.35 billion, according to official preliminary calculations. (ChinaOnline, 26 June) Also see below message of 29 June)

China to open market fund management to foreign firms
China will allow foreign fund management companies to help manage part of China's USD 6 billion pool of social security funds. When the government gives the go-ahead for some of the pension funds to be invested in domestic stocks, foreign firms will be allowed to manage a portion. The vast bulk of China's pension funds are currently held in bank deposits and treasury bonds which generate very low yields. (China Daily, 26 June)

Sale of state-owned shares about to start
Three Chinese government-owned companies are taking the lead in selling off state shares in a bid to raise badly needed funds for industrial restructuring and to help meet mounting pension costs. The new share offerings would include the sale of state-owned shares equivalent to 10% of the money to be raised. The trio will pave the way for a wave of up to RMB 7 billion of state shares that could come on stream this year. Estimates said the move could herald a much bigger selldown of state holdings and could raise up to USD 200 billion eventually. (SCMP, 27 June)

IPR reform sluggish despite revised law
The country's top official in charge of intellectual property rights has said the mainland still has a long way to go before the rights of locals and foreigners are properly protected. Local law enforcers still confiscate millions of counterfeit or pirated products almost every week. The cost to foreign business from Chinese piracy is astronomic, some observers believe it could account for as much as 8% of China's GDP. According to the latest report by the International Federation of the Phonographic Industry, China remained the world's biggest audio piracy offender, with illegal recordings comprising more than 90% of the market last year. (SCMP, 27 June) It has to be noted, though, that IPR violations are as much a problem for domestic companies as they are for foreign ones.

Industrial profits rise in first five months
Profits of China's industrial enterprises surged 30.4% during the first five months of this year, but the monthly growth rate slowed. Stockpiles at industrial enterprises grew 7.6% in the same period to RMB 693 billion (Xinhua, 27 June)

Huge investment to pour into Beijing water resource development
The central government and the Beijing municipal government have decided to spend a total of RMB 22 billion to ease water shortages in the capital city within five years. The investment will be used for development and protection of water resources and prevention of pollution for two major reservoirs in the city. (Xinhua, 27 June)

Mainland firm takes over Philips mobile production
Dutch electronics giant Philips will stop making mobile telephones, cutting more than 1'000 jobs and linking instead with China Electronics Corp. (AFP, 27 June)

US hits Chinese firms with weapons sanctions
The US Government imposed sanctions against Chinese and North Korean companies for allegedly helping Iran in violation of international pacts aimed at curbing the spread of deadly weapons. The offending action by China's Jiangsu Yongli Chemicals and Technology Import and Export Corporation took place last year . The same company had been sanctioned in May 1997 for allegedly transferring chemical weapons components to Iran. Under the sanctions, the US Government suspended licences for US companies involved in any regulated trade with the Chinese and North Korean companies. (Reuters, 28 June) To our knowledge, this news has not been reported by the Chinese Media.

Factory workers escape 'slavery'
More than 200 workers allege that inhumane treatment and slave-like conditions motivated their recent escape from a steel-casting factory in Xinjiang Autonomous Region. They say hundreds more are still suffering. (SCMP, 28 June)

Restructuring of automotive industry ahead
The State Economic and Trade Commission unveiled a plan to build two or three key car companies into domestic giants while forcing dozens of smaller manufacturers out of business in a five-year shake-up of the industry. SETC also predicted China's annual car demand would double to 1.1 million to 1.2 million units by 2005. First Automobile Industry in northern Liaoning, and Shanghai Automotive Industry Corp (SAIC) and Dongfeng Automotive Group in central Hubei are likely to be selected by SETC for this plan. (Reuters, 28 June)

ADB: China remains the bright spot in an increasingly gloomy region
In its latest Asia Recovery Report, the Asian Development Bank said the region would continue to be battered by the sharp drop in external demand, however, economists were increasingly hopeful of a strong, global recovery next year. Despite this year's more difficult environment, growth in China was projected to hit 7.7% this year, unchanged from the estimate issued at the end of the first quarter. (SCMP, 28 June)

Intellectual property in China
The Economist takes a look at the situation of intellectual property rights and finds a new generation of Chinese companies ready to play by the rules. These are companies like Kexing (pharmaceuticals), Haier (white goods), Legend (computers) and Konka (television) with strategies for global markets based on their own brands and intellectual property. Their biggest worry is not foreign rivals but local rip-offs, hence they, rather than foreigners, start lobbying Communist Party chiefs to enforce the rules. (The Economist, 28 June)
http://www.economist.com/printedition/displayStory.cfm?Story_ID=677617&CFID=1370468&CFTOKEN=51760897

Reinsurance in China
The lack of reinsurance is one reason for the inefficiency of China's capital markets. Once China opens to international top reinsurers, every Chinese risk becomes cheaper if it is ultimately reinsured, and China's economic development should then proceed faster and withstand more catastrophes. The government has hinted it would give Swiss Re access to its market "shortly after WTO accession". (The Economist, 28 June) The government's "hint" with regard to Swiss Re's license was in fact a very clear pledge.
http://www.economist.com/printedition/displayStory.cfm?Story_id=677685&CFID=1370468&CFTOKEN=51760897

Investing in China: Between hype and a hard place
The latest "Where to put your Money" - edition of the Far Eastern Economic Review takes an extensive look at China's stockmarkets. (FEER, 28 June). Also see other articles on the subject in the same issue of FEER. 

Concealed SOE losses
A recent audit of 1'290 major state-owned enterprises by China's Auditor-General found that 68% of them had falsified their bookkeeping. The AG accused the enterprises of concealing RMB 74.2 billion in losses in 1999. (China News Service, 29 June)

Coal to remain no.1 industrial fuel in China
Coal will continue to be the major source of energy for China's industries in the next five years. The government will make efforts to increase the efficiency of this traditional industry, by forming large enterprise groups, introducing advanced technology, producing environment-friendly products, and promoting exports. (Xinhua, 29 June)

More jobs lost than created, says expert
According to the director of Qinghua University's China research centre in Beijing, China has created fewer jobs than were lost in the past five years, which has pushed the unemployment rate over the 10 million mark. While government and other state-owned work units axed 28% of staff in the past five years, collectively owned enterprises had let go more than half of their workers. In contrast, only 15 million jobs had been created by foreign and privately owned enterprises during the five-year period. The official urban jobless rate is about 3.1%, or 5.5 million people. However, the actual unemployment rate estimated by the research centre is at least 7.6% in rural areas and 8.2% in urban China. (SCMP, 29 July)

PetroChina to hold largest ever domestic A-share offering
Chinese oil and gas producer PetroChina Co. Ltd. announced plans to hold the country's largest ever domestic A-share offering, in a move to raise funds for a natural-gas project it is currently heading. PetroChina already lists shares on the New York and Hong Kong stock exchanges, but an A-share offer will give the company access to the local capital market. Referring to last week's announcement by Sinopec of a 2.8 billion A-share offer, analysts were concerned that two of China's largest oil giants hoped to hit the A-share market within a short space of time. (Asian Wall Street Journal, 29 June)

Beijing to spend RMB 180 billion on traffic and environment
Beijing will spend RMB 180 billion over the next five years to solve traffic problems and to clean up the environment. These railway, road, sewage treatment, and gas pipeline projects include extending the total length of the city's light-rail and subway systems to 138 km; a fifth and a sixth ring road to reduce traffic congestion; a second pipeline to bring natural gas from Shaanxi province in the north; and, building 10 sewage plants to bring the sewage treatment rate to 90%. (Beijing Morning Post, 29 June)

Chinese condoms for the world
A condom manufactured in China recently won a tender for use by the United Nations Fund for Population Activities. This is the first time that a China-made contraceptive has been accepted for use worldwide. (Xinhua, 29 June)

Communist Party boosts private sector
Jing Shuping, chairman of the All-China Federation of Industry and Commerce, said that the country's private business sector could not have developed so quickly during the last two decades without the prudent leadership of the CPC. The nation now has over 1.7 million fully private enterprises with a total investment of RMB 1.1 trillion (USD 132 billion) and a work force of around 27 million. "Today private entrepreneurs are enthusiastic supporters of the Party's policies because they realize that their endeavors can not succeed without the correct leadership of the Party". (China Daily, 30 June) The most interesting feature about this article may be that it appeared on the day Beijing celebrates the 80th birthday of the CPC.