11 March - 17 March 2002

No 88

Pilot pension project short of money
Funding problems jeopardize the country's pilot pension plan project in Liaoning province. The problems once again reveal the great difficulties China faces in revamping its social security plan. The central government last year selected Liaoning province for its pilot plan to reform its social security system. (www.cbiz.cn, 11 March)

PBOC approves two representative offices of Taiwan banks
China's central bank has for the first time approved two commercial banks from Taiwan to set up representative offices in the mainland. The United World Chinese Commercial Bank and the Chang Hwa Commercial Bank will set up their representative offices in Shanghai and Kunshan, respectively. (People's Daily, 11 March)

China to keep Yuan stable
China's central bank ruled out the possibility of devaluing the country's currency. "Keeping Yuan stable is beneficial to both China and Asia", said Dai Xianglong, governor of the People's Bank of China. (People's Daily, 11 March)

China bank chief unfazed by size of debt
The governor of China's central bank acknowledged for the first time that national domestic debt is much higher than official yardsticks have so far indicated, but he said reform and economic growth would alleviate the gravity of the problem over the next 10 years. Mr Dai said that if unfunded state pensions liabilities, the debts of local governments and the non-performing loans in the "big four" banks were counted as public debt, then the level of domestic debt as a ratio of GDP was less than 60%. Independent economists typically put the figure at around 100%. Official statistics put domestic debt at around 16% of GDP last year. (FT, 11 March)

Foreign players put high priority on sinking capital into mainland
Nearly 90% of foreign companies with businesses in China plan to expand their investments over the next three years, according to a survey by Deloitte Touche Tohmatsu and CFO Asia magazine. However, there are still concerns about investing in China. The survey found foreign investors' top three concerns to be the regulatory environment, the pace of implementing China's WTO commitments and the mainland's economic outlook. (SCMP, 12 March)

Strong exports fuel growth optimism
The mainland economy is showing signs of recovery, with growth in industrial output faster than expected. China said industrial output rose 10.9% year on year in the first two months of this year. The surge was driven by positive exports. (SCMP, 12 March)

China to start Euro-Yuan trading
China will start trading the euro against the yuan in its national foreign exchange market from April 1. Currently, the yuan is only traded against the U.S. dollar, the Hong Kong dollar and the Japanese yen. China's decision to allow euro-yuan trading follows the government's move to increase the portion of euros in its foreign reserves. (Dow Jones Newswires, 12 March)

Chinese inflation was flat in February
China's consumer price index was unchanged in February, ending three consecutive months of price declines that had again raised worries about a resurgence of deflation. China's government has set a target range of 1%-2% growth in the CPI during full-year 2002. The main contributors to the flat result in February were higher prices for food, housing and utilities. (WSJ, 12 March) see below news item of 14 March

Tax revenue grows 13%
China's tax revenue reached RMB 266 billion in the first two months of the year, up 13% compared with the same period last year. Taxes from production and consumption accounted for 80% of the increase. Value-added tax revenue grew by 17.5% to RMB 99.7 billion, while consumption tax jumped 34.2% to RMB 16.9 billion. Sales tax increased by 14% to RMB 47 billion. (Xinhua, 13 March)

Shi predicts foreign glut
China is expected to maintain a high level of foreign direct investment of USD 45 to 50 billion this year, according to Moftec Minister Shi Guangsheng. However, he said this year will be an extremely difficult year for the growth of foreign trade, as many uncertainties remain despite signals in major developed nations for a possible economic recovery. (China Daily, 13 March)

Hyundai to set up second car base
Hyundai Motor Co. reached a deal with Beijing Automotive Industry Corp to set up a passenger car joint venture this year. Hyundai plans to invest USD 250 million in the expected 50-50 joint venture. The planned production capacity of the joint venture, to be named Beijing Hyundai Automobile Co, is 100'000 units a year and will be doubled by 2005. (China Daily, 13 March)

China issues new master list for foreign investment industries
SDPC, SETC and MOFTEC jointly issued the new master list for foreign investment industries and its attachment to go into effect as from April 1. The new list falls into four catalogs: the encouraged, the permitted, the restricted and the forbidden. (People's Daily, 14 March) 
http://english.peopledaily.com.cn/200203/14/print20020314_92106.html

Foreign Investment in China tops USD 400 billion
By February this year, China had made use of foreign investment of over USD 400 billion and approved the establishment of 393'988 foreign-funded businesses. (People's Daily, 14 March)

PetroChina faces massive protests as it pushes forward with reforms
Thousands of laid-off workers have besieged a subsidiary of one of China's biggest listed oil concerns, PetroChina Co., in a confrontation that highlights the social risks of cost-cutting at Chinese companies. In an attempt to contain the unrest, police have detained some of the protest organizers, witnesses say. (WSJ, 14 March)

Unchanged consumer prices hide deflation trend
The government said consumer prices in China remained flat in February compared with the same month last year, but analysts said the figure masked a stubborn deflationary trend that is expected to continue through at least the second quarter. (Dow Jones Newswires, 14 March)

China's exports grow 14.1% in the first two months of 2002
China's foreign trade reported an 8.8% increase, hitting USD 75.73 billion, in the first two months of this year. China's exports and imports in January and February increased to USD 40.84 billion and USD 34.89 billion respectively, up 14.1% and 3.2% percent year-on-year. China's exports to the United States increased by a large margin, while its exports to the European Union and Japan showed a weakening tendency. More notably, China's imports from Russia, Japan, the United States and European Union all decreased, according to the statistics. (People's Daily, 15 March)

China files first complaint to WTO
For the first time since it is a member of the WTO, China filed a complaint to the international trade body. The country protests against the decision of the United States to impose tariffs on steel imports. China, the world's largest steelmaker, complains against the move, saying it violates fair trade practices and urging for negotiations to resolve the dispute. (www.cbiz.cn, 15 March)

Foreign banks in Shanghai apply for expanded business
Foreign banks operating in Shanghai have submitted applications one after another to the People's Bank of China for permission to expand their business scope and capital circulation. Financial analysts commented that the move shows foreign banks holding an optimistic attitude towards their business in China. (People's Daily, 15 March)

Retail sales go up 8.5% in the first two months of 2002
China's retail sales of consumer goods grew 8.5% year-on-year to RMB 692.1 billion during the first two months of this year. Retail sales in urban areas rose 9.3% to RMB 435.9 billion, while sales in counties and areas at lower administrative levels grew 7% to RMB 256.1 billion. (People's Daily, 15 March)

Bank of China confirms huge theft by officials
Bank of China has unveiled details of its damaging Guangdong loan scandal and affirmed its determination to float its Hong Kong unit globally. Five officials of the bank's sub-branch in Kaiping, Guangdong, stole at least USD 483 million between 1993 and 2000 and had fled. (SCMP, 15 March)

China Q1 growth set for 7.5%
China's economy should grow 7.5% year on year in the first quarter, according to Premier Zhu Rongji, in one of the most upbeat forecasts from Beijing this year. Economists widely expect the first quarter to show the slowest GDP growth this year, so the figure unveiled is bound to lead many to upgrade their forecasts for the full year. (SCMP, 15 March)

Weekly Market update		15 March 2002	08 March 2002
Shanghai A		1691.06	1710.68
Shanghai B		150.20	154.06
Shenzhen A		496.25	501.38
Shenzhen B		231.91	241.18
Hong Kong Red Chip		1271.04	1272.13
Hong Kong H		2091.26	2049.01
Source: South China Morning Post