SOE revenue growth slows to trickle
Revenue growth in China's state-owned enterprise sector has all but dried up this year, throwing into question a three-year reform effort. Total gross profits at SOEs reached RMB 155.5 billion in the first eight months of the year, up 13.7% over the same period last year. But this growth rate was 5.7 percentage points lower than profit growth in the first seven months. The growth figure was also a huge drop from nearly 130% last year. (SCMP, 29 October)

China's consumer confidence remains high
Chinese consumers remained confident in the country's economy with the consumer confidence index at the high level of 97.3 points in September. The consumer confidence index only fell by 0.2 points from August to September even though the Chinese economy is affected by the world economic slowdown. (People's Daily, 29 October)

Chinese Premier stresses accounting ethics
Chinese Premier Zhu Rongji stressed the importance of accounting ethics when inspecting the newly-founded China National Accounting Institute. The Premier said that one of the prominent problems in the current economic life is the making of fake accounts, which is closely related to such crimes as graft, bribery, tax evasion and embezzlement. (People's Daily, 30 October)

China takes tiny step in making Yuan easier to convert
China has taken another tiny step in its glacial process of allowing full yuan convertibility by allowing one Shanghai bank to settle capital account transactions without first clearing them with the government. But while the move reduces the paperwork in foreign-exchange deals, it doesn't appear to signal a policy shift and doesn't make it easier for Chinese firms to send money abroad or for foreigners to invest in China. (Dow Jones Newswires, 30 October)

China three gorges mega bond to be launched
China's Yangtze Three Gorges Development Co. will offer RMB 5 billion worth of bonds on November 8. The offering will be the fourth batch of corporate bonds offered to domestic Chinese investors since 1998, by the developer of China's Three Gorges Dam. The Three Gorges company has successfully sold some RMB 7 billion in bonds to local investors since 1998. The total cost of the massive dam is estimated at RMB 203.9 billion. (Dow Jones Newswires, 30 October)

Foreign-funded firms to be listed in three stages
Foreign-funded companies will be permitted to list in China's Shanghai and Shenzhen stock markets in three stages: first the Sino-foreign joint ventures in China's inland, then foreign-funded enterprises, and finally transnationals. The detailed timetable for the list and for the issuance of China-Depositary-Receipt of foreign companies is still under consideration. (People's Daily, 31 October)

Foreign banks in China post good profits
Foreign banks operating in China are posting good profits, thanks to the strong growth of Chinese economy. In the third quarter of the year, 53 foreign banks operating in Shanghai recorded after-tax profits totaling USD 55.7 million. The 53 foreign banks had assets worth USD 23.176 billion at the end of September, accounting for half of the total assets of foreign banks operating in China. (People's Daily, 31 October)

China braces for slowdown
China's exports will feel the brunt of the global economic slowdown as early as the first half of next year, Moftec Minister Shi Guangsheng said at the East Asia Economic Summit in Hong Kong. A German newspaper quoted Premier Zhu Rongji as saying China expected exports to fall into negative territory in the coming year. Mr Shi told the summit that China's economic growth forecasts for the next five years remained unchanged, with GDP expected to grow by 7% annually. (SCMP, 31 October)

Water plant litmus test for 'Go West' scheme
The economic viability for foreign investors of China's "Go West" program will soon be put to the test by the nation's first build, operate and transfer (BOT) water treatment plant just completed in Chengdu. A consortium consisting of France's Vivendi Water, three of its subsidiaries and Japan's Marubeni successfully bid for the No 6 Water Plant B, which has the capacity to provide Chengdu's residents with 460'000 cubic metres of treated water per day. (SCMP, 31 October)

German chancellor brings business delegation to China
German Chancellor Gerhard Schroeder, with a business delegation in tow, arrived in China for a visit to expand trade and other relations. Schroeder's three-day visit also will take him to the northeastern port of Dalian and to Shanghai, where he will inspect construction of a German-built high-speed train and inaugurate several business ventures. (AP, 31 October)

China 1st half current account surplus narrows as exports weaken
China's first half balance of payments confirmed expectations of a narrower current account surplus as the country's export growth continued to slow. The decision by China to release its half-year balance of payments for the first time ever has been applauded as a welcome shift towards greater financial transparency. China's current account surplus narrowed to USD 5.098 billion in first half 2001, down from the previously released full-year 2000 surplus of USD 20.519 billion. China's trade surplus narrowed to USD 10.322 billion in first half 2001, down from USD 28.873 billion in full-year 2000. (Dow Jones Newswires, 31 October)

China listed companies start to reveal stock market losses
The first Chinese company quantified its losses from stock market investments, worsening fears that corporate earnings will be hurt by losses sustained in the declining market. The problem of listed Chinese companies investing their initial public offering proceeds and other cash in the stock markets is a long-acknowledged one. (Dow Jones Newswires, 31 October)

Bad loans to be sold at massive discount
Huarong estimates an average 60% discount to the face value of the non-performing state assets, taken over from the Industrial and Commercial Bank of China, the nation's largest commercial bank. The acceptance of a steep discount seems a major change in policy, as Huarong initially proclaimed to accept no discount at all. Potential bidders, like Merrill Lynch, Goldman Sachs, Morgan Stanley and Deutsche Bank are aiming for discount of at least 80%. (www.cbiz.cn, 31 October)

China issues more bonds this year than in 2000
The Export-Import Bank of China issued RMB 5 billion in financial bonds in the inter-bank market. As a result, total bonds issued this year by the Ministry of Finance and State Development Bank of China, together with the Export-Import Bank, have exceeded those issued during all of last year, amounting to RMB 401.5 billion. (ChinaOnline, 31 October)

German firms to expand business
A survey on the barriers in Sino-German trade indicates that more than 60% of the companies believe that after 2006, German companies operating in China will enjoy the same business conditions that Chinese companies in Germany currently have. In addition, 70% of the German businesses expect to further expand business in China next year. The respondents also provided some 150 recommendations on how to improve the business climate in China. (China Daily, 31 October)

Fears over renminbi devaluation scotched
China has no plans to devalue its currency in the foreseeable future despite weakening exports. However, the country is to speed up the process of having a convertible currency after it joins the WTO. Liu Tinghuan, vice-governor of the People's Bank of China made the remarks at the World Economic Forum in Hong Kong. (China Daily, 1 November)

Beijing launches decree to fight ambush marketing
As part of its efforts to ensure a successful Olympic Games in 2008, Beijing issued an municipal government decree to protect the Olympics-related intellectual property rights. "The Olympics intellectual property rights protection is one of the basic factors to ensure a successful Games," said the Director of the Beijing Municipal Bureau of Intellectual Property. (People's Daily, 1 November)

ASEAN to open free-trade talks with China
ASEAN is preparing to open talks with China on the possible establishment of a common free-trade area next year, a Thai official said in Bangkok. (People's Daily, 1 November)

Shangri-La to invest USD 400 million in China
Shangri-La Asia will invest USD 400 million in China in the next four years in new hotels and expansion of existing property. The Hong Kong-based company has 16 hotels in major Chinese cities (SCMP, 1 November)

Mainland banks not ready for WTO
According to the Bank of China chairman, the banks on the mainland are not fit for the struggle with foreign competitors that will come after China enters the WTO. Bank of China chief Liu Mingkang gave his bleak prediction during the East Asia Summit in Hong Kong. (www.cbiz.cn, 1 November)

Ease off China, Lamy tells Europeans
With China about to join the WTO, European Union trade chief Pascal Lamy is advising European business leaders against expecting too much, too soon. "We will have to show restraint and patience in dealing with China." (FEER, 1 November)

Bullish on China
According to a survey of foreign investment perceptions of top executives released by London-based consultancy A.T. Kearney, China is the only country where foreign-investment sentiment has become more positive in the wake of the terrorist attacks in the United States. "This finding comes as no surprise as China is expected to maintain high levels of growth next year as it integrates further with the world economy and formally enters the WTO," the firm said. It also noted that geopolitical stability was now a major consideration in making foreign investment decisions, something bound to help China as other parts of Asia get caught up in the U.S.-led "war on terrorism." The survey's finding is reflected in foreign direct investment. In the first nine months of the year, FDI in China rose by 21% to USD 32.2 billion, on track for a USD 48 billion total for 2001. Foreign-funded firms account for a third of industrial output, 10% of urban employment and about a quarter of GDP growth in China. (FEER, 1 November)

'Big Four' to reshuffle bad loans
China is to thin out its non-performing assets owned by the four major State-owned banks, by an annual 2 to 3% decrease in the 10th Five-Year-Plan Period (2001-05). Currently, the NPLs owned by the "Big Four" commercial banks stand at RMB 1.8 trillion, or 26.6% of their total loans in local and foreign currencies. China's asset management corporations are attempting to deal with the problem through debt-to-equity-swap transactions, the auctioning of bad loans and the seeking of foreign participation in disposing of the NPLs. (China Daily, 2 November) Independent experts reckon that the rate of bad loans owned by the major State banks is as high as 50%.

Sino-Japan talks fail
Talks between China and Japan in Beijing failed to resolve their trade dispute as expected, but the two sides called the meeting "friendly and productive." Japanese officials indicated the issue was unlikely to be resolved in the near future. (China Daily, 2 November)

Job cuts 'across the board' in WTO era
China expects to cut jobs in sectors ranging from farming to banking as it prepares for foreign competition after joining the WTO. Labour Minister Zhang Zuoji said traditional sectors to be hardest hit included farming and farm products, the car industry, electronics, banking and insurance. (SCMP, 3 November)

Growth hinges on FDI flows
Continuing inflows of foreign direct investment into China is expected to help offset any falling trade volume caused by the slowing United States economy. Trade is an important sector of the Chinese economy, the volume equivalent to 44% of China's GDP. The US is China's second-biggest trade partner, with bilateral trade last year totalling USD 74.4 billion. Last year, the contractual value of FDI into China rose 52% to USD 63 billion, or about 6% of the country's GDP, and increased nearly a third in the first eight months of this year. China is the world's second-largest FDI recipient after the US, with its growth being fuelled by its imminent entry to the WTO. Analysts have forecast that China's FDI this year will grow 12% to about USD 45 billion. The FDI inflows saw no signs of decline despite the terrorist attacks. (SCMP, 3 November)

Weekly Market update		02 November 2001	26 October 2001
Shanghai A		1764.74	1750.37
Shanghai B	--	156.09	156.09
Shenzhen A		514.29	509.50
Shenzhen B		251.63	251.76
Hong Kong Red Chip		1210.20	1222.40
Hong Kong H		1846.12	1775.92
Source: South China Morning Post