EMBASSY OF SWITZERLAND IN CHINA - CHINESE BUSINESS BRIEFING N°83 04 February

Swiss exports to China up 18.9% in 2001, imports down
Swiss exports to mainland China grew by 18.9% (to CHF 1.67 billion) in 2001 while imports from China decreased -1.9% (to CHF 2.26 billion). Machinery is still by far the largest category of export goods (63.2% of total), followed by chemicals/pharmaceuticals (18.8% of total) and precision instruments (6.1% of total). Swiss exports to Hong Kong increased 5.1% (to CHF 4.04 billion), while imports decreased -24.1% (to CHF 679.3 million). Swiss exports to Taiwan decreased -14.4% (to CHF 1.31 billion); imports went down -25.7% (to CHF 808.6 million). (Embassy of Switzerland, 10 February)
See more details below.

WTO-optimism on the retreat
China has started to release regulations to open up industries according to its obligations under the WTO. But often those regulations are accompanied by whole sets of new limitations that virtually reverse the promise of opening up. Hardest hit at this stage have been the financial services. Huge cash requirements are making expanding into China too expensive for many foreign players. In other industries, business people complain that diminished import tariffs have been replaced by higher internal barriers that make some goods even more expensive than before the tariff cut on January 1. (www.cbiz.cn, 3 February)

Jiangsu province absorbs USD 10 billion worth of Taiwanese investment
Taiwanese investors have invested USD 10 billion in China's Jiangsu province, making it one of the major areas for Taiwanese investment in China. (People's Daily, 4 February)

Monopoly State Power to be broken in next years
Plans to break up the monopoly of State Power Corp., China's main electricity producer and distributor, are back on the agenda again. In the next few years, the government will split the existing power network into six or seven regional grid companies. The power stations of SPC will be divided among four generators. (www.cbiz.cn, 4 February)

JV insurers gain landmark nod for branch opening
Recently approved branches of two Sino-foreign life insurance joint ventures - Shanghai-based Manulife-Sinochem Life Insurance Co and AXA-Minmetals Assurance Co. - will open soon. The branch openings mark the first time joint venture life insurers have been allowed to expand outside Shanghai. The one exception is American International Assurance Group, which already has three wholly-owned operations in Shanghai and South China's Guangzhou and Shenzhen. (Business Weekly, 5 February)

Foreign Olympic bids hampered
Despite the declaration of the Beijing Organization Committee to open bidding for the construction of Olympic facilities to foreign engineering firms, many of them still have to overcome numerous hurdles to ink deals. Lack of qualified professionals among China's sports industry officials, insufficient demand for sports facilities and severe competition among domestic construction firms are the major barriers blocking foreign access to the Olympic construction market. (Business Weekly, 5 February)

Enron: Alarm bells ring in China too
While the world was stunned by Enron's bankruptcy and the role of Arthur Andersen in the fiasco, Chinese investors face the reality that irregularities occur not only in China's fledging accounting business, but also among foreign accounting firms based on Chinese land. (China Daily, 5 February) Surprise, surprise.

New court to handle foreign cases
A special team of judges in Beijing has been called in to deal with expected international cases involving transnational disputes, now that China has entered the WTO. The new bench will handle cases concerning loan contracts, international transport contracts and disputes involving credit letters, international co-operation and trading involving foreigners. (China Daily, 5 February)

Insurance sector sees premiums up 32.2%
The nation's insurance industry reaped premiums of RMB 210.9 billion last year, up 32.2% on the previous year. Total assets of the industry amounted to RMB 459.1 billion, up 37.6%. The industry made a total of RMB 5.06 billion in profit, up 34.9%. (China Daily, 5 February)

Bank of China marks 90th anniversary
The Bank of China, one of China's "big four" State-owned commercial banks, held a grand ceremony to mark its 90th anniversary. Currently the Bank of China has 560 branches in 25 countries and regions. (People's Daily, 5 February)

Bank official urges yuan devaluation
Li Zaohang, vice-president of the Bank of China, has called for a devaluation of the yuan to help boost exports and deflect pressure from a weakening Japanese yen. While China is still seen as reluctant to risk triggering a round of competitive devaluations in Asia, this was the latest in a series of official publications sounding the alarm over the weak yen. The governor of the People's Bank of China has said that China would keep a stable yuan but he too has called for Japan to listen to its neighbours and put a brake on the yen. (SCMP, 5 February)

Chinese state-owned companies lag in productivity
A new study by a U.S. research group says the productivity of Chinese state-owned companies still lags behind that of private and foreign-owned Chinese companies by a wide margin. But the gap isn't as wide as some imagine, and should narrow in coming years. As foreign companies venture deeper into the Chinese domestic economy, the productivity advantages they enjoy will dissipate, the study said. (WSJ, 5 February)

China Telecom restructuring not at broadband speed
The delayed restructuring of China Telecom has caused a slowdown in business for foreign telecom companies dealing in China. The details preventing a closure in the deal concern the splitting up of the fiber-optic network that lies across the country. (www.cbiz.cn, 5 February)

China's unemployment figures dropping
The latest survey conducted by the Ministry of Labor and Social Security shows China's unemployment is decreasing but there are still many unemployed. During the fourth quarter of last year. There were 1.08 million jobs available but 1.45 million people looking for work leaving 370'000 unemployed. The unemployed consist of laid-off workers and surplus rural laborers, with an increasing number of unemployed young people. (People's Daily, 6 February) Beware of those figures.

Beijing gives pipeline green light
PetroChina has announced the official start of work on a 4'000km pipeline to bring gas from the far west region of Xinjiang to Shanghai, after signing an agreement with a consortium led by Royal Dutch/Shell. The project, which will cost more than USD 5.6 billion, carries engineering, public relations and commercial risk. It is uncertain whether consumers in the east will be ready to pay the cost of the gas when it finally reaches them. (SCMP, 6 February)

Shareholding banks clean up debt
Average non-performing loan ratios at China's shareholding, commercial banks have dropped to 12.94%, while the four state-owned banks' non-performing loan ratios averaged 25%. Analysts say they could be even higher. China's smaller, shareholding banks are regarded by analysts as the best-run financial institutions in the country in terms of profitability and bad-loan ratios. (SCMP, 6 February)

Alliance new weapon in disclosure battle
Xinhua Financial Network and Shanghai Far East Credit Rating have formed an alliance to assign credit ratings to the mainland's publicly listed companies. It is seen as an effort to bring more transparency to China's financial markets. Eventually, the pair hopes to become a full credit ratings agency and rate most of China's publicly listed firms. (SCMP, 6 February)

Airline mergers get green light
Nine existing State-owned airlines will be eventually merged into three aviation groups. Each of the three groups will have assets of more than RMB 50 billion and a fleet of 150 or so aircraft. The names and logos of the new groups will be taken from Air China, China Eastern and China Southern respectively. (China Daily, 6 February)

Shanghai to invest more overseas
Shanghai will invest USD 70 million overseas this year. This year the city will be starting up more new businesses in developed countries and setting up a group of research and development and design centers focusing on light industrial products, textiles, machinery and home appliances. Shanghai started up 32 businesses overseas, investing USD 53.84 million last year. (SCMP, 6 February)

Foreign operators rush to expand into new service areas
Foreign banks have rushed to file applications to the People's Bank of China to expand into new businesses opened to competition under China's WTO agreement following the release of detailed regulations. At the end of last year, the 31 foreign banks approved to conduct limited yuan business had assets worth RMB 45 billion. They had set up 214 representative offices throughout the mainland and 156 branches with assets of USD 45.2 billion. Foreign banks accounted for about 2% of the country's overall banking assets and about 15% of foreign-currency loans. (SCMP, 7 February)

Great Wall offers sell of bad assets
Great Wall Asset Management is offering to sell bad assets with a book value of RMB 11 billion to foreign and domestic investors. The assets, including debts, property and stakes in listed firms, span more than 20 sectors including real estate, pharmaceutical, textiles and power. The firm, set up in 1999 along with three other asset management companies, is trying to resolve RMB 345.8 billion in non-performing loans taken from the state-owned Agricultural Bank of China. (SCMP, 7 February)

Government ends Financial Conference, stresses bank reform
China's top leadership concluded three days of discussions on the future shape of the country's financial system and its transition to a market-based economy. The focus of the conference was on financial sector reform and improving risk management and supervision. In his speech at the conference, President Jiang Zemin emphasized the importance of financial reform and laid out the reform's guiding principles. Premier Zhu Rongji also made specific proposals on strengthening financial regulation and furthering reforms of China's state-owned commercial banks. The closed-door meeting, known as the Central Financial Work Conference, was organized by the State Council. (Dow Jones Newswires, 7 February)

Control commission forming under PBOC
A regulatory commission will soon be created under the central bank in a move to streamline the regulatory oversight of the country's banking industry. The decision was mooted during the three-day Central Financial Work Conference in Beijing, following a heated debate among top leaders, central bankers and chiefs at commercial banks and other financial institutions. The conference accepted that keeping the agency under the People's Bank of China would give it proper authority to implement policy. (SCMP, 7 February)

China initiates first anti-dumping case
China has decided to start an anti-dumping investigation into art paper imported from the Republic of Korea, Japan, the United States and Finland. It is the first anti-dumping case put forward by Chinese enterprises since China entered the WTO. (China Daily, 7 February)

Shandong takes large slice of 'green' food mart
Millions of hectares of land in China's Shandong Province are to be devoted to "green" food, in a bid to turn the area into a production base in this regard. According to the provincial agricultural department, the province plans to use 4.33 million hectares of land for "green" food and pesticide-free products by 2005. (China Daily, 8 February)

Consumer outlook promising
According to a recent survey conducted by MasterCard International, Chinese people are very optimistic about their future living standards and the national economy. On a scale of 100, China's index was 84.8, far ahead of the other countries and regions in the Asia-Pacific area and making it the most promising country in the area. (China Daily, 8 February)

Luxury taxi fleet set for Beijing
Beijing has launched its first joint venture taxi service with luxury cars after restrictions were lifted on foreign investment in transport services. (SCMP, 8 February)

Record disposal of non-performing loans at state banks
The nation's asset management companies disposed of a record number of non-performing loans last year with the four key firms accounting for RMB 124.5 billion. They recovered more than RMB 25.6 billion in cash, representing a 20.6% recovery rate. The four asset management companies were set up in late 1999 to dispose of bad loans at China's state-owned commercial banks. (SCMP, 8 February)

China Re to form shareholding group
China Reinsurance Company expects to transform itself into a shareholding group in three years by introducing foreign and domestic investors. Currently, 94% of China Re's revenue comes from compulsory reinsurance. According to China's commitment to the WTO, China Re will lose its 20% compulsory reinsurance privilege by 5% every year starting this year. (China Daily, 9 February)

China Construction Bank, German lender plan joint venture
The China Construction Bank has submitted an application to jointly establish a housing deposit and loan bank with the German bank Bausparkasse Schwabisch Hall. Thus, CCB could soon become the first Chinese bank to establish a Sino-foreign joint-venture bank. (China Daily, 9 February)

Shanghai to spend USD 2.5 billion on Expo bid
Shanghai is preparing to spend up to USD 2.5 billion to boost its bid to hold the World Expo in 2010. Officials were vague about precisely where all the money would go, saying it would be spent as part of a master plan aimed at luring more visitors and boosting the city's international image. (SCMP, 9 February)

ING inks life alliance
Dutch firm ING Insurance has signed a letter of intent with Beijing Capital Group to set up a 50:50 joint-venture life insurance firm in the northern city of Dalian. (SCMP, 9 February)

China posts 25% growth in foreign trade in January
China exported and imported USD 40. 67 billion worth of goods in the first month of this year, up 25.7% over the same period last year. Overall exports reached USD 21.7 billion (up 29.2%) while total imports were valued at USD 18.97 billion (up 21.9%). Trade experts say the real growth rate for foreign trade in January would have been about 10% considering a smaller comparative base in January of 2001, during which the Chinese were busy celebrating their lunar New Year. (Xinhua, 10 February)

Foreign investment to Tianjin climbs
Tianjin, one of China's four municipalities and the leading port city in northern China, has absorbed USD 3.2 billion of investment from abroad last year, a quarter more than the amount in the previous year. The municipal government approved 618 foreign-funded enterprises last year, bringing the total number of foreign-fundedfirms in Tianjin to 14'233, which involved a total contractual value of USD 36 billion. (People's Daily, 10 February)

Weekly Market update	08 February 2002	01 February 2002
Shanghai A	1571.11	1548.60
Shanghai B	142.29	143.50
Shenzhen A	449.74	440.67
Shenzhen B	218.70	213.70
Hong Kong Red Chip	1151.12	1165.01
Hong Kong H	1929.94	1891.63
Source: South China Morning Post

Bilateral Trade between Switzerland and China
January - December 2001 (in Mio. CHF)