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A Turbulent Year Ahead in 2004
for China-US Trade Relations?
Special
Report - China Northeast updated on Oct 14, 2004
EDITORIAL:
"Diplomacy a must for Taiwan mission"
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Business people must keep their eyes open
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Hawaii Ethic Commission
- To preserve public
confidence in government by administering and enforcing State of Hawaii
governmental ethics laws to ensure the highest standards of ethical conduct
among state officials and employees.
Daniel J Mollway,
Executive Director, Hawaii State Ethics Commission,
Pacific Tower, Suite 970,
1001 Bishop Street, Honolulu, Hawaii 96813, USA, Phone: (808) 587-0460, Fax:
(808) 587-0470, Email:
dmollway@hawaiiethics.org |
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The ICAC
(Independent Commission Against Corruption)
of Hong Kong and 13 professional
organizations/chambers of commerce have collaborated to produce the captioned
Guide. It is tailor-made for managers who are not trained IT experts but who
have to supervise their teams in the use of computers and the Internet. The
Guide offers managers practical advice on how to identify integrity risks in the
workplace and proactively reduce them by ethical management. Free copies are now
available for collection by business organizations. Contents of the Guide include:
Case illustrations from the ICAC's investigation files / An analytical
framework for addressing corruption from the legal and ethical perspectives / An
ethical management model and some practical measures / A directory of services provided by publishers, particularly the ICAC....Click here to read the Guide |
 |
Listen to MP3 Hawaii
Public Radio “Business
Beyond the Reef” to discuss the problems with imports from China, telling
all sides of the story and then expand the discussion to revitalizing
Chinatown -
Special Guest:
Johnson Choi, MBA, RFC. President - Hong Kong.China.Hawaii Chamber of
Commerce (HKCHcc) and Danny Au, Manager, Bo Wah Trading |
China Legal
Issues
China Central TV - English
Channel 24 hours live webcast
January 29 2009
Buy America Program may destroy
USA and Asia trade and business
The Honorable Daniel K. Inouye
United States Senate
722 Hart Senate Office Building
Washington, D.C. 20510-1102
The Honorable Daniel K. Akaka
United States Senate
141 Hart Senate Office Building
Washington, D.C. 20510-1102
Dear Senator Inouye and Senator Akaka:
You face an awesome responsibility as the Senate grapples with the stimulus
package. That responsibility includes ensuring that Hawaii gets the maximum
“bang for the buck” from projects to be financed and ensuring that Hawaii and
the country are not engulfed by a downward spiral likely to be triggered by “Buy
America” provisions that were inserted in
the House version of the package.
I write to you as vice-chair of the Hawaii Pacific Export Council, a volunteer
committee of business leaders in Hawaii, who are appointed by the U.S. Secretary
of Commerce to provide their expertise to assist our Hawaii companies, mostly
small businesses, to export their good as services overseas, thereby helping
Hawaii's economy. Hawaii’s market is simply too small for many companies to
thrive in these times, and we see more and more Hawaii companies trying to
generate overseas sales to tide themselves over.
The stimulus package passed by the House of Representatives contains provisions
calculated to prompt extreme reactions from the trading partners on which Hawaii
depends. These include requirements that the steel and cement to be used on
infrastructure projects financed by the package must be of U.S.-origin. This may
sound attractive on the surface, but the
provisions are fraught with unintended consequences. Perhaps intended to save
U.S. jobs in the steel and cement industries, this will be done at the price of
losing even more American jobs in the construction industries by raising the
price of their inputs and creating supply bottlenecks that will slow down the
hoped-for recovery. You can imagine how quickly Hawaii will get steel from the
Mainland if the entire country is competing for American steel only.
Hawaii’s exports are likely to be disrupted as well. The European Union is
already moving to prosecute the United States in the World Trade Organization
should the Buy America provisions become law. France is already considering a
Buy French policy to exclude our products. Our major markets in Asia are bound
to take action to protect themselves - in a replay of the world’s reaction when
the Smoot-Hawley Tariff was passed, exacerbating the Great Depression. Make
Hawaii a leader in helping the world recover from this recession by voting
against the Buy American provisions. Don’t let us lead the way to a downward
spiral.
A copy of a letter is attached that has been sent to Senators Reid and
McConnell, and to Representatives Pelosi and Boehner. The Hong Kong.China.Hawaii
Chamber of Commerce (HKCHcc) strongly endorses this letter.
Sincerely,
Johnson W. K. Choi
President
Hong Kong.China.Hawaii Chamber of Commerce
January 22, 2009
The Honorable Nancy Pelosi The Honorable Harry Reid
Speaker Majority Leader
U.S. House of Representatives U.S. Senate
H-232, U.S. Capitol S-221, U.S. Capitol
Washington, D.C. 20515 Washington, D.C. 20510
The Honorable John Boehner The Honorable Mitch McConnell
Republican Leader Republican Leader
U.S. House of Representatives U.S. Senate
H-204, U.S. Capitol S-230, U.S. Capitol
Washington, D.C. 20515 Washington, D.C. 20510
Dear Speaker Pelosi and Leaders Reid, Boehner, and McConnell:
The challenges facing the United States economy are far reaching, and we support
the Administration’s and Congress’ efforts to create an economic stimulus
package that will help American workers and companies to face them. One issue
that we urge you to bear in mind as you prepare this legislation is the vitally
important role that international markets play in sustaining U.S. jobs today and
the role they will play in economic recovery. Without sales abroad and access to
inputs, many U.S. workers would be out of a job. As a consequence, the
undersigned associations, representing every major U.S. business sector, urge
you to ensure that the economic stimulus package does not include
trade-restrictive provisions – including counterproductive expansions of Buy
American-type mandates – that would undermine the ability of American companies
and workers to export goods and services made in the United States and thereby
undercut the goals of this
package.
U.S. law already imposes significant Buy American mandates on products purchased
by the Federal government, as well as additional mandates for federally funded
highway projects. These provisions generally require the use of American
products except in specifically defined circumstances. As a result, there is no
need to expand these provisions or create new ones.
Moreover, proposals to expand Buy American restrictions would have several major
adverse consequences for the United States, U.S. industry and U.S. workers. In
particular, the inclusion of such restrictive provisions in the economic
stimulus legislation would:
Undermine America’s leadership in the global response to the worldwide
financial crisis by turning our backs on the November 15, 2008 G-20 Joint
Declaration commitment that “within the next 12 months, we will refrain from
raising new barriers to investment or to trade in goods and services, imposing
new export restrictions, or implementing World Trade Organization (WTO)
inconsistent measures to stimulate exports.” We believe that any expansion of
Buy American-type provisions in the economic stimulus legislation would be
counter to that commitment and American leadership thus far.
Shut U.S. companies and their workers out of the economic stimulus programs
being initiated around the world. Inclusion of new trade-restrictive proposals
would send precisely the wrong signal to governments around the world that are
undertaking their own economic stimulus programs. The list of countries moving
forward with their own economic recovery programs – many of whom are major
markets for American goods and services – is growing. Already, China, Germany,
Great Britain, France, Australia, India and other countries have initiated or
are preparing to initiate major new infrastructure and other stimulus projects.
If the United States further restricts access to our market, these other
countries will certainly follow our lead, shutting U.S. exporters and their
workers out of hundreds of billions of dollars of new business, while propping
up their own national champions to the detriment of the United States. At a time
when American exports are one of the few bright spots of the U.S. economy and
markets are weakening overseas, the U.S. Congress should be taking actions to
promote U.S. exports, not undermine them.
Unnecessarily delay and undermine the economic stimulus goals of this
legislation. Current provisions already require that supplies for public use in
federally funded highway projects be manufactured in the United States
substantially all from articles, material or supplies mined, produced, or
manufactured in the United States. With such a huge infrastructure task ahead,
adding additional restrictions will only delay the ability of projects to move
forward, delay job creation and delay economic recovery.
Diminish competition and efficiency in the contracting process, which will
result in lowering the quality and cost-effectiveness of our infrastructure
improvements.
Violate the United States’ international commitments, depending upon the
actual proposal. The United States, through its membership in the World Trade
Organization Government Procurement Agreement (GPA) and several bilateral and
regional trade agreements, has guaranteed non-discriminatory access to the
procurement markets of many of our largest trading partners. In return, the
United States has agreed to provide non-discriminatory access to our own
procurement markets for projects above certain dollar thresholds. The U.S.
approach, crafted over successive Democratic and Republican Administrations,
preserves many safeguards in our procurement rules for American goods and firms,
including Buy American provisions for some projects, as well as small-business
preferences. If the United States expands or enacts new Buy American-type
provisions that abrogate U.S. GPA or our other trade agreement commitments, the
United States and U.S. firms will face retaliatory sanctions in other markets
and jeopardize our ability to open other foreign government procurement markets
to U.S. goods and services.
We share your strong interest in promoting economic recovery for the United
States and its workers and firms through a strong economic stimulus package. For
all of the reasons set forth above, we strongly urge you to reject the expansion
or creation of new Buy American-type provisions in the stimulus package because
such provisions would undermine the economic recovery we all seek.
Respectfully,
Aerospace Industries Association
American Business Conference
American Council of Engineering Companies
Associated Builders and Contractors
The Associated General Contractors of America
The Association of Equipment Manufacturers
Business Roundtable
The Coalition for Government Procurement
Coalition of Service Industries
Emergency Committee for American Trade
The Information Technology Association of America
National Defense Industrial Association
National Foreign Trade Council
United States Council for International Business
U.S. Chamber of Commerce
December 17 2008
Services in the CEPA (Closer Economic
Partnership Arrangement) spotlight
 Financial Secretary John Tsang
and Vice-Minister of Commerce Jiang Zengwei sign Supplement V to the Hong
Kong-Mainland Closer Economic Partnership Arrangement
 Andrew Brandler, Hong Kong General
Chamber of Commerce Chairman, welcomes the latest CEPA initiatives
Good news for Hong Kong-based businesses in the services sector. The latest
phase of CEPA, the Closer Economic Partnership Arrangement between Hong Kong and
the Chinese mainland, will bring with it more opportunities.
The newest additions to CEPA, signed in July, brings to 40 the number of
services now covered by the free trade agreement, introduced in 2003. CEPA
created 36,000 jobs and attracted more than US$642 million of investment into
Hong Kong in its first three years. CEPA gives favorable trading and investment
treatment to a range of Hong Kong-incorporated manufacturers and services
through tariff exemptions and greater mainland access.
Overseas companies not based in Hong Kong can also take advantage of CEPA by
outsourcing to, or partnering with, CEPA-qualified manufacturers or service
providers in Hong Kong.
The latest phase, Supplement V, covers sectors such as tourism, accounting,
medical and dental services, education, construction and related engineering.
Two new sectors have been added: services related to mining, for oil and gas
exploration; and associated scientific and technical consulting services for the
prospecting and surveying of iron, manganese and copper in the mainland.
Supplement V also introduces a mechanism for increased cooperation on branding,
trademarks and e-commerce.
The new phase puts special focus on strengthening economic and trade cooperation
between Hong Kong and the southern mainland province of Guangdong, making it
easier for Hong Kong services providers to open businesses in the province.
Among the new CEPA commitments, 25 will be initiated as pilot projects in
Guangdong, a testing ground for the rest of the mainland.
Tangible benefits - Industry bodies have welcomed the latest signing. Hong Kong
General Chamber of Commerce (HKGCC) Chairman Andrew Brandler said the agreement
would bring tangible benefits to many Hong Kong companies and professionals as
they expand their operations in the mainland. It would also foster growth in
services, he said.
"For example, under the framework of Trade and Investment Facilitation, both
parties will promote cooperation in electronic commerce. Under Trademark, they
will set up a working team to encourage communication and cooperation in
trademark registration, management and protection," said Mr Brandler. "In
addition, Brand Cooperation between Hong Kong and the mainland is a new sector
under CEPA Trade and Investment Facilitation. The chamber has been calling for
these measures to be added to CEPA, so we are glad to see they have been
included in the latest supplement."
HKGCC Chief Executive Officer Alex Fong said the services sectors covered were
relevant to business needs. Commenting on a CEPA working mission that the
chamber organized to Guangdong last year, Mr Fong said the cases observed there
"helped to generate proposals for our CEPA wish list." Mr Fong was also pleased
to see that the newly signed supplement contains 25 liberalization provisions
between Guangdong and Hong Kong. "These should allow more Hong Kong enterprises
to operate businesses in the province. At the same time, implementation of CEPA
will be improved, which will help Hong Kong companies make use of their
competitive edge there."
Faster and easier - The Hong Kong Institute of Certified Public Accountants said
the new agreement would bring Hong Kong accountants more opportunities to
practice in China.
"For the accounting profession, it means that Hong Kong certified public
accountants (CPAs) need only pass the tax and law papers of the Chinese
Institute of Certified Public Accountants' exam to become CICPA members.
Mainland CPAs now only need to pass the taxation module and the final exam of
the Hong Kong Institute of CPAs qualification program to become Hong Kong
Institute of CPAs members," said Winnie CW Cheung, Chief Executive and Registrar
of the Hong Kong Institute of CPAs.
"These exemptions make it faster and easier for accountants to qualify, or
become licensed, in each market. And it's going to bring the two professions
another step closer to full mutual recognition."
Chairman of the Federation of Hong Kong Industries Clement Chen said the
agreement on trademark cooperation could encourage more Hong Kong companies to
develop new products and build their own brands.
"The cooperation mechanism for intellectual property protection and branding
will help encourage Hong Kong enterprises to invest in developing new products
and branding. This will assist them in targeting the newly emerged middle class
consumer market in the mainland," Mr Chen said. "The distribution sector will
benefit from the liberalization measures of the new CEPA package. By allowing
Hong Kong enterprises to operate on a wholly-owned basis in China, it will be
easier for them to open up chain stores in the targeted cities, and to gradually
set foot in the massive mainland domestic market."
CEPA Supplement V comes into effect 1 January 2009
http://www.tid.gov.hk/english/cepa/
October 4, 2007
New Rule Exempts Use By Dates From Four
Types of Food
The Administrative Provisions on Food Labeling recently promulgated by the
General Administration of Quality Supervision, Inspection and Quarantine will
come into force on 1 September 2008. Under the new rule, use by dates will not
be required for four types of food with an ethanol content of 10% or over.
The new provisions govern the content and format of labels for food products and
include a number of additional requirements, such as place of manufacture, name
of repacker, warning message and minimum units for sale. Chinese explanations
must be given if the food has been clinically proven to be harmful to special
groups, has been treated with ionizing radiation or energy, is genetically
modified (GM) or contains legal GM raw materials, and is required by law,
regulations and national standards to show other explanations in Chinese. Food
that uses words like "nourishing" and "strengthening" in their name or
explanation must indicate the vitamin content and calories in its labeling.
The new rule requires that food labels clearly indicate the date of production
and use by date. If the use by date has to do with storage, the special storage
conditions should also be indicated. Alcoholic beverages, edible vinegar, edible
salt and sugar in solid form that have an ethanol content of 10% or over, are
exempted from use by dates. The dates should be indicated in a manner that
complies with national standards or in the "year/month/date" format.
Seven types of content are prohibited from use on food labels, including
expressed or implied claims that the product may be used for the prevention or
treatment of diseases; expressed or implied claims that the product has health
care functions when it is not a health care product; fraudulent or misleading
ways of describing or introducing a type of food; and additional product notes
that cannot be justified. Quality inspection departments will order violators to
make rectification before a stipulated date. Those who fail to make
rectifications after the due date will be fined up to Rmb10,000. Those who
violate laws and regulations will be dealt with accordingly.
Aug 9, 2007
China spends $1b improving
food, drug safety
China will spend more than $1 billion improving food and drug safety by 2010 and
the regulator will be given stronger oversight powers, an official said on
Wednesday.
State Food and Drug Administration spokeswoman Yan Jiangying said the government
had earmarked 8.8 billion yuan (US$1.16 billion) for food and drug safety over
the current Five Year Plan, which runs to 2010.
Part of this would be spent on a large, new laboratory, she said, adding this
was the first time the spending figure had been made public. Yan did not provide
a comparison for previous years.
"Once the Five Year Plan has been completed, the abilities and the base of the
regulator will be substantially raised," Yan said. "There will be an enormous
improvement in the system for guaranteeing food and drug safety for the public."
New rules would give the watchdog the power to seal factories and seize whatever
materials they need when probing sub-standard goods, she added.
Yan said her department would also take the safety message nationwide, starting
out in the enormous countryside, home to 60 percent of the 1.3 billion
population.
"We will focus on rural food safety," Yan said.
A deputy agriculture minister admitted recently that the backward state of
Chinese farming was a major obstacle to raising food safety.
State media said on Wednesday, the beginning of the one-year year countdown to
the Beijing Olympics, the government would launch a campaign to crack down on
the use of highly potent and poisonous pesticides which are banned but still in
use.
Five pesticides were banned earlier this year, and the Agriculture Ministry was
compiling a blacklist of companies still making them. As part of the
government's food safety strategy, it will educate farmers how to properly use
pesticides.
Aug 8, 2007
China New Health Food
Policy Soon to Come Out
The State Administration of Industry and Commerce is currently drawing up a new
set of standards for the examination of health food advertisements for
promulgation in the second half of the year. Over 40 industry standards are also
expected to come out before the end of the year.
The Measures on the Administration of Health Food Registration have been in
force for two years since their promulgation on 1 July 2005. During these two
years, the measures have been amended from time to time and the industry's entry
threshold has been raised. The Standards for the Examination of Health Food
Advertisements being drawn up will subject health food advertisements to strict
examination. Exaggerated advertisements will be banned while brand
advertisements and public service advertisements will be encouraged.
The Regulations Governing the Naming of Health Food (Trial Implementation),
promulgated on 14 June this year as a supplement to the Measures on the
Administration of Health Food Registration, require that health food cannot be
named after physical functions. Under this new regulation, the majority of
health products need to change their names. The industry sees this as the
beginning of the government's firm grip on the health food market.
As a matter of fact, the Measures on the Administration of Health Food
Registration set higher market entry thresholds for the health food industry.
These measures clearly point out that health food refers to "food that is good
for a particular group of people with the function of improving physical
condition, but is not meant for curing diseases and does not cause any acute,
sub-acute or chronic harm to the human body." They also set higher technical
requirements for the registration of health food.
As a result of the raising of entry thresholds, the percentage of health food
passing examination dropped last year. In 2006, China approved 1,231 health food
items and withheld approval for 182 items. The failure rate was 12.7%, an
increase of 53% over the previous year.
Aug 6, 2007
Protectionism - the real threat to growth, stability -
By John Rutledge (The author Dr John Rutledge is a leading
economist who has advised several presidents, including the current
administration, as well as multinational corporations and financial
institutions)
At Nobelist Robert Mundell's recent Santa Columbia Conference, the assembled
group of specialists in international finance agreed on two points: 1) the
global economy is growing faster than at any time in history, and 2) the number
one risk to sustained global growth is rising protectionism in the United
States.
This week in Washington, short-term politics won over long-term economics and
basic humanity when the Senate Banking Committee voted in favor of a
protectionist bill, joining a long list of bills aimed at China.
There is a race to the bottom among American politicians to determine who will
get the honor of leading the lynch mob that blames China for every real or
imagined economic ill. These political leaders are competing for short-term
political gain at the risk of the global growth that is lifting billions of
people out of poverty around the world. Worse still, they know exactly what they
are doing.
On Wednesday of this week, 1,028 economists signed a petition to members of
Congress, advising them of the immense benefits of free and open trade in goods,
services, and capital, and warning them of the grave risk to growth and
stability, both in and outside the US, from escalating protectionist measures
that could lead to a global trade war.
As one of the signers of the petition, I spoke on the issue at a press
conference on Capitol Hill organized by the Club for Growth, who ran the signed
petition as a full-page display in the Wall Street Journal. Let's hope we had
some effect on the policy makers.
Not coincidentally, 77 years ago, in May, 1930, 1,028 economists signed a
similar petition, which ran as a full page in the New York Times. They were
trying to convince Congress not to pass the Smoot-Hawley tariff legislation.
They failed. I am convinced the tariffs then were a major contributor to the
length and severity of the Great Depression that followed.
Today's global economy is in great shape. Global economic growth in 2006 was an
incredible 5.4 percent, compared with 2.9 percent during 1950-73, when Europe
and Japan were rebuilding their economies after the war, and 1.3 percent during
the 1870-1913 industrial revolution. The IMF predicts 5 percent growth for both
2007 and 2008, which would mark the sixth straight year of growth in excess of 4
percent. Developing Asia - the epicenter of the world's economic growth
explosion - will grow at nearly twice that rate, led by the spectacular growth
of China.
The US economy is in good shape too, with growth in excess of 3 percent,
contained inflation, profit growth of over 14 percent in the most recent
quarter, and long-term interest rates below 5 percent.
If things are so good, then why are voters demanding protectionism?
I am convinced that today's chorus of protectionist actions represents more than
the profit-seeking actions of a few special interest groups. Today, when a
political leader announces a new protectionist measure, crowds cheer. I believe
that rising protectionism, nationalism, and social instability are rooted in the
turbulence caused by rapid economic change. Rapid economic change raises average
incomes but it creates new industries and destroys others, creating uncertainty
in the lives of many people. Those, whose fortunes have been temporarily or
permanently reduced, as well as those who are simply afraid of change, appeal to
political leaders for relief; political leaders who promise to stop or reverse
change will gain power over leaders who counsel openness.
Left unchecked, this process can lead to global trade war as country after
country erects non-market barriers to the smooth flow of trade. Ultimately,
these mounting frictions can produce system failure, akin to the blackouts
caused by failures of an electricity network, in which the global economy stops
growing, as it did in the 1970's.
Rampant protectionism could also breed social and political instability and,
ultimately, bring nations into conflict. Political instability would put all the
gains of the past quarter century at risk. The unintended consequences of
protectionism would be harmful for people living in developed countries; they
would be a tragedy for the world's three billion poor people.
We can choose a better course. Although we cannot entirely eliminate calls for
protectionism, there are things we can do to retard its growth and mitigate its
harmful effects. Here are a few ideas:
Policies to reduce frictions include training, education and relocation
assistance for people experiencing change due to rapid global growth.
An education system that gives people the tools to adapt to change by
emphasizing problem solving over rote learning will reduce turbulence.
Labor market policies that make it easy for companies and workers to change the
nature of the work they do will reduce turbulence.
Policies that increase people's overall sense of security, such as reducing
corruption, predictable rule of law, and a healthy environment with clean air
and water, will reduce friction and turbulence.
A stable monetary environment with a predictable price level and a moderate,
predictable tax system will reduce turbulence. I strongly urge China's leaders
to resist pressure from the American government to revalue the RMB. A stable RMB
will keep China's prices stable, deter speculation, promote increased FDI and
sustainable growth.
The reason we care about protectionism is its impact on the lives of families
trying to feed, educate, and care for their children to give them a better
future. Protectionism attempts to stop change. But change is inevitable. It is a
better use of resources to prepare people for change by giving them a stable
society with a growing economy and by forward-looking education that gives
people the skills and flexibility they will need for the jobs of tomorrow's
global economy.
PETITION: Concerning protectionism against China
We, the undersigned, have serious concerns about the recent protectionist
sentiments coming from Congress, especially with regards to China.
By the end of this year, China will most likely be the United States' second
largest trading partner. Over the past six years, total trade between the two
countries has soared, growing from $116 billion in 2000 to almost $343 billion
in 2006. That's an average growth rate of almost 20 percent a year. This
marvelous growth has led to more affordable goods, higher productivity, strong
job growth, and a higher standard of living for both countries. These economic
benefits were made possible in large part because both China and the United
States embraced freer trade.
As economists, we understand the vital and beneficial role that free trade plays
in the world economy. Conversely, we believe that barriers to free trade destroy
wealth and benefit no one in the long run. Because of these fundamental economic
principles, we sign this letter to advise Congress against imposing retaliatory
trade measures against China. There is no foundation in economics that supports
punitive tariffs. China currently supplies American consumers with inexpensive
goods and low-interest rate loans.
Retaliatory tariffs on China are tantamount to taxing ourselves as a punishment.
Worse, such a move will likely encourage China to impose its own tariffs,
increasing the possibility of a futile and harmful trade war. American consumers
and businesses would pay the price for this senseless war through higher prices,
worse jobs, and reduced economic growth.
We urge Congress to discard any plans for increased protectionism, and instead
urge lawmakers to work towards fostering stronger global economic ties through
free trade.
The petition, signed by 1,028 economists, was published in Wall Street Journal
on Wednesday
Aug 4, 2007
China blacklists 400 exporters
China has established a blacklist of companies that have violated rules on the
quality of exports, the Ministry of Commerce said Saturday amid growing global
concern about the safety of China-made goods.
"We have set up a blacklist system for companies in the exporting sector and
punished some companies that have violated laws and regulations," Vice Commerce
Minister Gao Hucheng said in remarks posted on the ministry's website. "Already
429 companies have been punished."
Gao said the recent examples of companies that had been targeted included two
firms that illegally added a deadly chemical to food products blamed for killing
thousands of US pets.
The two companies, Xuzhou Anying Biologic Technology Development Co Ltd. and
Binzhou Futian Biology Technology Co Ltd., had their export foreign trade
licences revoked, Gao said.
Gao stressed the government line that Chinese products were overwhelmingly safe
and of high quality, and called on foreign media not to hype the problems of a
small minority of goods or companies. "China will strengthen international
cooperation on the safety of products," Gao was quoted as saying.
A delegation of US officials in Beijing hammered out "basic frameworks" for two
agreements seeking to reassure US consumers that Chinese-made goods met safety
standards, Secretary of Health and Human Services Mike Leavitt said on Friday.
China, where the former drug and food safety watchdog chief was executed last
month for corruption, has also cancelled the licences of six medicine
manufacturers.
Aug 3, 2007
1,028 US economists urge no
protectionist against China
More than 1,000 top American economists have signed a petition to urge Congress
not to impose protectionist measures against China, saying such a move would
hurt the US. The petition, sponsored by the Club for Growth, was signed by a
total of 1,028 economists from all 50 states and top universities. In addition
to many other prominent and well-respected economists, signatories include Nobel
laureates Finn Kydland, Edward Prescott, Thomas Schelling and Vernon Smith.
The economists said in the petition that China currently supplies American
consumers with inexpensive goods and low-interest rate loans and retaliatory
tariffs on China "are tantamount to taxing ourselves as a punishment."
"Worse, such a move will likely encourage China to impose its own tariffs,
increasing the possibility of a futile and harmful trade war. American consumers
and businesses would pay the price for this senseless war through higher prices,
worse jobs, and reduced economic growth," they warned.
"As economists, we understand the vital and beneficial role that free trade
plays in the world economy. Conversely, we believethat barriers to free trade
destroy wealth and benefit no one in the long run," they said. "Because of these
fundamental economic principles, we sign this letter to advise Congress against
imposing retaliatory trade measures against China."
The economists said trade between the US and China is mutually beneficial.
Government data shows that total trade between the two countries has soared from
US$116 billion in 2000 to almost US$343 billion in 2006. That's an average
growth rate of almost 20 percent a year.
"This marvelous growth has led to more affordable goods, higher productivity,
strong job growth, and a higher standard of living for both countries," said the
signatories. "These economic benefits were made possible in large part because
both China and the United States embraced freer trade." "We urge Congress to
discard any plans for increased protectionism, and instead urge lawmakers to
work towards fostering stronger global economic ties through free trade," they
concluded.
The economists expressed serious concerns about the recent protectionist
sentiments expressed in Congress, which on Wednesday passed a bill in the Senate
banking committee that would make it harder for the Treasury to avoid a finding
that China and other countries have "misaligned currencies."
Last week, the Senate Financial Committee passed another bill that would allow
the US government to push other nations to adopt more market-based currency
policies or face sanctions. Pat Toomey, president of the Club for Growth,
criticized the fact that Congress is suffering from a bad case of amnesia. On
May 4, 1930, 1,028 economists signed a petition urging Congress and President
Herbert Hoover to reject a similar protectionist bill. Neither Congress nor the
president listened and the stock market plunged dramatically, he recalled.
"Over the past several months, protectionism has reached a fever pitch with
lawmakers in both Houses clamoring to attach their names to as many as 50
anti-trade bills," he said.
"Congress hasn't changed much over the past 77 years. Thankfully, economics
hasn't changed much either: 77 years after 1,028 economists stood to thwart
protectionism yelling 'stop!'" he added.
China Pledge over exports
safety By Audra Ang
China said it will work with the United States to improve product safety amid a
massive US recall yesterday of plastic preschool toys made by a mainland vendor.
"We want to cooperate with other countries including the United States to
strengthen cooperation and communication," Wei Chuanzhong, an official with the
General Administration for Quality Supervision, Inspection and Quarantine, one
of China's product safety watchdogs, said on the administration's website.
"We shouldn't use problems found in one product to block all products," Wei
said, in a nod to concerns in the mainland that scattered safety violations are
threatening the reputation of Chinese exports as a whole.
Beijing has acknowledged safety problems, but says other countries are grappling
with similar issues and insists its products should not be unfairly singled out.
The remarks came just ahead of toymaker Fisher-Price's announcement that it was
recalling almost one million toys, the latest in a string of mainland product
safety scandals. Wei's comments came in a meeting Wednesday with a visiting team
of American health officials led by US Health and Human Services official Rich
McKeown. The delegation's five- day visit is centered around developing systems
for ensuring the safety of food, feed, drugs and medical devices exported from
the mainland. Talks have also touched on a US block on Chinese catfish, basa,
dace, shrimp and eel after repeated testing turned up contamination by drugs
that have not been approved in the United States for farmed seafood. Fears were
triggered earlier this year after a mainland-made ingredient in pet food was
linked to the deaths of cats and dogs in North America.
Since then, juice, toothpaste and seafood have joined an expanding list of
Chinese goods that have been banned or recalled around the world because they
contain chemicals and toxins.
Also yesterday, state media said quarantine officials have seized two tons of
dried banana chips imported from the Philippines because they contained levels
of the preservative sulfur dioxide that were 25 times the maximum allowed by
Chinese regulations.
China's latest moves - both conciliatory and defensive - illustrate how the
country has been dealing with a growing international backlash against its
exports because of health and safety concerns.
Xinhua News Agency also said that two people have been arrested in the
southwestern province of Sichuan for selling fake rabies vaccines. The vaccines,
made in Heilongjiang province thousands of kilometers away, have been
administered to 29 people in Sichuan and another 198 in Heilongjiang, Xinhua
said. No side effects have been reported but the people are under close
observation, the agency reported.
Like China's food industry, the pharmaceutical field is poorly regulated, with
companies trying to cash in by substituting fake or substandard ingredients.
July 31, 2007
Xenophobia at heart of
product panic in USA By Debasish Roy Chowdhury -
senior editor with China Daily
 A new
bout of food scare has gripped the United States, with the US Food and Drug
Administration urging people to throw away more than 90 different products, made
at a Castleberry's Food Co plant, from chili sauce to corned beef hash to dog
food, for fears that they are causing botulism, a muscle-paralyzing disease.
Seven cases of botulism have so far been reported. Most victims consumed a hot
dog chili sauce made at the company's plant in Georgia that has been temporarily
closed. The recall has been expanded to Canada as well. Castleberry is owned by
Bumble Bee Foods, the largest branded seafood company in North America. Not
China, the land from where many of the "toxic food and lethal products" in the
world supposedly emanate.
The list of product recalls in the US in recent months is almost inexhaustible:
in March, Ford Motor Company recalled new 2008 Super Duty trucks made in a
Kentucky plant after reports of tailpipe fires in the diesel version of the
vehicles; in June, California-based United Food Group recalled 75,000 pounds of
ground beef products as they were suspected to have been contaminated with E.
coli; and in July, Sara Lee Corp began to recall dozens of its whole-wheat bread
brands made at a Mississippi bakery for fears that they may contain pieces of
metal.
 But the product scares and recalls
the US media seems fixated on are the ones from China. It is the faulty tires,
toothpaste, pet food, seafood and toys with a China connection that are making
all the news, with cover stories, editorials and television programs harping on
how China's "substandard" manufacturing methods are putting American consumers
at risk, how the factory to the world is actually one big sham, and proffering
ways to keep off products with any trace of China.
China's economic stardom is beginning to unravel - there had to be a catch, it
is all falling into place now. Scare sells. As a bonus, the China horror story
even has a feel-good subtext - nothing can match American quality; if China
makes goods cheaper than America, now you know how, by cutting corners.
This fear of Chinese products is reinforced by administrative measures. At the
height of the product scare, the US government quickly formed a Cabinet-level
panel to recommend how to guarantee the safety of imported food and other
products. In this self-delusional world of policymaking, the Castleberrys and
the United Food Groups do not exist, it is only the products coming from outside
the US that pose a threat.
Though it was denied that the move was aimed at China, the announcement came the
same day senators heard testimony from quality regulators about problems caused
by the extremely rapid growth of imports from China. That is really what this is
all about - rising imports from China. It is not the Chinese product scare, what
is actually being played out is the China scare - the antiquated, mercantilist
fear of imports that China's growing economic might evokes.
Chinese exports to the United States last year were nearly triple that of just
five years ago. Chinese exports to US totaled $288 billion while US exports to
China totaled $55 billion.
But according to Cato Institute, Americans have never earned or spent a higher
share of their income in the global economy than they do today. In 2006, what
the US earned through exports and income from foreign investments abroad reached
a record 15.6 percent of gross domestic product. Since China's entry into the
World Trade Organization in 2001, US exports to China have grown from $19
billion to $55 billion, an annual average growth of 24 percent.
Despite the din about how China is getting ahead with its undervalued yuan, real
output of US factories has increased by 50 percent since China fixed its
currency in 1994.
Despite the rhetoric of how ("substandard") Chinese products are stealing jobs
from Americans rendered powerless by this unforeseen consequence of
globalization, trade with China accounts for a mere 1 percent of annual job
displacement in the US.
By Cato's estimates, at the most 150,000 jobs are lost in the US every year
because of imports from China, compared with 15 million jobs that disappear
annually in the US economy primarily as a result of technological changes and
the consequent increase in productivity.
Productivity gains have actually taken a bigger toll on employment in China than
the US. A study by Alliance Capital Management LP in New York finds that while
the number of manufacturing workers in the US dropped by 11 percent from 1995
through 2002, in China it dropped by 15 percent.
And in any case, Chinese imports in the US are mostly replacing imports from
other Asian countries, not American products themselves. And manufacturing is no
longer the foundation of the American economy as it begins to deindustrialize as
part of a global economic shift.
But then again, while there is no market for reason, there is a big one for
fear. That is why a Utah-based health food company has launched a new label and
ad blitz promoting its products as "China-Free". This despite the fact that FDA
records show China is not even the leading source of contaminated imports to the
US, as a Washington Post columnist points out. India and Mexico have surpassed
China in "refused food shipments" over the past year, while the leader in
rejected candy imports happens to be Denmark.
Then why pick on China? In a way China is paying the price for its success.
It is difficult to ignore the xenophobic, and even racist, overtones in the
attacks against China. When the products are made in the US, it is just the
company that is in focus. When they are found to have a China connection, even
if it is an American company getting its products made in China, it is the
country that takes the lashes. As if the company has no obligation toward
quality control.
Protectionism needs a popular idiom. Xenophobia needs a whipping boy. China
scare is the product of this marriage of convenience. As the poster boy of
economic success and the visions it inspires of trumping the almighty US
economy, China is the obvious target when it comes to manufactures. Quite in the
same way as India is, when it comes to services, with outsourcing fears often
vented by Western callers in torrents of racist abuses on Indian call center
workers.
This xenophobia is what lies at the heart of the current product panic in US. If
unchecked, and recklessly fanned, this has the potential of derailing the very
process of globalization that developing countries are betting on for a better
future. That is scarier than the China scare.
July 31, 2007 Honolulu Hawaii USA
There is a Star Bulletin Newspaper article
this morning, I would also add a footnote to the article.
We have to realize that Asian Culture (i.e. Japanese, Chinese & etc)....
1) talking about down turn in business in public may consider as losing face.
Most of these Chinatown Merchants are FIRST Generation Immigrants. Their Asian
Culture of not saying things to lose face is very important to them.
2) They may not want to look weak or not doing well to their competitors in
Chinatown in public media - therefore in public, they will say "things are fine"
"not as bad as it look"...but in reality, could be a very different story...a
public tour in Chinatown will NOT get the real story.
3) No one is offering the Chinatown merchant something tangible - telling the
media that they are not doing well result in nothing, except, may be losing
face!
4) Chinatown merchant has been down this road before. They knew when something
bad happened, a tour of the Chinatown by people in public offices is a standard
procedure for news media consumption - most of the time, that is end of the
story.
Johnson Choi
Isle officials tout safety
of imports from Asia
By Kristen Consillio /
kconsillio@starbulletin.com
State officials visited a handful of
Chinatown merchants yesterday to highlight the safety of Asian imports in the
wake of China's tainted-food scare.
One of five merchants attributed a decline in sales of at least 20 percent to
public fears over the safety of Chinese imports, while others blamed the soft
economy and a seasonal slowdown for the downturn in business.
The state Department of Health released a warning this month to Hawaii consumers
to avoid buying toothpaste labeled as made in China, and the U.S. Food and Drug
Administration has issued other public warnings about tainted Chinese food
products.
"It's a real issue, but I think you have to keep it in perspective," said Gov.
Linda Lingle, who led the group of officials, which included Department of
Health Director Chiyome Fukino and Ted Liu of the Department of Business,
Economic Development and Tourism. "Generally, merchants feel the impact is
small."
Tighter scrutiny of imports also may be a major factor affecting sales as
products are held up in longer inspections by the U.S. Department of
Agriculture, said Ted Li, president-elect of the Chinese Chamber of Commerce of
Hawaii.
"Because containers are retained longer maybe they have less products to sell,"
he said. "The general economic trend is that retail is slowing."
However, Johnson Choi, president of the Hong Kong China Hawaii Chamber of
Commerce, maintains that at least a dozen merchants surveyed this month had
previously indicated that Chinese food-safety concerns were to blame for an up
to 40 percent drop in sales among some downtown business, most of whom were
reluctant to publicly address the issue.
Hawaii Chinese News Coverage
(click on the picture for full view)
July 26, 2007 Honolulu Hawaii USA
Food scandal also claims
Chinatown merchants - China's food-safety ills afflict local (Honolulu Hawaii)
merchants - By CINDY ELLEN RUSSELL /
CRUSSELL@STARBULLETIN.COM &
Kristen Consillio /
kconsillio@starbulletin.com
 Danny Au
reviewed paperwork yesterday at his family-run grocery store, Bo Wah Trading
Co., in Chinatown. Business is down for some Chinatown stores because of tainted
Chinese products that have been imported to America.
Some Chinatown businesses are seeing a
downturn in sales in the wake of food-safety concerns in China. The state Health
Department released a warning this month to Hawaii consumers to avoid buying
toothpaste labeled as made in China, and the U.S. Food and Drug Administration
has issued other public warnings about tainted Chinese food products.
The issue has put doubt in the minds of some patrons of longtime Chinatown
businesses, some of which have seen sales decrease up to 40 percent, according
to the president of the Hong Kong China Hawaii Chamber of Commerce.
Local business leaders are in the process of determining the extent of the
reported downturn and what should be done to help.
Some Chinatown businesses say public fears
over the safety of Chinese products are cutting into their profits. Retail sales
at Bo Wah Trading Co., which sells Chinese dry goods and porcelain, have fallen
30 percent over last year, said owner Danny Au, who attributes the decrease to
consumer fears of products imported from the country.
"A lot of people come to my store and ask me, 'Are these stuff made in China? If
they're made in China, I'm not going to buy,'" he said, adding that his
wholesale business on Maunakea Street is down another 20 percent. "They see in
the newspapers all the negative talk about Chinese products. It causes the
people not to buy Chinese stuff."
The state Health Department released a warning this month to Hawaii consumers to
avoid buying toothpaste labeled as made in China, and the U.S. Food and Drug
Administration has issued other warnings about Chinese food products. "There's a
reason why consumers are maybe hesitating, but that's the public's choice," said
Janice Okubo, state Health Department spokeswoman. The issue is drawing concern
from Chinese business leaders, who are attempting to counter the negative
publicity and downturn in local business.
 Sammy Au
and his father, Tin Yeu Au, helped customers yesterday at the family's Bo Wah
Trading Co. in Chinatown. An estimated 90 percent of the store's goods are from
China.
Johnson Choi, president of the Hong
Kong China Hawaii Chamber of Commerce, said he surveyed at least a dozen
Chinatown merchants in the past week, who said the issue has resulted in a 30 to
40 percent drop in sales. He sent an e-mail yesterday to local business leaders
urging them to unite to help local Chinese businesses and is trying to get the
message out to his 250 chamber members.
"What we're trying to explain to the local community in Hawaii is that
there are actions that have been taken by the Chinese government and that all
exports from now on (do) meet international standards," he said.
Jim Tollefson, president and CEO of the Chamber of Commerce of Hawaii, and
Edward Pei, president of the Chinese Chamber of Commerce, both said the e-mail
was the first time they had heard of a reported downturn among Chinatown
businesses.
"We're not sure how we can help at this stage, but certainly we are concerned if
there has been a slippage in their sales," Pei said. "We're kind of in the
fact-finding mode seeing if this is in fact a sales pattern that is of concern
to merchants in Chinatown."
A representative from the Chinatown Merchants Association wanted to do more
research on the issue before publicly commenting.
 Most
of Bo Wah Trading Co.'s goods, such as the imported foods shown here, come from
China.
Meanwhile, some other businesses say the
negative publicity surrounding Chinese products has had little to no effect on
sales. "We have lots of customers always saying they're scared of Chinese
products ... but they're still buying," said C.K. Wong, owner of Kwong Tong
Chong Co., which has sold Chinese dry goods on Maunakea Street for more than 30
years.
However, business has dropped between 5 and 7 percent for Shirley Ing, owner of
Sun Chong Co., another Chinese grocer on North Hotel Street, though July is
typically a slow month for the store.
"I don't hurt that much, maybe because my store is small," she said. "I've been
telling (customers) sometimes the news is not true, you don't have to believe
it."
While the Empress Restaurant on North Beretania Street has seen lower sales of
about 10 percent this summer compared with last year, it is likely due to more
competition in the neighborhood rather than the safety concerns of Chinese food
products, said owner Kenneth Lee.
"Something like that is not necessarily a bad thing -- at least it raises
people's awareness of food safety," he said. "I would not be surprised if it
affects (retailers) more because people are actually reading the label on the
shelf, whereas people who come to our restaurant don't see what kind of canned
goods we put in ingredients that goes into the preparation process."
China needs to improve the quality of
its exports to win a better international reputation, Premier Wen Jiabao said
during a meeting on Friday that set out punishments for food and drug firms that
violate standards. "Product quality relates to our people's interest, the
survival and development of our enterprises and the image of our nation," Wen
told the meeting on export quality. It was crucial to win over the international
market with good-quality exports, Wen added. Chinese exports of everything from
fish to toys, pet food to toothpaste, have been found in recent months to be
mislabeled, unsafe or dangerously contaminated, creating an international
backlash. Wen's remarks were reported on state radio and TV. "We will not avoid
problems, but we protest against untrue reports that tell only part of the
story, and trade protectionism and discrimination," Wen was quoted as saying.
Food safety scandals are a regular topic in the Chinese media, but the nation
lacks a basic food safety law and the ability to enforce its food and drug
safety regulations at home or for exports. Its imports are generally carefully
scrutinized. The head of the State Food and Drug Administration was executed
last month, after being found guilty of accepting bribes to approve drugs. "It
is a timely, urgent and important job and also a long-term and enduring task for
us to fully improve the quality of Chinese products," Wen said. China would
raise the threshold for products relating to human health and safety so as to
prevent problematic exports from leaving the country, he said. The authorities
would also check every stage of production, including raw materials, additives
and intermediate products, so as to make the "made in China" brand a symbol for
goods with great quality, Wen said. Producers of food, drugs and other
agricultural goods that violate the food safety rules would face fines of up to
100,000 yuan ($13,220), have operation certificates or export permits cancelled
or even risk arrest, according to regulations carried on the central government
Web site
Chinese Premier Wen Jiabao said on
Friday that China would strengthen exchanges and cooperation with other
countries to cope with the issue of food safety "in a responsible way" at a
national work meeting in Beijing. The following are measures the Chinese
government has taken since China's food quality was called into question both
locally and globally. (1) China and the United States will hold a
vice-ministerial-level talk on food security in August and the two sides will
sign a memorandum of understanding on food safety by the end of this year to
enable the two countries to resolve food safety issues more effectively. (2) The
U.S. Health and Human Services officials will visit China at the end of July to
exchange views with Chinese officials on the U.S. detention of four categories
of aquatic products (catfish, basa and dace, shrimp and eel) that were alleged
to contain banned substances. (3) China pledged on July 25 to provide regular
and detailed information about potentially dangerous exports from China based on
European complaints during the visit of Meglena Kuneva, the European
commissioner for consumer protection. (4) China has established bilateral
mechanisms and multi-lateral mechanisms on food safety with its trade partners
including the United States, the European Union, Japan and the Republic of
Korea.
May 20, 2007
 Former U.S. Trade Rep Discusses Managing
Challenges in Asia Trade
The United States Congress has had numerous hearing and introduced legislation
this year aimed at rectifying the “unfairness” underlying the U.S. trade deficit
with China. Many members of Congress have also questioned the benefits of trade
agreements negotiated by the Bush Administration, such as the U.S.-Korea Free
Trade Agreement (FTA).
Ambassador Carla A. Hills, who served as U.S. Trade Representative from 1989 to
1993, sat down recently for a wide-ranging discussion with the United States
Asia Pacific Council (USAPC) at East-West Center Washington. Amb. Hills
challenges trade critics on Capitol Hill. She offers new insights into the
imbalance in U.S.-China economic relations, touts the benefits of the U.S.-Korea
FTA, and underscores the need to better educate workers about the importance of
trade to their livelihoods.
USAPC: You co-chaired the Council on Foreign Relations’ China Task Force,
which issued a report on April 10 entitled, U.S.-China Relations: An Affirmative
Agenda, A Responsible Course. Among other points, the report maintains that
trade barriers are not a significant cause of the U.S.-China trade deficit.
Please elaborate.
Hills: The Task Force reviewed a great deal of economic data and
concluded that the U.S.-China trade deficit primarily reflects a broad
macroeconomic imbalance between the two countries rather than unfair trade
practices by China. Actually, China is one of the most open of the developing
countries.
The bilateral deficit results largely from the fact that China consumes so
little and saves so much. China’s consumption rate is about 38 percent, which is
extraordinarily low for a major economy. By comparison consumption in the United
States is about 70 percent of GDP. In India it is over 60 percent. China’s
savings rate nudges 50 percent—quite high for a developing country. By
comparison, the U.S. savings rate is in the negative range.
The Task Force believes the U.S. government could encourage China to stimulate
domestic consumption and reduce political tension here by, for example,
permitting the valuation of its currency to respond to market forces. We found
that China was unlikely to permit its currency to appreciate in response to
market forces if other East Asian governments, such as Japan and South Korea,
did not do so as well. Thus, the Task Force concluded that a broader discussion
regarding currency policy would be helpful.
Also, the Task Force concluded that increased Chinese government expenditures on
health care, pensions, welfare, and education would help to stimulate domestic
consumption and reduce savings, as would financial reforms aimed at opening the
mortgage market, providing car loans, and creating other forms of consumer
finance, like credit cards.
The Chinese people save so much because they are worried about their futures.
Their government spends very little on social welfare programs—less than four
percent of GDP. And for some time, China has had a one-child policy.
Consequently, most Chinese cannot look to their children to support them in
their old age—and they are aging very rapidly. So they feel they must save for
their health, their pensions, and the education of their children.
USAPC: How about on the U.S. side of the relationship? Did the Task Force
recommend actions the United States should take to help correct the
misalignment?
Hills: Yes. The Task Force emphasized that, first, the United States
should increase domestic savings by trimming the federal deficit and cutting
back on “pork-barrel” spending. Second, we should strive to improve our
competitiveness in the global economy by educating the U.S. population to be as
efficient and skilled as possible. And third, the U.S. should continue to pursue
market-opening trade negotiations so there are more markets for U.S. exports.
Getting the bilateral economic relationship in order will require both countries
to undertake reforms. The trade imbalance is not primarily a result of China’s
trade barriers.
USAPC: That point is a very hard sell on Capitol Hill these days. Many
lawmakers regard China’s trade barriers as the problem.
Hills: Yes, there are some trade barriers, the principal one being
China’s failure to adequately protect intellectual property. The Task Force was
quite harsh in its evaluation of China’s efforts to enforce the protection of
intellectual property rights (IPR). We argued that China’s poor enforcement
record and
nominal penalties for IPR infringement reflect a lack of political will as much
as they reflect a lack of capacity.
The Task Force urged the U.S. government to develop a system based on one
already used by the U.S. Chamber of Commerce, which rates how well provincial
governments enforce IPR. The system would help guide U.S. companies toward
provinces that do a better job of protecting intellectual property. But it is
important to bear in mind that even if China dramatically improved enforcement
of IPR rules, that, in and of itself would not rectify the trade imbalance.
USAPC: With respect to IPR, the U.S. Trade Representative (USTR)
announced April 9 that it had filed cases against China in the World Trade
Organization (WTO) over (1) deficiencies in China’s legal regime forprotecting
and enforcing copyrights and trademarks on a wide range of products and (2)
China’s barriers to trade in books, music, and films. Some Members of Congress
argued that USTR should have been more aggressive and taken China to the WTO
much sooner. Do you agree?
Hills: No. I think USTR has done quite well. I applaud the bringing of
IPR cases against China. It is much better to bring a case to the WTO where
there is a violation than it is to haggle bilaterally. The WTO provides a system
for resolving disputes. And if the complainant is correct, it is likely to
prevail. The process eliminates a lot of potential hostility.
Under the WTO dispute settlement rules, the parties to a dispute are required to
consult for 60 days, which USTR and its Chinese counterpart did. Unfortunately,
they did not resolve the dispute through consultation. USTR therefore was
correct to file the suits when it did.
USAPC: Concerning another important Asian economic relationship, on April
1 the United States and South Korea concluded a groundbreaking free trade
agreement (FTA). Leading members of the U.S. business community applauded the
accord, but key American lawmakers strongly opposed certain provisions. Some
observers worry that Congress may not approve the agreement. What effect would
Congress’ failure to approve the U.S.-Korea FTA have on American economic
leadership in Asia?
Hills: First let me say that I am very much in favor of the U.S.-Korea
Free Trade Agreement. It is a good agreement that will make 95 percent of
bilateral trade in consumer and industrial products duty free within three
years. Most of the remaining tariffs will be abolished within 10 years.
It also tackles sensitive sectors that Korea has protected for many years, like
agriculture. More than $1 billion worth of U.S. agricultural exports to South
Korea will become duty-free immediately, with most of the remaining tariffs and
quotas phased out over the first 10 years of the FTA. We also will realize
improved IPR protection and expanded opportunities for U.S. service industries,
including telecommunications and e-commerce.
In short, the U.S.-Korea FTA has few exemptions—unlike those that have been
negotiated by other WTO members. It is one of the few efforts worthy of the name
“free trade agreement.” And it goes much further than the most fervent
optimist’s aspiration for the current WTO round of multilateral trade
negotiations.
As a result, bilateral trade will expand and stimulate economic growth with
little diversion. That experience should help persuade Koreans, who have taken a
highly defensive position against agricultural liberalization in the WTO talks,
of the benefits of even broader liberalization.
The U.S.-Korea FTA also stands as a model for how other nations could open their
markets to goods, services, procurement, and protected IPR just as the North
American Free Trade Agreement (NAFTA) did when the so-called Uruguay Round of
multilateral trade negotiations faltered in 1992. The NAFTA not only stimulated
economic growth throughout North America, it also (1) encouraged the nations of
the Asia Pacific to agree to gradually open their economies, (2) persuaded the
34 democratically elected leaders of the Western Hemisphere to negotiate a FTA
for the hemisphere, and (3) breathed new life into the then-stalled global trade
talks.
Politically, the U.S.-Korea FTA is equally important. Congress complains that
the Asian nations have meetings that exclude the United States. An agreement
with a major Asian nation like South Korea effectively throws a rope across the
Pacific.
I remember when ex-Prime Minister of Malaysia Mahathir bin Mohamad said he
wanted to draw a line down the Pacific and create an Asian economic caucus. Then
Secretary of State James Baker said he did not want such a “line” because the
United States has major interests in East Asia.
We cannot stop the Asian nations from talking to each other. We certainly talk
to our friends in the Western Hemisphere. But I do think that if the Asian
nations form an economic bloc or caucus that includes the ASEAN nations plus
China, Japan, South Korea and possibly India, Australia, and New Zealand, the
United States definitely will want to participate in that group.
One way for the United States to gain access to an emerging regional economic
arrangement is to conclude a FTA with one or more of the major Asian economies.
I think the U.S.-Korea FTA is a particularly good way to start.
USAPC: As we speak, the outlook for the WTO round of multilateral trade
negotiations remains uncertain owing, in part, to strong domestic opposition in
South Korea and many WTO member countries to liberalizing agricultural trade. Do
you think we have gone as far as we can politically in liberalizing the global
trading system?
Hills: No, I do not. But we must make a greater effort to explain to the
public why open markets and economic interdependence benefit all countries.
Certainly, industrialized countries have enjoyed enormous benefits from
globalization. According to studies by the Peterson Institute for International
Economics, since
World War II the U.S. economy has gained an additional $1 trillion per year as a
result of globalization. That, in turn, has made every American household
roughly $9,000 per year richer.
Developing countries that have opened their markets also have gained. They have
grown five times faster than those that have kept their markets closed. This is
apparent if you compare China and India. In the 1980s, China began opening its
markets. In the subsequent 20-odd years, it has enjoyed 10 percent annual
growth, attracted a tremendous inflow of foreign investment, and raised 400
million people out of poverty.
India has been much slower in opening its markets. As a result, it has attracted
on average only about $7-8 billion worth of inward investment per year over the
past decade, whereas China has attracted nearly $65 billion during the same
period. That is quite a contrast. It shows how opening markets benefits rich
and poor countries alike.
USAPC: The United States and Brazil, which founded the so-called G-20
developing country coalition in the WTO,[1] recently agreed to cooperate in
bringing the WTO Round to a successful conclusion. Do you think that Brazil
ultimately can persuade India and other Asian members of the G-20 to support
ambitious agricultural reforms that would eliminate impediments to free trade?
Hills: I am a big believer that Brazil could make quite a difference in
helping to bring the WTO Round to a successful conclusion through its leadership
in the G-20. It has not yet done so. I find this curious because in the past
Brazil has been an aggressive member of the Cairns Group, which has historically
sought to open agricultural markets.[2]
The G-20 provides Brazil a good platform on which to talk to India about
liberalizing agricultural trade. It could use this platform to talk to China and
Russia as well. We must persuade developing countries about the benefits of
liberalization, particularly in agriculture.
Today, tariffs on agricultural goods are five times higher than tariffs on
industrial products. A multilateral agreement dealing with agricultural barriers
will maximize poverty alleviation for it will require commitments from all
nations. Developing countries as a group have higher tariffs than industrial
countries and trade disproportionately with other developing countries. A WTO
agreement will best integrate poorer nations into the global trading system by
maximizing opportunity for their people and stimulating their economic growth.
USAPC: Do you think it would be appropriate for American companies to
launch campaigns aimed at educating the man-on-the-street about the benefits of
trade and globalization?
Hills: Quite clearly, if American companies want to keep international markets
open, they must play a bigger role in educating the American public about the
benefits of trade. I often tell audiences of corporate executives that they must
educate their employees, whether they have five or 50,000 on their payroll. They
should do everything they can to educate their employee populations.
Corporate management must explain to employees how trade benefits the company,
what percentage of company revenues comes from the company’s international
activity, what percentage of employees’ paychecks can be attributed to trade,
and why, therefore, the company needs open markets.
Employees should be informed that companies with international connections pay
higher wages, offer more expansive benefits, and provide greater security than
businesses that are focused only on the domestic economy. In short, U.S. workers
should understand fully why it is in their interest to support open trade.
Also, the average American is not likely to know about—but likely would
oppose—the inequities created by certain U.S. trading practices. These practices
have the effect of robbing developing countries of a chance to participate in
the global marketplace.
For example, our subsidies to producers of cotton crops are higher than the cash
value of that crop. The subsidies serve to rob the poor sub-Saharan African
nations of potential export opportunities, even though they are more competitive
in cotton production.
Similarly, Americans should know that we do a great disservice to global
stability by our restrictions on the import of sugar. The U.S. system of quotas
greatly limits sugar imports, thereby enabling inefficient American producers to
block export opportunities of poor countries that produce this commodity far
more competitively. Not only do these quotas hurt nations that produce sugar—and
in some cases drive these producers to grow illegal crops—but they also hurt the
average American who must pay more for sugar.
If you examine the U.S. tariff schedule, you will see that tariffs are extremely
regressive. They are much higher on ordinary goods than on luxury items. Tariffs
on heavy glass are much higher than tariffs on Tiffany crystal. Tariffs on shoes
are much higher than tariffs on leather luxury goods. The United States should
be a leader in correcting these inequities.
USAPC: So the average American often must pay more at the check-out
counter because of protective trade practices. But some Americans are paying an
even steeper price in that they are losing their jobs because of trade. You have
said that we must find a way to use the money we have earned from trade
expansion to
rectify problems caused by trade-related job dislocation. Please elaborate.
Hills: Yes, there are some people who are displaced by reason of trade.
However, there are many more people who are displaced by reason of technology. I
would target assistance at both groups because it is impossible for those
affected to distinguish the cause of the displacement, and they are a
politically vocal group.
If business and political leaders want to keep markets open, we must deal with
those who are adversely affected as a result of trade-related displacement. The
U.S. government should provide more and better training to those who are
displaced. Our current assistance and training programs are inadequate.
For example, the Trade Adjustment Assistance (TAA) program does not cover
services workers. This group constitutes 80 percent of the U.S. workforce. In
addition, TAA only applies to people 50 years of age or older, so it does not
help younger, displaced workers. And it has a $10,000 limit. So if you are a
laid-off steelworker earning $80,000 a year and you immediately find a new,
entry-level job in the computer industry for $45,000, you suffer quite a
shortfall.
As I mentioned earlier, studies by the Peterson Institute for International
Economics (IIE) calculate that (1) the United States is richer by $1 trillion
per year as a result of the opening of global markets over the past half century
and (2) we could add another half trillion dollars per year to our economy by
further removing trade barriers.
Our nation currently spends about $2 billion annually to address directly the
costs connected to displacement. IIE calculates that expanding TAA to cover
displaced workers would cost between $3 billion to $12 billion per year
depending on the breadth of coverage and the amount of benefits. This is far
less than the $1 trillion yearly we currently derive from open markets.
I am persuaded that we need a government program that pays part of the loss a
worker may incur in having to change industries to secure employment,
particularly if the job is in a new sector that is more promising. Perhaps the
government would provide 90 percent of the pay differential the first year, 80
percent the second year and so forth until the worker gets his or her bearings
and no longer is at the entry-level salary. That money will upgrade our
workforce by providing the very best training a worker can get, which is
training on a real job.
I also favor programs encouraging business to do more to train workers. For
years, we have provided tax incentives to business to upgrade capital equipment.
But the United States is not as active in heavy industry as in earlier years.
The knowledge sector is where we are growing. I would like to see the U.S.
government provide tax incentives to encourage business to develop our human
capital.
USAPC: The President’s authority to negotiate trade agreements expires on
June 30. Congress must renew this authority. House Democrats, in particular,
appear unlikely to approve renewal of Trade Promotion Authority (TPA) unless the
Bush Administration agrees to include labor and environmental standards in all
trade agreements. Is this a reasonable demand? Will it make U.S. trade policy
more ethical, as some Democrats maintain?
Hills: We have to be careful about what we insist other countries do. I
have heard loose talk in Congress about including provisions in trade agreements
that would require the trading partner to enact laws that enforce the
International Labor Organization (ILO) standards.
The problem with that requirement is that the United States does not enforce
every ILO standard. We do not permit agricultural workers to organize, for
example. I do not know how the United States can insist that other countries
adhere to a code that we have not fully adopted.
I believe in labor standards in the sense that we certainly want countries to
upgrade their laws where they are deficient. But if we examine a trading
partner’s labor laws and they appear to be reasonable, what then becomes
important to us is that the nation enforces those laws. USTR used this approach
in FTAs it negotiated with the Andean nations, Colombia, Peru, and Panama.
It would be a mistake, in my view, to ask these Latin American nations to open
up the FTAs for the purpose of adding labor and environmental provisions. If
there are specific labor provisions that Congress would like included, perhaps
this could be done via side letters.
U.S. lawmakers should be very careful of what they demand, lest the same be
asked of our nation. If Congress insists on compliance with ILO standards, it
then should be prepared to change U.S. labor laws, some of which involve state
laws. But Congress always has harbored quite a lot of resentment toward
countries
that ask the United States to change its domestic laws.
[1] In 2003, Brazil led the creation of the G-20 in response
to an agreement between the United States and the European Union on text aimed
at liberalizing agricultural trade. Brazil and its developing country allies
evidently were concerned that the U.S.-EU language would end up marginalizing
their interests in the WTO Round. Brazil therefore formed the G-20 to enable the
WTO’s developing country members to bargain more effectively with Washington and
Brussels in the agricultural trade talks that are part of the current WTO Round.
[2] The Cairns Group is comprised of 18 agricultural exporting countries from
Latin America, Africa and the Asia-Pacific region. The Group is made up of both
developed and developing countries and has been an active force in agricultural
trade reform for 20 years. Cairns Group members include Argentina, Australia,
Bolivia, Brazil, Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia,
Malaysia, New Zealand, Pakistan, Paraguay, Philippines, South Africa, Thailand
and Uruguay.
April 23, 2007
New Policies for Zhuhai-Macau
Cross-Boundary Industrial Zone
The Administrative Measures of the General Administration of Customs for the
Zhuhai Park of the Zhuhai-Macau Cross-Boundary Industrial Zone took effect on 8
April. Under the new measures, the Zhuhai Park will enjoy special policies as a
bonded area, an export processing zone and a special port. This is the first
customs-supervised special area in the whole of China and is the only industrial
zone with these three "special roles" approved by the State Council. Under the
new measures, enterprises operating in the park enjoy greater freedom and
flexibility than those outside in terms of customs declaration. Enterprises
within the park that deliver goods across customs boundaries and enterprises
crossing customs boundaries to pick up deliveries in the park may either make
customs declarations at the park or directly declare the goods to the local
customs where they are registered.
Export Rebates for Goods Entering Zhuhai Park - Enterprises in the park are
eligible for more preferential tax policies under the new measures. Customs will
create a virtually tax-free environment for these enterprises. Goods entering
the park will be considered as having been exported and will immediately be
eligible for export rebates (except for goods intended for daily or office use
in the park). Goods leaving the park will be taxed as they are, and no VAT will
be levied on goods processed in the park. Scraps, rejects, packaging materials,
defective and sub-standard goods leaving the park are taxed as they are, which
is more preferential than like goods outside the park. Equipment and office
supplies entering the park for own use are entitled to tax deduction and
exemption. Goods entering the rest of the country via the park in the form of
general trade are entitled to zero tariff if they have obtained CEPA
Certificates of Hong Kong or Macau Origin issued by the Hong Kong or Macau
issuing authorities.
Processing Trade Eligible for Preferential Policies - The customs offers five
preferential policies to processing trade in the cross-boundary industrial zone.
These include: implementation of electronic account management, whereby
paperless processing trade registration handbooks are used; customs duty deposit
is not required; the processing of bird's nest, shark, American gingseng and
antler, which is forbidden elsewhere in the country, is permitted; processing
trade is not subject to national or customs territory unit consumption standards
and enterprises are only required to make a truthful declaration to customs for
verification and cancellation purposes; consumables are entitled to bonded
treatment whether or not they are completely consumed in the production of
export products.
According to the Gongbei customs, the State Council approved the establishment
of the Zhuhai-Macau Cross-Boundary Industrial Zone on 5 December 2003, and the
zone officially went into operation as a bonded area on 8 December 2006. The
industrial zone is divided into two sections, the Zhuhai Park which comes under
the administration of the Zhuhai government and the Macau Park which comes under
the administration of the Macau SAR government. The two parks are separated by a
waterway and are connected by a special customs port channel. A total of 26
enterprises have moved into the Zhuhai Park during the past four months. Among
them, 14 foreign-invested enterprises have registered with the Chinese customs.
Total investment in the Zhuhai Park exceeds US$100 million.
March 3, 2007
China: New Rules for
Foreign M&A Coming Out Soon
As disclosed by officials of the Ministry of Commerce (MOFCOM), the departments
concerned are discussing the law governing the joint examination of mergers and
acquisitions (M&As) by foreign companies, which is expected to come out soon.
Also, the new edition of the Catalogue for the Guidance of Foreign Investment
Industries will be published in the first half of this year.
At the Foreign Investment Work Conference for departments under the National
Development and Reform Commission (NDRC) at the end of last year, NDRC vice
minister Zhang Xiaoqiang proposed establishing a special mechanism for the
examination of M&As, preparing a list of "strategic and sensitive" industries,
and taking measures to "control what should be controlled, liberalise what
should be liberalised, and safeguard national economic security and industrial
security".
A report compiled by NDRC's Institute of Investment also noted that China should
set up a permanent body made up of relevant personnel from MOFCOM, NDRC,
Ministry of Finance and other ministries and commissions for the examination of
M&As by foreign companies. According to the report, these people can discharge
their duties when project examination is needed and can work in their own
departments at other times.
There has been a growing call for better examination of M&As by foreign
companies since 2006. This is particularly true following the outbreak of
controversies over foreign M&As and industrial security triggered by Carlyle's
bid to acquire Xugong Construction Machinery, German-based Schaeffler's bid to
acquire Luoyang Bearing, and the acquisition of Supor.
MOFCOM and five other ministries and commissions jointly promulgated the
Provisions on the Merger and Acquisition of Domestic Enterprises by Foreign
Investors in September 2006. Under these provisions, M&As of domestic
enterprises by foreign investors must be examined and approved by MOFCOM and
relevant departments as well as go through anti-monopoly verification when
necessary. MOFCOM is responsible for summoning the departments, institutions,
enterprises and stakeholders concerned for hearings. However, the provisions
have not specified whether or not a special organ for the examination of foreign
M&As will be established.
It is understood that the existing mechanism requires enterprises concerned to
submit documents relating to proposed M&As, which will be examined by the
foreign investment management department or bureau under relevant ministries or
commissions according to a set order. When necessary, the heads of relevant
departments or bureaus may form a joint committee to discuss whether it is
necessary to hold hearings.
Food Dealers Not Allowed to Name Food
After Drug
To put a halt to the unscrupulous act of some food producers and distributors
who name food items after drug, the Ministry of Health has recently issued a
notice urging the departments concerned to strictly exercise supervision and
inspection to stem such practices. Consumers are encouraged to report or lodge
complaints to their local health administrations once they discover such
practices.
According to an official from the Ministry of Health, illegal acts of producing
and selling food as drugs include: Naming food after drugs without
authorization, such as calling a product "Ban Lan Gen XX" or "Qing Kai Ling XX";
illegally adding medicinal ingredients; and making exaggerated claims with hints
of therapeutic effects. These illegal acts not only disrupt the order of the
food retailing market but may be hazardous to public health. The notice
stipulates that food producers are forbidden to use listed names of drugs as
trade names of their food, and food distributors (including retail drug stores
with food hygiene licence) may not purchase, stock, display or sell food bearing
the names of listed drugs.
The Ministry of Health stressed that health administrations at all levels may
not overstep their authority in the examination and approval of food or add
names of specific items of food other than health foods, food additives and new
foods to the list of "permitted items" on their Food Hygiene Licence without
authorization.
March 1, 2007
Clean-Energy Technologies Focus of Upcoming Trade Mission to India and China
In April, a Commerce Department trade mission to India and China will promote
U.S. clean-energy technologies to potential buyers in those expanding markets.
A trade mission to India and China to promote the sales of U.S. clean-energy
technology has been scheduled for April 18–25, 2007. Led by David Bohigian,
assistant secretary of commerce for market access and compliance, the mission
will visit New Delhi and Chennai in India from April 18 to 20 and Beijing and
Nanjing in China from April 23 to 25.
Clean-energy technologies have moved to the forefront of energy infrastructure
investments in India and China. Those two expanding economies are seeking to
diversify their energy sources and to reduce carbon emissions without hindering
economic development. The trade mission will highlight technologies that are at
the center of the Asia Pacific Partnership (APP) on Clean Development and
Climate, an innovative U.S.-led effort to accelerate the development and
deployment of clean energy technologies through a voluntary public-private
partnership among six major Asia-Pacific nations.
“We have seen amazing growth in the economies of both India and China that has
led to a great need for additional energy in these countries, and we expect this
trend to continue,” said Bohigian. “At the same time, U.S. companies have
developed innovative clean-energy products, and their deployment in India and
China will have dramatic effects on the environment not only in these countries,
but around the world.” During the trade mission, U.S. renewable energy,
energy-efficiency, clean-coal, and distributed generation companies will have
the chance to meet with national and local government officials and to
participate in networking opportunities, one-on-one business meetings, country
briefings by experts, and site visits.
Growing Economies, High Energy Demand - India, the world’s fastest-growing
free-market democracy, has a critical need for investments in clean energy.
Demand for energy in India far exceeds supply, and the development of renewable
energy resources is a high priority for the government. According to Commercial
Service estimates, the market for renewable energy business is about $500
million per year and is growing at an annual rate of 15 percent, creating strong
and diverse business prospects for U.S. companies. China, the world’s
fastest-growing major market, is targeting the development of clean-energy
technologies in its current Five Year Plan because of rapidly increasing energy
demand and the desire to expand the use of non–fossil fuels. The plan emphasizes
clean coal, wind power, solar power, and biomass technologies. It also calls for
developing large-scale, high-efficiency, and environmentally friendly power
generation.
Two Indian Cities at Forefront of Clean-Energy Usage - The first stop for the
mission will be New Delhi, the seat of India’s national government and the
country’s principal end-user of clean-energy technology. New Delhi is also one
of India’s largest metropolitan areas and is in acute need of power generation
and environmental quality improvements. The city’s size makes it a particularly
attractive market for large investments in clean energy generated by solid and
liquid wastes. Chennai, formerly known as Madras, is the capital of Tamil Nadu.
In addition to being one of the top five Indian states in terms of foreign
direct investment, Tamil Nadu is home to a number of renewable energy companies.
Chennai and Tamil Nadu are centers for national efforts in wind energy and solar
air–heating technology. Also, India’s first special economic zone for
manufacturing and testing of non-conventional energy equipment will open soon in
Chennai.
In China, Olympics Spur Development - Beijing is unique in China because it is a
city with provincial status, enabling its municipal government to approve
independent foreign investment projects up to $30 million. This ability has
positioned Beijing as an attractive location for foreign investment in China. As
the national capital, the city also offers unparalleled access to Chinese
policy-makers. The selection of Beijing as the host of the 2008 Summer Olympic
Games has also spurred substantial government investment in projects that
improve environmental quality. Nanjing, home to more than 5 million people, is
one of China’s most developed cities. Power and energy are among the city’s core
industries. Nanjing hosts one of China’s largest trade fairs on clean and
renewable energy and is beginning a prominent provincial-level project to create
an efficient power plant. This project is intended to achieve energy
conservation and efficiency by implementing new technologies, and it is rooted
in demand-side management familiar to U.S. companies. The use of clean,
renewable energy and energy efficiency are crucial components of the project.
February 17, 2007
Proven Track Record Needed
When Applying for Foreign-Invested Design Enterprise Qualifications
On 1 February, the Ministry of Construction and Ministry of Commerce jointly
issued the Implementing Rules for Regulations on the Administration of
Foreign-Invested Construction Engineering Design Enterprises. The new rules set
strict standards for the application and verification of qualifications of
foreign-invested construction engineering design enterprises.
Under the new rules, when applying for verification of qualifications,
foreign-invested construction engineering design enterprises must not only meet
the necessary professional requirements, but must also provide documents
supporting their track record as foreign service suppliers outside China as well
as qualification certificates of individual registered architects and engineers.
As required by the Ministry of Construction, foreign service suppliers should be
enterprises engaged in construction engineering design or natural persons who
have obtained relevant professional qualifications in their own countries or
regions. While foreign enterprises must have proven track record as construction
engineering design enterprises in their own countries or regions, natural
persons must be registered architects or engineers engaged in construction
engineering design in their own countries or regions.
When foreign-invested construction engineering design enterprises employing
foreign registered architects or engineers as principal professional personnel
apply for qualifications as a construction engineering design enterprise, the
professional titles of these personnel will not be verified. Verification will
only be conducted on their academic qualifications, number of years of service
in engineering design, as well as their registered qualifications, track record
and goodwill in engineering design abroad.
Foreign Brands Dominate Shanghai Market
According to statistics released by the Shanghai Municipal Business
Information Centre on 5 February, foreign brands accounted for 54.8% of
best-selling brands in 2006, up 2.2 percentage points from 2005. Meanwhile, the
market share of domestic brands dropped to 45.2%. The increased market
concentration of best-selling brands is mainly attributed to foreign brands,
while the gap between domestic and foreign brands is widening.
The statistics show an obvious increase in the market share of foreign brands of
ladies' underwear, leather goods, brown goods, white goods and garments.
However, foreign brands are lagging far behind local brands in the rate of brand
renewal. Although the share of domestic brands on the best-selling list is
basically commensurate with that of foreign brands, the gap between domestic and
foreign brands in competitiveness has widened further.
Although the market share of foreign brands has risen, Shanghai brands continue
to maintain a competitive edge in traditional products, such as gold and silver
jewellery, beddings, underwear, condiments, yellow wine, dairy products, and
staple and non-staple foodstuffs. Traditional well-known brands such as
Guangming, Three Gun, Wangbaohe and Sea Lion and new-generation brands such as
Shikumen, Only, Tayohya and Fuqin have firmly secured their market lead in their
respective areas.
February 7, 2007
Lower Registered Capital
for Hong Kong and Macau Air Freight Forwarders
After the China Air Transport Association (CATA) has decided to accept
applications from wholly-owned Hong Kong and Macau air freight companies for
entering the mainland market, it has issued a set of supplementary regulations
providing them with guidance on market access. The Measures for the
Accreditation of China Civil Aviation Transport Agencies were promulgated on 30
January 2007 and took effect immediately.
According to the measures, Hong Kong and Macau air freight enterprises that meet
the definition of Hong Kong and Macau service providers are allowed to set up
equity or contractual joint-venture or wholly-owned air transport agencies on
the mainland. The registered capital and other requirements for them will be the
same as those for mainland enterprises. According to Order No.37 of CAAC,
minimum registered capital for these agencies is Rmb500,000 (US$64,102).
Guarantee for Accreditation Not Yet Clearly Spelled Out
In order to simplify procedures, qualified Hong Kong and Macau air freight
enterprises seeking to set up equity or contractual joint-venture or
wholly-owned air transport agencies on the mainland may complete the application
form online at CATA's website. After the application form has been examined and
approved by CATA's regional representative, written materials may be directly
submitted to CATA's headquarters for accreditation.
However, the supplementary regulations do not give clear guidance on the
guarantee for Hong Kong and Macau enterprises entering the mainland air
forwarding market. According to earlier regulations, equity or contractual
joint-venture enterprises seeking entry into the market must be guaranteed by
their mainland partners. However, the supplementary regulations do not give
further clarifications regarding Hong Kong and Macau enterprises entering the
market as wholly-owned operations.
On this issue, CATA secretary-general Wei Zhenzhong said that CATA has reached a
consensus with CAAC under which Hong Kong and Macau enterprises still need
guarantee cover from China-funded enterprises when seeking entry into the
mainland air forwarding market. The guarantee is mainly for the qualifications
of the enterprise concerned, such as its legal person status, authenticity,
economic strength and business background, and is not a guarantee for the
economic contract.
As for those Hong Kong and Macau enterprises which have such a large registered
capital that ordinary China-funded enterprises cannot afford to provide
guarantee for them, CATA has signed a cooperation agreement with a guaranty
company under which Hong Kong and Macau enterprises may seek guarantee cover
from this company.
Shenzhen China - Five Years
After WTO
China became the 143rd member of the WTO at the Doha Ministerial Conference on
11 December five years ago. The five years since China's entry to the WTO are an
important period of economic and social transformation for Shenzhen. As the
five-year WTO entry transition period draws to an end, China will fully open its
market in accordance with its WTO commitments and Shenzhen will be facing a new
situation and new tasks. In light of this, the city has just held the Seminar on
the International Competitiveness of China's Industry and the 2006 Annual
Meeting of the Shenzhen WTO Affairs Centre to brace itself for the new
challenge. At these two meetings, experts and scholars gathered together and
exchanged views on the international competitiveness of China's industry and the
WTO Affairs Centre.
1. Seminar on the International Competitiveness of China's Industry
On 4 December 2006, the Seminar on the International Competitiveness of China's
Industry organized by the Ministry of Commerce (MOFCOM) was held in Shenzhen
after meeting in Xiamen twice. Xu Zongheng, mayor of Shenzhen, Ambassador Sun
Zhenyu, China's permanent representative to the WTO, and Wang Chao, assistant
minister of commerce, attended the meeting. Arancha Gonzalez Laya, director of
the Office of the WTO Director General, and other Chinese and foreign experts
and scholars delivered keynote speeches. The theme of the seminar was "Five
Years After WTO: Multilateral Rules, Multinational Operation and Independent
Innovation", under which discussions were held on ways to actively cope with
international competition and challenges brought by globalization and post-WTO
transition, promote the change in the mode of economic growth and the
optimization of industrial structure, further strengthen the competitiveness of
China's industries, and on how China and Shenzhen's industries could actively
make use of the rules of the WTO and other multilateral organizations to enhance
their competitiveness in an all-round way under the globalization trend.
Shenzhen's efforts in honoring its WTO commitments are obvious to all. It has
built up a working system in compliance with WTO practices, drawn up WTO
compliance guidelines, and revised existing laws and regulations in line with
WTO regulations. Over the past five years, it has amended or annulled 24 laws
and regulations that fail to comply with China's WTO commitments, thus hastening
China's WTO compliance.
Experts also put forth their suggestions for China in the post-transition
period. First, China must bring about a change in the mode of foreign trade
growth and effectively deal with problems of trade friction. Second, it must
prepare itself for yet another round of industrial transformation -- the
outsourcing of services -- in the wake of globalization. This is particularly
important for Shenzhen and crucial measures must be taken by Shenzhen to adapt
itself to globalization and optimize its industrial structure. As the vanguard
of reform and opening up, Shenzhen must accelerate its pace of independent
innovation and promote the transformation and upgrading of processing trade.
Shenzhen enjoys an obvious advantage in the development of trade in services. It
should make full use of the China High-Tech Fair, China Cultural Industry Fair
and other platforms to boost trade in services. It is hoped that the WTO Affairs
Centre would make greater efforts to study WTO rules, especially their actual
application in local administrative work. Meanwhile, steps should be taken to
set up a warning system for industry injury, to integrate resources in a bid to
render assistance to enterprises in trade friction, and to strengthen training
of WTO affairs personnel.
2. 2006 Annual Meeting of the Shenzhen WTO Affairs Centre
At the 2006 Annual Meeting of the Shenzhen WTO Affairs Centre held on 5
December, Chinese permanent ambassador to the WTO Sun Zhenyu, director of
MOFCOM's department of trade in services Hu Jingyan, director of MOFCOM's
department of electromechanical and high-tech Industries Wang Qinhua, and
officials of the Guangdong provincial foreign economic and trade cooperation
department delivered keynote speeches. The meeting discussed the implementation
of the scientific development concept and the 11th Five-Year Programme, the idea
of "putting industry first" and "attaching importance to enterprises" put
forward by Shenzhen, and the development strategies of "going out" and "building
a harmonious and efficient Shenzhen" in the light of the characteristics of
industrial restructuring and upgrading in Shenzhen and the Pan-PRD region in
order to promote Shenzhen's internationalization process. Shenzhen will find new
opportunities in the latest round of international industrial restructuring and
transfer, and the strategy of "putting industries first" will give Shenzhen
enterprises a boost in seizing international market opportunities.
3. Some Figures About Shenzhen
Shenzhen has done extremely well in trade in goods and services, IPR protection,
investment and financing and has embarked on a new track of development in
economic and social undertakings these past five years. Shenzhen ranks third
among China's top 100 cities in terms of overall strength according to figures
published by the State Statistical Bureau at the end of 2005. Its GDP reached
Rmb495.091 billion in 2005 after successively breaking the Rmb300 billion and
Rmb400 billion marks. The 2005 figure was double the 2001 figure of Rmb248.249
billion when China joined the WTO. Per-capita GDP was 1.75 times that in 2001.
The WTO effect has been obvious in the past five years and Shenzhen's economic
and social undertakings have been developing on a healthy and stable track.
Where foreign trade is concerned, in 2001 Shenzhen's total imports and exports
reached US$68.611 billion, of which exports were worth US$37.480 billion and
imports US$31.131 billion. In 2005, its total imports and exports increased to
US$182.817 billion, up 24.1% year-on-year and 2.7 times the figure in the year
of WTO accession. Its total exports amounted to US$101.518 billion, up 30.4% and
accounting for 13.3% of the national total. It is the first mainland city to
break the US$100 billion mark in exports and has been China's top exporter for
13 years running.
In terms of foreign direct investment (FDI), Shenzhen has maintained a high rate
of growth in the absorption of FDI in the last five years, with an accumulated
total of US$14.7 billion. Today, 135 of the Fortune 500 companies have 214
investment projects in Shenzhen. In 2005, increases in contracted foreign
investment and utilized foreign capital both exceeded 25% on the high bases
achieved in 2004. Contracted foreign investment during the year reached US$5.251
billion, up 27.4%, while utilised FDI amounted to US$2.969 billion, up 26.3%. In
the same year, Shenzhen approved 61 new projects with investment of over US$30
million and 10 key projects with investment of over US$100 million. In the same
year, the value of contracts on increased capital amounted to US$2.598 billion,
up 63.6%.
In the development of "going out", Shenzhen enterprises have made a great
breakthrough since China's WTO accession five years ago. Among the 43
enterprises that made offshore investment in 2005, 47% were private enterprises
and 35% were recognized high-tech enterprises. Among them, offshore investment
by SMEs accounted for more than 50% of new investments. In 2005, approval was
granted to 64 foreign enterprises and institutions with a total agreed
investment of US$309.28 billion, up 22.4%. New contracts for foreign
construction projects and labor cooperation worth US$2.985 billion were signed,
up 109.5% year-on-year. The completed business amount reached US$2.14 billion,
up 64.1% year-on-year.
For the output value of high-tech products, during the five years since China's
WTO accession, Shenzhen has broken the US$100 billion mark four consecutive
times. In 2005, the value-added of its high-tech products amounted to Rmb140
billion, or 28.4% of the city's total output value. The output value of products
with proprietary intellectual property rights amounted to 58% of the total
output value of high-tech products. In 2005, Shenzhen applied for over 20,000
patents, ranking third in the country. It rose to the second place in 2006 and
applications for 700 PCT international patents were made, ranking first among
China's large and medium-sized cities. Today, Shenzhen has over 50,000 own
brands and is hailed as China's "brand name capital". In the national assessment
of Chinese brand-name products, 58 of its products have won the title of "Famous
Chinese Brands", ranking first in the country.
In trade in services, Shenzhen's total imports and exports, total exports and
total imports of services registered annual growths of 37.0%, 43.5% and 29.7%
respectively between 2001 and 2004, with increases in service exports exceeding
imports. In 2001, the total imports and exports in trade in services was US$1.91
billion. In 2004, it rose to US$6.05 billion, representing an annual growth rate
of 36% and more than three times the 2001 figure. As a result of the rapid
growth of service exports since WTO accession, Shenzhen's service trade balance
ended its long history of deficit and began showing a surplus in 2002. The
surplus continued its increase in the following two years to reach US$1.13
billion in 2004. Overall, Shenzhen's trade in services is still in its nascent
stage of development, and there is great potential for the import of services
from Hong Kong and other countries and regions to the city.
The private sector in Shenzhen also witnessed rapid growth in the last five
years. Private enterprises in the city applied for 2,020 national patents in
2005, accounting for 98% of the total number of national patent applications in
China. Their offshore investment also experienced fast growth. Private and
shareholding enterprises contributed to 70% of Shenzhen's offshore investment,
overtaking the long-time predominance of state-owned enterprises. Capitalizing
on CEPA, Shenzhen has taken a positive part in regional economic integration at
the three levels of Shenzhen-Hong Kong cooperation, Greater PRD cooperation and
Pan-PRD cooperation since WTO accession, thereby establishing an important
channel for opening the domestic market and linking it with Southeast Asia. It
has also become an important passage to the sea for the Pan-PRD economic circle
as well as a window for economic ties with foreign countries.
January 30, 2007
Taiwan, Hong Kong and Macau
Employees Allowed to Join Old Age Pension Scheme in Shenzhen
The Shenzhen labor and social security bureau announced at a press conference on
10 January 2007 that major changes will be introduced in three areas in
Shenzhen's social security system with the aim of relaxing the requirements for
joining the social security system.
The changes include allowing Taiwan, Hong Kong, Macau and foreign employees to
join the old age pension scheme in Shenzhen; abolishing the requirement for
laborers to pay insurance premiums for five consecutive years prior to their
retirement; and permitting Shenzhen residents retiring before the maturity of
their insurance policies to continue paying insurance premiums.
According to Yuan Jianyong, director of the Shenzhen Social Security Fund
Management Centre, this is the first time that clear policies have been drawn up
to allow Taiwan, Hong Kong, Macau and foreign employees to join the old age
pension scheme in the city. Under the regulations governing social insurance for
Taiwan, Hong Kong and Macau people working in Shenzhen, those who have obtained
employment certificates and signed employment contracts with their Shenzhen
employers can join the city's old age pension, medical insurance and industrial
injury insurance schemes as non-Shenzhen residents. Upon retirement, they will
be entitled to a monthly pension. This policy also applies to expatriate
employees working in the city.
January 25, 2007
Multinationals can learn
from Chinese companies
Multinational companies hoping to stay out front in China should start by
understanding the workings of the nation's economic growth engine.
Many Chinese companies have grown at such an astounding pace that observers have
wondered how so much change is possible in so little time.
It is the "Chinese Miracle" all right, but its roots lie in Japan and South
Korea.
The nation began its quantum economic leap by borrowing a three-phase strategy
first used in Japan and South Korea: They established local manufacturing, often
for low-cost sourcing to multinationals; they acquired know-how and technology
through licensing and joint ventures; and they bought assets and brands abroad
to secure global positions.
But unlike their regional counterparts, Chinese companies have mostly done away
with sequencing, instead condensing three phases into one. It took Japanese and
Korean firms on average 25 years to reach global leadership; Chinese companies
will achieve this in 10 to 15 years.
Such a shortcut taken by Shanghai Automotive Co Ltd. Started in 1984 as a
manufacturer of farm tractors, the company later built its auto manufacturing
arm, borrowing innovation through government-negotiated agreements, including
those with GM and VW.
It also purchased a stake in South Korea's Ssangyong Motor to blunt challenges
from regional rivals. And in 2000, the company bought two models from Britain's
Rover Group to sell under its own brand.
Last month the automaker announced it will acquire the joint-venture assets of
its parent company, Shanghai Automotive Industry Corp. The $2.4 billion deal
brings all of the company's partnerships under a single umbrella, making it the
largest publicly traded carmaker in China.
In addition to compressing their build, borrow and buy phases, companies like
Shanghai Automotive move ahead by harnessing the innovation and energy common to
most start-ups, combined with the centralized, coordinated planning of
nationwide turnaround projects.
We call this the "start-around" approach, one which has helped key players in
China quickly overcome weaknesses and adapt to market changes.
Another reason Chinese companies can advance so quicklyis that they typically
start off targeting the low-cost, lower-quality segment, where the high volumes
make up for small margins.
These volumes put companies on a fast learning curve, accelerating the growth
process and preparing them for the rapidly growing middle market. It's what we
call the "good enough" market, the segment of acceptable quality goods at
unbeatable prices, and it's a breeding ground for global competitors.
For foreign multinationals, the way to get ahead in China's fast lane is to take
advantage of what these companies are missing in their race to secure a global
presence. There are three important areas where Chinese companies get stalled.
The most significant is customer loyalty, in terms of both the end consumer and
intermediate distributors. Chinese companies historically dealt with fewer
distributors, relying instead on mega-retail channels. Customer insight takes
time to develop, and global firms have many more years of experience to draw
upon.
The battle for talent will also be critical, as firms seek out people with
global experience. Multinationals are experienced in developing strong
leadership, and will rely on their best-in-class programs for recruiting,
developing and deploying management.
Then there's innovation. Corporations today are unlikely to repeat this mistake.
Constant innovation and compressed product cycles will characterize Chinese and
multinational firms alike.
Not only development phases, but various industries and sectors will be
integrated: One day soon, R&D will converge across cosmetics, pharmaceuticals
and food industries.
Emulation will become progressively more difficult; Chinese companies may find
themselves continually playing catch-up.
In the end, however, it's important to remember that the race will be won by
those who endure the longest. Here, China has another advantage: The centuries
have taught its people to be patient. With their emphasis on quarterly earnings,
today's multinationals may have yet another lesson to learn from China's
companies: the idea of thinking forward in decades.
American view on China
changing quietly
A feature article in US-based Time magazine published on January 11 assessed the
rise of China, calling it the "dawn of a new dynasty" and "the China century".
It reviewed China's rapid development in recent years: from investment in Africa
to diplomatic activities in Latin America, from energy needs to geographical
influence, from domestic challenges to diplomatic achievements, and from
democracy and human rights to sovereignty and territory. It ended by concluding
that "China's rise to global prominence¡doesn't have to lead to the sort of
horror that accompanied the emerging power of Germany or Japan¡There need be no
wars between China and the US, no catastrophes, no economic competition that
gets out of hand. But in this century the relative power of the US is going to
decline, and that of China is going to rise. That cake was baked long ago."
This article one of the most comprehensive, deep and balanced analyses of China
to come from mainstream US media so far; it reflects a change in American
society's view of China, and is largely in line with Washington's current China
policy.
The idea of the "China century" is nothing new. Talk of the "China century" in
the West began as early as the 1980s, when it was predicted the 21st century
would belong to Asia and specifically, China. It was an expectation that stemmed
from a strategic awareness in western nations. In the 1990s, however, theories
about China's collapse and watered-down statistics popped up across the US,
reflecting doubt about the continuous, rapid development of the nation. When
China overcame one difficulty after another and, backed by solid statistics,
proved to the world that "robust growth" was no longer in the future, that it
was happening now and would continue to happen, Americans refused to look
squarely at the facts and started trumpeting the "China threat" theory, which
constituted, among other things, a military, environmental and energy threat.
It should be noted that since the end of 2004 a new wave of concern about China
has swept across the US, in which sentimental arguments have gradually given way
to objective, practical reports and analysis. The "China threat" rhetoric has
been dropped and "China's responsibility" is now more widely heard. This is
progress. If the Newsweek panorama report on China in early 2005 was regarded as
a wind vane, then the recent Time article is a temporary summary of America's
concerns about China. It is a mixture of complex emotions: surprise at China's
fast growth that has gone well beyond American expectations; helplessness, as it
is bogged down in the Middle East and unable to cope with China's development;
and anxiety over possible challenges a stronger China might pose. The US has
observed changes in China's domestic and foreign affairs in recent years and has
adjusted its attitude to face the dawn of the China century. In fact, these
sentiments are already present in current strategic thinking, and are
represented by US calls for China to be a "responsible shareholder" and the
"hedge" theory.
This quiet change in the US' attitude towards China should be affirmed. Unlike
past judgments which were simple, sentimental and tried to demonize China, the
Time article indicates that US politicians, academics and journalists have
become more objective and rational in their way of looking at China, which is
critical for the development of sound, stable Sino-US relations. However,
reading between the lines, we can see the US is still constrained by a
deep-rooted US-centric mentality. Ideologically it has not moved away from
democracy and peace or "historic fatalism" when it comes to the rise and fall of
powers. As a result, it has failed to subscribe to the idea of constructive
cooperation for mutual benefit and clung to traditional "power" thinking in
which the western world will "manage" China's rise together. It will probably
take time for America to really understand China.
The author, Yuan Peng, is vice director of the Institute of American Studies,
China Institutes of Contemporary International Relations
January 23, 2007
 
World Boutique, Hong Kong : Fair
Daily
Shimmer and sparkle characterised Cecilia
Yau's collection of evening gowns. Silhouettes were long and simple, mostly with
high waistlines. She began with a palette of soft coral, salmon and cream.
Brighter hues of moss, lilac, lemon and turquoise came next, with a finish of
rich purple, fuchsia and a delicious combination of chocolate and pink.
There were plenty of sheer fabrics in Peter Lau's presentation, too. Micro
skirts and dresses were matched with fitted bodice tops. Wrap-around
mini-dresses offered an easy look. Necklines varied from mandarin collars to
sweetheart shapes. Floral prints, lacy details and ruching added plenty of fun
to the collection. Tweed and velvet were standout fabrics.
January 20, 2007
Peg to greenback stays `until 2047'
Carrie Chan and Michael Ng
Despite the appreciation of the yuan in recent months, Chief Executive Donald
Tsang Yam-kuen said Thursday he had no intention to give up the Hong Kong dollar
peg to the American currency.
He said the peg, adopted in 1983, should last until at least 2047. As the
exchange rate of the yuan to the US dollar surged to a historical high of 7.771
Thursday, Tsang told CNBC that pegging the Hong Kong dollar to the greenback had
already proved to be very effective and successful.
"The peg has proved successful for nearly three decades. We have seen ups and
downs with the US dollar in relation to other currencies, and we have survived
that, and that linkage has helped us survive several crises in the financial
world, some of an international dimension, particularly the one in 1997," Tsang
said.
"So we believe it's a very strong linkage." He said the government had no plan
to change such an effective system or to peg the Hong Kong dollar to the yuan.
"Irrespective of what is happening with the renminbi, it will take a long time
before the currency becomes fully convertible. Indeed, our constitution
prescribes that Hong Kong should have a currency of its own at least until 2047,
so the question of merging with the renminbi will not happen within that time
frame," Tsang said.
In an interview with local broadcaster TVB, Tsang also declared for the first
time he will reshuffle and appoint new candidates to head the policy bureaus
should he be re-elected, though he insisted the current team was performing
well.
"I can only reshuffle or make new Cabinet appointments after I am re- elected.
But I am quite confident the Cabinet will be able to adapt to and exercise the
requirements and targets stated in my platform," Tsang said. The chief executive
insisted he is still focused on performing his duties, including leading a SAR
delegation to Jiangxi province today.
But he said he is drafting his platform during his spare time. "So everybody
will not need to wait too long for that [declaring his candidacy]," he said. A
Liberal Party source said Thursday at least half of the incumbent policy bureau
chiefs, including the less popular secretaries such as Arthur Li Kwok- cheung at
education and manpower, Frederick Ma Si-hang at economic services and the
treasury, Sarah Liao Sau-tung at the environment, transport and works, and
Patrick Ho Chi-ping at home affairs, will be shown the door.
To ensure a smooth transition and the SAR's stability, Tsang retained all senior
officials in the government and non-official members in the Executive Council
after he succeeded former chief executive Tung Chee-hwa in June 2005. The only
new appointment he made was Secretary for Justice Wong Yan- lung who replaced
Elsie Leung Oi-sie who retired later that year.
In yet another interview, with Now TV, Tsang said the most essential
consideration in drafting his platform was to include matters which he could
achieve and which would enhance Hong Kong's social, economic and political
situation over the next five years. "I was thinking about what I could do to
really help Hong Kong. When I find the answer, it is then that I will announce
my candidacy," he said.
Meanwhile, a source said Tsang would just aim at obtaining about 400 nominations
from the 800-strong Election Committee when the chief executive election's
nomination stage starts in in the middle of next month, rather than the more
than 700 nominations he got in the 2005 by-election.
"Instead of 700, he will just try to find an agent in each subsector and lobby
for about 300-400 nominations in total," the source said. In 2005, Tsang secured
710 nominations, compared with 51 for former Democratic Party chairman Lee Wing-
tat, and 21 for financial-services legislator Chim Pui-chung. Tsang's total was
four shy of the 714 nominations obtained by Tung in the 2002 election, in which
he was returned unopposed.
City University of Hong Kong political commentator James Sung Lap- kung said the
news, together with the announcement this week by Secretary for Constitutional
Affairs Stephen Lam Sui-lung that the government will not host any election
forum for candidates nor will Election Committee votes be read out as before,
shows Tsang lacks the confidence of getting the same number of votes that he did
two years ago.
However, Sung said, a mere 401 nominations will be enough to give Tsang victory
at the polls. In addition, he will not have to make too many promises to secure
votes while the various subsectors will not be able to make too many demands on
him. More important, the strategy will be in line with public demands for a
competitive chief executive election, Sung said.
Having revealed the SAR's action agenda on China's 11th five-year plan earlier
this week, Tsang also denied the 200 strategic proposals in the report were the
result of greedy demands aimed at searching for economic backing and lucrative
gains from Beijing. "I will not do anything to take advantage of the country or
harm our national interests," Tsang said.
HKMA chief Joseph Yam says he has
no intention of tampering with the currency peg.
HSBC and the Hong Kong Monetary Authority
yesterday warned of more volatility in Hong Kong's stock market following the
surge they said was driven by liquidity rather than fundamentals. The warning
came as the Hang Seng Index, which surged 34.2 per cent last year, yesterday
rose 1.06 per cent to close at 20,277.51 points, boosted by property stocks.
Turnover yesterday was a heavy HK$64.24 billion. Releasing its outlook for this
year, HSBC predicted a "sharp" correction in the Hang Seng Index of between 10
and 25 per cent before returning to positive territory and closing out at about
21,500 points. Garry Evans, the lender's pan-Asian equity strategist, would not
provide a timetable for the downturn, noting only that liquidity had a track
record of leaving the market between March and May.
Hong Kong stocks were quite "expensive", Mr Evans said, with their
price-earnings ratio reaching 19, compared with about 16 in the past few years.
He said investors were likely to get "okay but not spectacular returns" this
year.
Echoing the sentiment, HKMA chief executive Joseph Yam Chi-kwong said investors
should be prepared for higher risk. The city's de facto central banker warned
that governments in the region might interfere in their markets, citing the
recent regulatory changes in Thailand as an example. The Bank of Thailand
triggered a slump in the country's stocks, bonds and currency when it imposed
penalties on early withdrawals by investors in Thai assets on December 18. Its
reversal of some of the measures a day later raised concerns that its handling
of the economy would drive away investors.
For its part, HSBC is not at all pessimistic. It expects the US to cut interest
rates by 1.25 percentage points this year to 4 per cent, which should provide a
boost to Hong Kong stocks. The lender, which expects H shares to gain 12 to 13
per cent this year, also said that the downward trend on raw materials prices
would boost mainland corporate earnings. HSBC sees the mainland economy growing
9 per cent this year because of strong domestic demand, which will offset the
negative impact of slowing exports because of a decline in global demand. The
lender forecast gross domestic product growth of 10.6 per cent for last year.
HSBC predicted the yuan to appreciate within 5 per cent this year and the pace
would be slower if the growth in exports showed a sharp downward trend. It
forecast China's export value to grow 15 per cent, down from last year's 27 per
cent. Mr Yam yesterday reiterated that the Hong Kong dollar would be firmly
pegged to the US dollar despite investor speculation about a peg between the
Hong Kong dollar and the strengthening yuan. In late trade yesterday, the Hong
Kong dollar fell to HK$7.8085 to the US dollar, the lowest since 1983 when the
peg was introduced.
On the weakening Hong Kong dollar, Mr Yam said: "The fact that the aggregate
balance of the city's banking system remains unchanged suggests there is no
outflow of capital."
Int'l laws applied in local
IPR cases
International intellectual property rights (IPR) laws will take precedence
whenever they are applied in domestic trials even if they differ from domestic
laws, a senior judicial figure told a national conference on IPR-related trials.
Chinese IPR laws are typically in tune with international IPR laws, so equal
protection is accorded to both overseas and domestic IPR owners, Cao Jianming,
vice-president of the Supreme People's Court (SPC), said yesterday.
But when they are not, China will give priority to international conventions
that are directly applicable to domestic IPR case trials, said Cao. As for
regulations among documents that China signed on accession to the World Trade
Organization, such as the Agreement on Trade-Related Aspects of Intellectual
Property Rights (TRIPS), the endeavor is to transform them into domestic laws.
"And for those that have already been enshrined in domestic laws, their
execution is bound by international treaties," he said. To further allay foreign
concerns on IPR protection, the Standing Committee of the National People's
Congress, the top legislature, recently approved China's entry into the WIPO
Copyright Treaty and WIPO Performances and Phonograms Treaty.
"IPR protection has become a constant strategic topic in China's external
affairs," Cao said. "On the one hand, China has made remarkable progress; while
on the other, some developed countries keep applying pressure as global IPR
competition intensifies. "It is impossible to solve in a short time
contradictions between China's economic and technical shortcomings as a
developing country and the high IPR protection standards proposed by developed
countries," Cao said.
"The disputes will last for a long time." He reiterated China's stand in
adhering to "national treatment" principles according to TRIPS agreements.
"Favorable treatment will neither be offered to foreign parties because of their
foreign sensitiveness, nor protectionism given to any local or industrial
parties in the name of protecting national interests," Cao said.
IPR-related court cases have been on a rapid rise in recent years. From 2002 to
2006, Chinese courts dealt with 931 IPR cases involving overseas parties, or a
rise of 50 percent each year, according to Jiang Zhipei, chief justice of the
SPC IPR Tribunal.
During that period, the Beijing No 1 Intermediate People's Court alone ruled in
favor of overseas parties in 60 percent of the 670 IPR cases.
January 18, 2007
The future of licensing
With licensing growing more important in the business world, the 'Licensing
Workshop: Industry Trend and Outlook' held yesterday was attended by a
full-house audience.
In the first session, 'US Licensing Outlook and the Latest Global Trends',
Charles Riotto, President of the International Licensing Industry Merchandisers'
Association, gave a comprehensive overview of the performance of the US
licensing market in various categories. Entertainment licensing, driven by movie
and television properties, was among the major winners in terms of royalties and
retail sales generated. Major challenges, royalty rates, and licensing revenues
of various categories were also discussed. A worldwide perspective was further
supplemented by information on the licensing markets in UK, Italy, Germany,
France and Spain.
In the second session, Ms Susan Huang, Managing Director of Interasia Marketing
(HK) Co Ltd, spoke on 'Leveraging Brand Power Through Licensing'. Serving a
number of international brands, Ms Huang shared her experience by highlighting
the importance of branding, explaining the essence of licensing, as well as
illustrating its benefits with a case study from one of her clients, Hallmark
Babies. The concise analysis encompassed discussion on the benefits of working
for a licensed brand as compared to starting a totally new brand.
Ms Rebecca Lo, Vice-Chairman of the Licensing Executive Society China, Hong Kong
Sub-Chapter, gave practical advice on intellectual property rights and legal
issues in licensing which must not be overlooked by industry players.
January 17, 2007
Hong Kong people buying
homes in the mainland are to get greater protection under a proposed new
property law.
The new law, which would strike a balance between private property and state
ownership, would strengthen the confidence and desire of Hong Kong people who
plan to purchase properties in the mainland, local National People's Congress
deputy Ip Kwok-him said Monday.
Hong Kong and Macau deputies to the NPC and the Chinese People's Political
Consultative Conference were briefed on the new law by NPC vice chairman Sheng
Huaren, who hosted a preparatory meeting in Shenzhen Monday ahead of the annual
NPC session starting in Beijing March 5.
The proposed law will be submitted to the NPC session for approval.
"Investors now only purchase the lease-out right of a property from the
government for a period of 50 or 70 years. After that, investors would be
required to return the property rights to the government," said Ip, who is also
vice chairman of the pro-Beijing Democratic Alliance for the Betterment and
Progress of Hong Kong. "But after the legislative proposal is passed, in the
same scenario, the property rights could be returned to the owner automatically
after the owner has paid a land premium to the government."
Ip believed this could offer better protection to private property owners, as it
requires all governments to compensate an owner for loss if any public
interest-based land resumption exercise is carried out. Another NPC deputy, Lau
Pui-king, who is also associate professor at Hong Kong Polytechnic University's
School of Accounting and Finance, agreed that the introduction of the property
ownership registration as included in the new bill would help safeguard the
interests of private property owners.
But she said the improvements were still not sufficient to lure more Hong Kong
people to buy mainland properties. "For instance, at present, if a potential
buyer is interested in buying a flat which is leased to a tenant, it's the
tenant who gets priority in purchasing the property. Under existing laws, the
purchasing right lies with the user, not the property owner," Lau said.
Although the new property law has gone through seven reviews since it was first
submitted to the NPC in 2002, Sheng said Monday he was confident the proposed
legislation could be passed in March. Mainland law expert Ong Yew-kim said the
new property law would be a "revolutionary move" for China, with the Communist
Party having long viewed land resources as a state-owned asset that is sacred
and inviolable.
"With all current laws and policy measures geared to protect state ownership and
its assets, this legislation would instigate a drastic change in the nature of
the mainland legal system, as all other secondary property legislation to be
drafted in future would be based on protecting the interests of private property
owners," Ong said.
He believed implementing such a law could stimulate mainlanders' desire to buy
property and create a boom in the real estate market. "Currently, many
mainlanders have already earned a lot of money, but they're reluctant to invest
in property or even deposit their money with the banks as they fear the
government would suspect the origin of their wealth and conduct an
investigation," Ong said.
"But once after the new legislation is implemented, it would offer better
protection for their private properties and assets, as they would be free to
deposit their money or buy property if they could prove the sources of their
wealth were legal."
January 10, 2007
Guangzhou: Filing of
Records Required for Lay-offs of Over 20 Employees
It has been learned from the labor and social security bureau of Guangzhou that
the Guangzhou municipal government has recently issued a set of opinions on how
to strengthen employment and re-employment.
Under the opinions, an early warning system on unemployment will be established.
Local governments at various levels will be required to draw up unemployment
warning levels and formulate contingency plans which should be activated when
unemployment reaches a dangerous level. In addition, enterprises which lay off
over 20 workers at one go should file a record of their workers' arrangement
plan with the municipal labour and social security bureau.
Enterprises which do not have a workers' arrangement plan, are unable to make
the necessary severance compensation to employees in accordance with the law or
settle all the debts owed to employees will not be allowed to lay off any
workers. Enterprises are also strictly prohibited to dismiss their workers in a
random manner to avoid creating large-scale unemployment.
Bank loans made available to enterprises employing laid-off workers
In the past, enterprises which employ laid-off female and male workers over 35
and 40 years of age respectively used to enjoy social security subsidy and post
allowance for three years. Under the latest policy, for enterprises which employ
laid-off female and male workers aged over 40 and 50 respectively, such subsidy
and allowance will be available until these workers' statutory retirement age.
For a small labour-intensive enterprise which qualifies for financing and whose
current workforce has 30% or more of its newly created positions taken up by
laid-off workers holding Re-employment Privilege Card and with whom it has
entered into labour contracts with a period of over one year, it will be
entitled to be extended a bank loan of an amount not exceeding Rmb1 million.?
National Standards for Minimum Land Price of Industrial Plot
To strengthen control and management of industrial land, the Ministry of Land
and Resources announced the National Minimum Price Standards for Transferring
Industrial Land on 27 December 2006.
The Standards stipulate that open tenders or auctions must be held for the
transfer of industrial plots across the mainland, and the base price and
transaction price must exceed the minimum price of similar plots in the same
locality.
Land is classified into 15 grades in China based on a set of assessment criteria
that take into consideration factors such as the level of social and economic
development, status of land and resources utilisation, and standard land price
of the different administrative units at prefecture and city (district) level.
The Standards also stipulate that when industrial land is transferred for a
period of time that is shorter than the maximum statutory period (of 50 years)
or in the form of leasing, the final transaction price or annual rental shall be
adjusted proportionally according to a certain capitalisation rate that would
have been applied if the plot was offered for the maximum statutory period, and
must exceed the levels as prescribed in the Standards. The new rules will take
effect on 1 January 2007.
Views Sought on Patent Law Revision
China's Patent Law will soon undergo the third round of amendments. According to
the official in charge at the State Intellectual Property Office (SIPO), the
draft of the revised version has been completed and public views are being
sought.
The proposed amendments contained in the consultation paper cover five major
areas:
First, the ownership, transfer and joint ownership of patent rights. According
to the official, the definitions of service invention-creation and non-service
invention-creation as well as the rights and responsibilities of joint patent
owners are clearly set out in the proposed draft. The procedures for
invention-creations completed in China to apply for patents overseas will also
be regulated.
Second, the criteria for granting patent for utility models. "Current
technology" is given a definition, and issues concerning the protection of
inherited resources are also addressed.
Third, the system for protecting design patent. The consultation paper outlines
six proposed changes as follows: revising the criteria for granting design
patent; expanding the scope of banned subject matters for design patent
applications; allowing joint application of associated design patents; making it
mandatory to file a brief description with a design patent application;
expanding the search and reporting system for design patent; and clearly
defining the standards for determining infringement of design patent.
Fourth, the system of compulsory licence. In the consultation paper, "patent not
exploited without reasonable grounds or patent not fully exploited" is added as
one of the justifications for seeking a compulsory licence. It is proposed that
a compulsory licence should be granted in national emergency situations such as
public health crises caused by the outbreak and spread of infectious diseases.
The proposed amendment will stipulate that drug makers in China may be
authorised to manufacture designated patented drugs and export them to
developing countries under the compulsory licence system, provided that certain
criteria are met in accordance with the new rules of the World Health
Organisation in this respect.
Fifth, protection of patent rights. It is proposed that administrative
enforcement of patent right protection should be stepped up and amendments made
to the criteria in determining infringement of patent rights. These include:
adding the doctrine of equivalents to the criteria in determining infringement
of invention or utility model patent; and adding to the criteria in determining
infringement of design patent the doctrine of estoppel and the use of current
technology as counterargument. With regard to the exceptions to the validity of
patent rights, it is proposed that parallel imports should be explicitly
permitted, the scope of patent rights more clearly defined, exception granted to
the infringement of patent rights for the purposes of research and scientific
experiment, as well as exception granted in relation to drugs and medical
equipment.
It is also proposed that the litigation validity period should be stipulated in
the event of successive infringing acts, and the delay on the part of the
patentee to exercise his rights should also be regulated.
The Patent Law of China was first implemented on 1 April 1985. Amendments were
subsequently made in 1992 and 2000 respectively.
New Environmental Certification Requirements for Furniture and
Wallpaper
The State Environmental Protection Administration (SEPA) has recently announced
a set of new technical requirements for the environmental certification of four
categories of goods, including furniture; wallpaper; ceramic, glass-ceramic and
glass dinnerware in contact with food; and shoes.
The application of international standards in the technical requirements for the
eco-labelling of furniture and wallpaper will give a boost to the improvement of
the interior environment of buildings. For furniture, the announcement of safety
indicators for the use of chemical compounds, such as paints, plastics, metal
fillers and halogenated organic flame retardants, will ensure that the products
are not harmful to users.
Following the promulgation of the new technical standards, China now has
environmental certification for 55 major categories of products, including home
appliances, office equipment, daily necessities, textiles and building
decoration materials. Products of 12,000-plus specifications produced by over
800 Chinese enterprises now bear the China eco mark. Their total output value
exceeds Rmb60 billion.
Eco mark certification will help ensure better environmental protection in
production. For example, Chinese consumers favour solid wood furniture made of
natural timber. Since China prohibits the felling of trees in natural forests,
some enterprises are importing natural timber to satisfy their production needs.
However, this practice falls short of international standards.
Today, many foreign governments require enterprises using natural timber as raw
materials to have forest certification to ensure the sustainable use of forest
resources. The new furniture standards promulgated lately specify that for
furniture with a wood content of over 10% by weight, the timber used may not
come from protected natural forests or from rare species.
New Regulations on Investment Scope for Hong Kong and Macau
Investors
The Ministry of Commerce has recently issued the Second Supplementary
Regulations to the Measures on the Administration of Foreign-invested Commercial
Enterprises, which make further provisions on the scope of investment for Hong
Kong and Macau investors. Any single Hong Kong or Macau service provider
operating a total of over 30 stores in the mainland handling such commodities as
publications, newspapers, magazines, drugs, pesticides, agricultural films,
chemical fertilisers, grain, vegetable oil, sugar and cotton of various brands
and supplied by different vendors are allowed to hold majority shares but the
equity ratio must not be over 65%. The new regulations came into force on 1
December 2006.
The new supplementary regulations are aimed at encouraging Hong Kong and Macau
companies to foster closer ties with and establish commercial enterprises in the
mainland under the provisions under CEPA III.
The new regulations apply only to Hong Kong and Macau service providers who meet
the definitions and requirements of "service providers" under CEPA for the two
SARs. In relation to other aspects of their investment in the mainland, Hong
Kong and Macau service providers are still governed by the Measures on the
Administration of Foreign-invested Commercial Enterprises.
Hong Kong Companies' Views on Customs' Management of
Enterprises by Category
The South China office of the Hong Kong Trade Development Council (HKTDC) was
commissioned by the Guangzhou customs to conduct a survey through questionnaires
and interviews on the views of Hong Kong trade associations and investors
towards the Measures of Customs on the Management of Enterprises by Category. As
the survey was carried out within a short time, the following comments do not
necessarily represent the views of all Hong Kong companies. The HKTDC will
continue to collect opinions from Hong Kong companies on the issue.
During the course of the survey, it was found that the measures are closely
related to the central government's policies on processing trade. Reportedly,
many traditional products such as plastics and textiles may be included in the
list of restricted goods in the future, this is expected to deal a severe blow
to the majority of processing trade enterprises. Further still, the government
may impose more restrictions on export trade in a bid to reduce its trade
surplus. Against this backdrop, many enterprises and trade associations have
expressed in the survey their hope that the Chinese customs can take into
account changes in processing trade policies when introducing amendments to its
system of managing enterprises by category to minimise the impact on
enterprises.
A summary of the opinions of Hong Kong trade associations and investors is as
follows:
1. Categorization of enterprises and the relevant requirements
At present, applicants for category A status are mainly large-scale enterprises,
in particular foreign trade companies with a total import and export volume
exceeding US$30 million or a total export volume exceeding US$20 million, as
well as production enterprises with total exports of their own goods exceeding
US$10 million in value. Many enterprises opine that such requirements are too
high and should be relaxed to allow more law-abiding enterprises to be included
in the category A classification to enjoy benefits in customs procedures.
Some enterprises are of the opinion that although the seven requirements for
becoming a category A enterprise look simple on the surface, meeting them in
entirety is in fact very difficult. For instance, the seventh requirement
specifies that enterprises with warehouses storing customs-supervised goods
should ensure conformity of their accounts and inventory. However, in the daily
operations of enterprises, discrepancies between accounts and inventory are
common and such a target is seldom met. If amendments are to be introduced to
the categorisation system, it is hoped that this requirement can be changed to
allow for discrepancy to be calculated based on the total value of goods.
In view of the Chinese government's frequent changes in its processing trade
policies and in order to cope with market needs, processing enterprises
processing goods under the prohibited category are considering to transform into
foreign-invested enterprises. Yet, enterprises applying for category A status
are required to be registered for more than two years. It is therefore hoped
that the authorities can consider the special circumstances of these enterprises
and take into account their processing history when evaluating their
applications for category A status.
Under the present system, enterprises will be downgraded if they have violated
customs regulations twice in a year and fined Rmb10,000 or above, or have broken
customs rules exceeding one-thousandth times of their customs declarations in
the previous year. Many enterprises feel that this requirement is too strict,
particularly for larger enterprises which have a higher chance of making
mistakes and violating customs rules given their large turnover.
For acts of violation, enterprises are now penalised in accordance with the
stipulations in Chapter 3 of the Implementation Details of the Customs of the
People's Republic of China on Administrative Penalties. Subsequent supplementary
regulations provide that the following acts of violation will not be counted in
evaluating an enterprise's categorisation: violations not related to
import-export licensing or customs duties, and violations related to
import-export licensing or customs duties but the amount fined by customs is
Rmb10,000 or below. Some enterprises reckon that further distinction should be
made between intentional and unintentional violations. In addition, enterprises
should be given a chance to explain their cases. One enterprise said that the
enterprise had once made a mistake in the declaration of goods, but it was ruled
as an act of smuggling by Customs. It was suggested that Customs should make
allowance for careless mistakes committed by enterprises and should charge them
a fine instead of considering their mistakes as "acts of violation" or
"smuggling".
Many enterprises are not familiar with the channels for seeking reviews of
Customs' rulings of their conduct as acts of violation. Some express that even
if a review system is in place, they lack the confidence in initiating a review
process. They hope that Customs can set up a proper review mechanism, including
establishing a review committee similar to the jury system in foreign countries
and comprising representatives from Customs, trade associations and enterprises.
The committee will make a final decision on whether an act is deemed violation
of regulations.
2. Supervision measures on various categories of enterprises
Some enterprises are of the view that for category A and B enterprises not
handling products on the restricted list, their benefits and preferential
treatment in customs clearance are not much different from enterprises in other
categories, with a shorter queuing time in submitting their declaration forms
being the only benefit. Besides, apart from category A enterprises, there are
also "credible enterprises" ("AA" enterprises) and enterprises on the "red list"
which seem to enjoy additional conveniences in customs clearance. To bring more
benefits and convenience to category A or even category B enterprises, it is
hoped that Customs can introduce measures to expedite Customs procedures and
raise its work efficiency.
Some enterprises see category B enterprises as equally law-abiding as their
category A counterparts and their only difference lies in their operation scale.
Hence, category B enterprises should be entitled to the same customs clearance
benefits as category A enterprises. They further note that in Guangdong, many
industrial clusters have been formed which will boost the province's market
competitiveness. Within these clusters, large enterprises are relying on the
support of small- and medium-sized enterprises (SMEs) in their operation. Any
problems encountered by the latter will also impact on the former. Thus it is
important for Customs to provide more convenience to law-abiding SMEs as well in
a bid to raise the industrial sector's overall competitiveness.
3. Customs duty deposit and different categories of processing trade enterprises
Many enterprises have expressed concern about the saying that traditional
products such as plastics and textiles will be included in the list of
restricted products. While Hong Kong companies understand the need for macro
control measures to be taken by the Chinese government to reduce its trade
surplus, they hope that such measures will not impact too much on the many
law-abiding enterprises in the mainland. Under such circumstances, Hong Kong
companies have put forward the following suggestions:
Customs should relax the requirements for applications for category A
classification, in particular in the export value required, so that more
law-abiding enterprises can be exempted from paying the customs duty deposit.
Such a suggestion is also in line with Customs' principle of "providing
convenience to law-abiding enterprises and penalising law-breakers".
As category B enterprises are also law-abiding, they should be allowed to make
"nominal" payment of customs duty deposit when importing products under the
restricted category.
Some enterprises suggest that if more goods are to be subject to customs duty
deposit in the future, the amount of the deposit should be calculated as the
difference between the export tax rebate and the taxable amount of the goods.
Many Hong Kong companies hope that the mainland branches of Hong Kong and
foreign-invested banks will be allowed to provide guarantee for their customs
duty deposit in lieu of payment. Most Hong Kong companies are now granted loans
by Hong Kong banks, and often have difficulties in finding a mainland bank to
act as guarantor since mainland banks are unfamiliar with their operations. On
the other hand, Hong Kong banks have a good understanding of Hong Kong companies
and in many cases the two have worked together for years. As foreign-invested
banks can offer full renminbi business starting from 11 December 2006,
permitting Hong Kong banks and foreign-invested banks to provide guarantee for
Hong Kong companies' customs duty deposit will certainly help ease the latter's
financing pressure.
4. Other comments and suggestions
Some enterprises point out that in their daily operation, in addition to dealing
with Customs, they have to deal with many other authorities such as taxation,
foreign exchange administration, and foreign trade and economic cooperation. It
is therefore hoped that a nationwide standardised enterprise credit system can
be built. Such a system can incorporate information on various aspects of an
enterprise's credit position, instead of merely the enterprise's performance in
imports and exports customs declaration, and should thus be able to reflect more
accurately the enterprise's creditworthiness. The system will also bring
convenience to enterprises.
It is also found in the survey that many enterprise owners are in fact
unfamiliar with Customs' system of managing enterprises by category, and it is
suggested that Customs should step up its publicity efforts to enhance
enterprise owners' understanding of its policies and regulations. The HKTDC is
ready to render its assistance in this respect.
November 7, 2006
Implementation of
Processing Trade Policy Change Postponed
According to the latest reports, China will postpone the date for the
implementation of processing trade policy adjustments to 22 November. Meanwhile,
certain raw materials which are commonly used in processing trade and were
classified under the prohibited category earlier have now been removed from this
category.
On 1 November 2006, the Ministry of Commerce, General Administration of Customs
and State Environmental Protection Administration jointly issued Public
Announcement No.82 on details of the Catalogue of Products under the Prohibited
Category in Processing Trade based on Circular No.139 [2006] issued earlier by
the Ministry of Finance and State Administration of Taxation in conjunction with
three other ministries on the expansion of the prohibited category under export
processing trade. Public Announcement No.82 will become effective on 22
November.
Under the new announcement, processing trade contracts which have been approved
by the commerce departments before 22 November 2006 are allowed to be filed with
Customs according to relevant regulations and completed within the validity
period. Meanwhile, enterprises under online supervision are allowed to complete
their processing trade contracts before 22 November 2007. Upon expiry of the
validity period, if the contracts are still not completed, no extension will be
granted and the regulations on processing trade will apply.
The newly announced Catalogue of Products under the Prohibited Category in
Processing Trade further classifies products under the prohibited category into
three sub-categories, namely "prohibited for export", "prohibited for import"
and "prohibited for import and export". It is also stated that certain products
used for deep processing transfer will not be subject to prohibition. In the new
catalogue, all products are listed clearly under 10-digit commodity codes.
Products such as raw hides and skins, zinc alloys and aluminium alloys which
were included in the prohibited category under Circulars No.139 [2006] and
No.145 [2006] issued jointly by the Ministry of Finance, State Administration of
Taxation and three other ministries earlier have now been removed from the
prohibited category in the new catalogue. However, according to Public
Announcement No.82, the regulations forbidding the import of wood, wood chips
and wood pulp under processing trade for the production of paper and paperboard
for re-export as prescribed in Public Announcement No.105 [2005] issued by the
Ministry of Commerce, General Administration of Customs and State Environmental
Protection will remain in force.
For the full text in Chinese of Public Announcement No.82 and the Catalogue of
Products under the Prohibited Category in Processing Trade, please visit the
following website at:
http://www.mofcom.gov.cn/aarticle/b/c/200611/20061103621171.html
Details in Chinese of Public Announcement No.105 [2005] can be found at the
website of MOFCOM at:
http://www.mofcom.gov.cn/aarticle/b/c/200601/20060101437412.html
October 6, 2006
EU to Impose Anti-Dumping Duties on
Leather Footwear from Chinese Mainland and Vietnam
The EU has decided to impose, with effect from 7 October 2006, definitive
anti-dumping duties of 16.5% and 10% on certain leather shoes from the Chinese
mainland and Vietnam respectively. While these definitive duties are lower than
the provisional rates of 19.4% for the mainland and 16.8% for Vietnam, and the
measures are also set to expire after two years instead of the usual five years,
children's shoes, which are exempted from the provisional measures, are included
in the definitive measures.
It should be noted that, all Hong Kong companies which engage in exporting the
concerned Chinese mainland/Vietnam-origin footwear to the EU will be affected by
these definitive anti-dumping measures. According to the EU's rules, any
anti-dumping measures will be applied to the concerned products originating in
the Chinese mainland and Vietnam, regardless of the origin of the companies that
produce or export the products (unless exemption is granted).
Aug 28, 2006
Electricity Bill Now Includes Renewable
Energy Surcharge
As disclosed by an official from the State Development and Reform Commission (SDRC),
the central government has started collecting a surcharge of Rmb0.001per kwh in
support of the renewable energy development programme. This surcharge is already
included in the electricity tariff increase by an average of Rmb0.025 per kwh
announced on 30 June this year.
China's Renewable Energy Law took effect on 1 January this year. Developing
renewable energy is an important means to increase energy supply, improve the
energy structure, ensure energy security, protect the environment and achieve
sustainable economic and social development. It is also the obligation of the
whole society. Due to technical reasons and other factors, it is generally more
expensive to generate electricity using renewable energy than conventional
energy. As such, in the early stage of development of renewable energy, it is a
general practice in most countries to resort to fiscal, tax and price policies
to promote its development. China's Renewable Energy Law stipulates that the
costs for generating electricity using renewable energy over and above those for
using conventional energy should be shared by all users. Accordingly, Rmb0.001
per kwh is levied as renewable energy surcharge in the recent electricity tariff
adjustment.
Under the Medium- and Long-Term Plan for the Development of Renewable Energy
formulated by SDRC, China will strive to raise the share of renewable energy in
the supply of primary energy to 15% from the present level of 7%, and bring the
installed capacity of renewable energy to over 30% of the national total
installed capacity by 2020.
Aug 22, 2006
Three Types of FIEs Entitled to Tax Rebate
in Buying Domestic Equipment
The State Administration of Taxation and the National Development and Reform
Commission (NDRC) announced recently that three types of foreign-invested
enterprises (FIEs) will be entitled to VAT rebate in buying
domestically-produced equipment. They are FIEs which are general VAT taxpayers,
FIEs engaged in transport and general residential development projects, and
Sino-foreign joint ventures engaged in offshore oil prospecting and exploration.
The Trial Measures for the Administration of Tax Rebate for the Purchase of
Domestically-Produced Equipment in Foreign Investment Projects came into force
on 1 July 2006. However, FIEs under the expanded scope for VAT deductions are
not entitled to VAT rebate for purchasing domestically-made equipment within
their total investment limit.
Under the measures, for FIEs buying domestically-made equipment for own use
through their subsidiary company or factory, tax rebate applications should be
lodged by the subsidiary with the local tax authorities. For Sino-foreign oil
and gas field projects exploring offshore oil resources, tax rebate applications
should be made by the individual, organisation or subsidiary company operating
the project.
In addition, the measures specify that foreign investment projects under the
encouraged category in the Catalogue for the Guidance of Foreign Investment
Industries and foreign investment projects in the Catalogue for Priority
Industries for Foreign Investment in Central and Western Regions can enjoy VAT
rebate in buying domestically-made equipment. However, if the
domestically-produced equipment purchased by the encouraged foreign investment
projects falls within the Catalogue of Commodities Imported by Foreign
Investment Projects Not Subject to Tax Exemption, tax rebate will not be
granted.
For projects approved prior to the measures took effect but whose tax rebate
applications have not yet been made, application should be made to NDRC for
confirmation of the project and the list of domestically-produced equipment
purchased before applying for tax rebate in accordance with the relevant
regulations.
July 31, 2006
Preferential Measure for
Labor-intensive Small Enterprises
Financing has long been a major hurdle for small and medium sized enterprises (SMEs).
Recently, the People's Bank of China, Ministry of Finance, and Ministry of Labor
and Social Security (MOLSS) have jointly issued a circular on further promoting
small-amount guaranteed loans to small enterprise hiring laid-off workers. Banks
are encouraged to give greater support to small, labour-intensive enterprises
which qualify for financing and whose workforce has a certain ratio of newly
created positions taken up by laid-off workers. This measure also represents a
financing channel for Hong Kong-invested companies operating in the mainland.
A small, labor-intensive enterprise whose current workforce consists of 30% or
more newly hired laid-off workers with whom it has entered into labor contracts
with a minimum period of one year may apply in writing to MOLSS for
certification to that effect prior to lodging a loan application at banks. MOLSS
will screen the application and submit it to the finance department for
verification. Small enterprises engaging in the following operations are
excluded from this preferential treatment: advertising, sauna, massage, cyber
cafe, oxygen bar, and other sectors not encouraged by the state industrial
policy.
An enterprise applying for certification with MOLSS should submit the following
documents: 1) copy of business license; 2) copy of tax registration certificate;
3) "Re-employment Privilege Card" of laid-off workers; 4) staff name list (duly
affixed with company chop); 5) copy of labour contracts signed with laid-off
workers; 6) record of social insurance premium payment for workers; 7) payroll
record; 8) other information as requested by labor and social security and
finance departments.
Commercial banks should process applications based on the number of laid-off
workers hired by a qualified applicant and extend a loan with an amount not
exceeding Rmb1 million and for a period of no more than two years. Upon request
by the applicant and provided that conditions for loan extension are met, the
bank may extend the loan once and for a duration of no more than one year.
July 12, 2006
Proposed Changes to U.S.
Export Control Regulations Applying to U.S.-China Trade
The U.S. Department of Commerce's Bureau of Industry and Security (“BIS”) has
published a proposed rule amending export and re-export controls for the
People's Republic of China (“China”). BIS is responsible for administering U.S.
export control laws regarding so-called "dual-use" items, which are items with
both commercial and military applications. This long-anticipated proposed rule
may significantly affect companies that export or re-export U.S. -origin goods,
software and technology to China.
There are three components to the new rule:
Military End-Use Control: The proposed rule would establish a new control policy
based on an exporter's knowledge of a military end-use for certain dual-use
items. Specifically, the proposed rule would impose a new licensing requirement
for certain items controlled on the Commerce Control List (“CCL”), but which do
not currently require a license for export to China, if the exporter has
knowledge, or reason to know, that such items are destined for a military
end-use in China. (This would principally affect certain items that are
currently controlled only for anti-terrorism reasons.) The proposed rule defines
“military end-use” as "incorporation into, or use for the production, design,
development, maintenance, operation, installation, or deployment, repair,
overhaul, or refurbishing of items" listed on the U.S. Munitions List, the
International Munitions List, or covered by Export Control Classification
Numbers ending in “A018” on the CCL. Exporters seeking licenses for items to be
used for a military end-use in China will need to explain why the proposed
export should be approved despite U.S. concerns about the capabilities of the
Chinese military. In a recent speech on U.S.-China high-technology trade, U.S.
Commerce Department Under-Secretary for Industry and Security David McCormick
defended the proposed measure, stating that the rule: “is not a wide-ranging
'catch-all regulation' that subjects everything from fountain pens to office
furniture to government scrutiny. Rather, these changes carefully target certain
technologies that, while unrestricted until now, have the potential to
materially enhance China's military capabilities.”
Validated End-User Authorization: The proposed rule creates a new authorization
for validated end-users located in certain destinations, including China, to
whom controlled items may be exported license-free. This program will permit
expedited shipments to a published list of end-users that have been vetted and
determined to have no ties to the Chinese military or other activities of
concern (for example, nuclear proliferation). Under-Secretary McCormick extolled
the benefits of this program: “U.S. exporters seeking to grow market share in
critical sectors such as semiconductor equipment and electronics will be spared
the need to apply for licenses for potentially hundreds of millions of dollars
worth of sales to these companies in China.”
Expanded End-User Certificate Requirements: BIS proposes to expand the
requirement that exporters obtain an End-User Certificate from the Chinese
Ministry of Commerce ("MOFCOM") for items that both require a license to China
for any reason and exceed a total value of $5,000. Currently, only items
controlled for national security purposes require such certificates.
The impact of the proposed rule (once adopted) will depend on the nature of a
company's products and its customers. A copy of the proposed rule is attached.
[PDF] Any interested party may submit comments to BIS regarding these proposed
revisions of U.S. export and re-export controls to China by November 3, 2006.
Following its consideration of the comments, BIS will publish a final rule.
July 7, 2006
China Clarifies Pre-Tax
Deductions for Four Funds
The Ministry of Finance and the State Administration of Taxation have recently
issued a joint circular to clarify questions regarding pre-tax deductions for
individual income tax on the so-called "four funds", namely, basic pension
insurance, basic medical insurance, unemployment insurance and housing provident
fund.
In the case of pension insurance, basic medical insurance and unemployment
insurance, basic premiums actually paid by enterprises and institutions in
accordance with the percentage or method of payment prescribed by the central,
provincial, autonomous region or municipal government are exempt from individual
income tax. Basic premiums paid by individuals in accordance with the percentage
or method of payment prescribed by the central, provincial, autonomous region or
municipal government may be deducted from individual income tax. For the portion
of premium paid by enterprises, institutions and individuals over and above the
prescribed percentage and standards, it will be included in the individual¡¦s
current salary income subject to individual income tax.
In the case of housing provident fund, the actual amount contributed by both the
employing unit and the individual, which must be less than 12% of the average
monthly income of the individual employee in the previous year, is deductible
from the taxable income of the individual. The average monthly income based on
which the housing provident fund is paid by the employing unit and the
individual may not exceed three times the previous year¡¦s average monthly wage
standard set by the city where the employee works. For the portion of housing
provident fund contributions paid by the employing unit and the individual over
and above the prescribed percentage and standards, it will be included in the
individual¡¦s current salary income subject to individual income tax.
All sums of money actually received by the individual from the "four funds"
already drawn are exempt from individual income tax.
For localities which have raised the pre-tax deduction standards for the
above-mentioned insurance premiums and housing provident fund without
authorization, the circular stipulates that financial and tax organs must
resolutely rectify these practices.
July 4, 2006
China Soon to Allow Limited
Liability Partnerships - HKTDC
China is currently reviewing the draft of the revised Partnership Enterprise
Law, marking the first round of revisions since the law was promulgated in 1997
and covering new rules on doing business in China in the form of partnership.
Currently, Hong Kong companies are prohibited from establishing
independently-run operations and must team up with mainland partners in certain
business sectors (especially key industries). Hence, Hong Kong companies should
take note of these imminent changes.
According to Zhu Shaoping, director of the National People's Congress financial
and economic committee bills office, the present round of revisions submitted
for deliberation primarily contains changes in the following areas: two new
forms of partnership, namely limited partnership (LP) and limited liability
partnership (LLP) are introduced, and legal persons can take part in
partnerships.
According to Zhu, the existing Partnership Enterprise Law was formulated at a
time when the planned economy was shifting gear to the market economy and
partnership was only narrowly defined as general partnership. As time changes,
the old law can no longer cope with the current needs for building an innovative
nation and promoting private investment. One of the major considerations for
revising the Partnership Enterprise Law is to introduce LP as a new enterprise
form, paving the way for attracting venture capital and promoting the input of
technology and innovation.
An LP is a form of enterprise that allows partners assuming limited liability to
join on the basis of one or more partners assuming unlimited liability.
This type of partnership has several advantages. First, as a partnership
enterprise, no corporate income tax has to be paid and the investors concerned
will not be subject to double taxation. Second, investment risk can be reduced
as some of the investors and investing institutions concerned may assume limited
liability. For those partners who assume unlimited liability, this type of
partnership offers the capital enlargement effect as they may raise a massive
amount of capital based on a relatively small sum backed by good reputation. In
other words, it offers the benefits of low operating cost and high efficiency.
LP is an internationally adopted form of enterprise especially suited to
investment in the form of venture capital. Partners with limited liability are
usually the major venture capital contributors. They only assume limited
liability for their share of capital and are not involved in the management and
operation of the venture capital funds. Meanwhile, general partners are
responsible for managing the venture capital. They are entrusted with the
management of the partnership enterprise because of their higher management
capability. They may make a smaller capital contribution but assume unlimited
liability. The parties concerned enter into an agreement which clearly sets out
the contractual rights and obligations of the respective parties. As a form of
enterprise, LP offers various advantages over limited company for venture
capital investments, including the operation scale of the capital, the level of
professionalism in investing, and the cost of management.
In fact, the issue of LP was discussed during the legislative process of the
existing Partnership Enterprise Law. In the year following the formulation of
the Partnership Enterprise Law, a group spearheaded by the chairman of China
Democratic National Construction Association Cheng Siwei tabled a proposal at
the CPPCC (Chinese People's Political Consultative Conference) annual meeting to
promote venture capital with full force.
Subsequently, some local authorities experimented with venture capital
investment in the form of LP but limited progress was made because LP was not
covered in the law.
According to Zhu, more than 250 venture capital firms are currently operating in
China involving over Rmb50 billion worth of venture capital funds. These funds
are being invested in 3,000-4,000 projects where the investment amount accounts
for about one-third of the total capitalization. The relatively low ratio is
attributable to the absence of free flow of capital into and out of China.
Although the introduction of LP is the right move, law professor Gan Peizhong of
Peking University who participated in drafting the existing Partnership
Enterprise Law cautioned that, "LP also involves high risks because partners
with limited liability are not involved in management and they have to take into
consideration the credentials and trustworthiness of their partners with
unlimited liability, as well as supervision and control over them".
"Legal persons participating in partnerships is an issue that warrants
prudence," said Gan. This is because legal person shareholders cannot exert
control over partners with unlimited liability, and in-between there is also the
presence of the management staff of the legal person. Hence, in many countries
and regions the law will require the consent of all or the majority of
shareholders for admitting legal person partners.
While the existing Partnership Enterprise Law consists of 78 articles under nine
chapters, the revised draft law adds 26 new articles, deletes two articles and
combines four articles to form 11 chapters with a total of 100 articles. Major
revisions include:
1) The draft contains a new chapter on "Special Provisions on Limited
Partnership" which sets out the rights and obligations of the partners with
limited liability, how the affairs of the limited partnership are to be managed,
as well as special rules governing limited partnership as opposed to general
partnership.
2) The draft also contains a new chapter on "Special Provisions on Limited
Liability Partnership" which covers the definition of limited liability
partnership, the responsibilities of professional services providers, and the
professional risk fund etc.
3) The draft provides for the participation of legal persons in partnerships.
Wholly state-owned enterprises and listed companies should participate in
partnerships via their subsidiaries or other holding companies.
China's First Food Recall
Rule to Take Effect in Shanghai in August - HKTDC
Starting from 1 August, "problematic food" will be recalled in Shanghai.
According to the Shanghai food and drug administration, food manufacturers are
required to recall within 72 hours food products that have already caused, or
there is evidence they may cause, serious health hazard or even death. The
manufacturer concerned must also report the progress of the recall to the
Shanghai food and drug administration once every 24 hours. If the manufacturer
concerned does not recall the problematic food voluntarily, the government will
issue a recall order and seal up the problematic food if the manufacturer still
refuses to take any action.
Before, Shanghai would only punish the food manufacturer after a food hazard
incident had occurred. Now the new food recall rule puts people¡¦s health first
by recalling problematic food once it is found.
In future, there will be unified standards for defining problematic food, which
is classified into three levels:
Level 1 problematic food products refer to those that have already caused, or
there is evidence they may cause, serious health hazard or even death.
Level 2 problematic food products are those that have caused or may cause
temporary health hazard but the hazard is curable, or food products that are
less likely to lead to serious health hazard.
Level 3 problematic food products are those that do not cause obvious health
hazard after eating.
Relevant recall measures will be taken according to the seriousness of the
problem. There are two major categories of problematic food. One is food items
that fail to conform to national standards; the other is food items with no
unified standards for the time being, such as Sudan Red, but may pose health
hazard and need risk evaluation by experts.
Under the new regulation, a food manufacturer should voluntarily recall its
products upon discovering through self-examination or through reports or
complaints by distributors or consumers that the food products pose safety
hazard. At the same time, the food manufacturer should report to the government
department concerned, draw up a recall plan, promptly notify consumers, and
recall the products from the market and from consumers. The whole recall process
will be monitored by the government department concerned. If it is discovered
that the food manufacturer fails to make a voluntary recall, a recall order will
be issued by the government department concerned.
The food and drug administration will only mete out lenient punishment if an
enterprise voluntarily recalls its problematic products and the recall is
effectively implemented. Otherwise it will be subject to severe administrative
penalty whereby the problematic products will be sealed up and its food
production licence may be quashed.
After the issuance of a Level 2 recall order, the food manufacturer should also
announce the recall notice to the public and recall its products from all
consumers. The recall must be completed within seven days, and the progress of
the recall should be reported to the food and drug administration once every
three days.
Once the "Red Alert" for Level 1 problematic food recall is raised, the Shanghai
food and drug administration will announce to the public details of the problem,
emergency measures to be taken to avoid hazards, as well as other relevant
information. The manufacturer will issue a recall notice and have the products
recalled from consumers and users. The recall must be completed within 72 hours
and the manufacturer must report the progress of the recall to the food and drug
administration once every 24 hours.
For Level 3 problematic food products, the recall may be extended to wholesalers
or retailers if necessary.
June 30, 2006
CEPA 4 lift for some -
Mark Lee and Carrie Chan
More Hong Kong service companies, from law firms to travel agents, stand to
benefit from improved mainland market access from next year, after the central
government and the SAR administration agreed on new enhancements to the Closer
Economic Partnership Agreement. But Hong Kong bankers were particularly
disappointed as there was an unexpected delay in plans to set up a trading
center for yuan-denominated bonds in the city.
The latest installment of CEPA, dubbed CEPA 4, signed here Thursday under the
gaze of visiting Chinese People's Political Consultative Conference chairman Jia
Qinglin, contained concessions for 10 service industries, including the
important legal, construction and tourism sectors.
The service industry focus of CEPA 4 means it is expected to do more for the
city's economy than the previous agreement last October, CEPA 3, which was more
geared to manufacturers.
Under CEPA 3, import duties on all Hong Kong-produced goods were waived.
"CEPA 4 will improve the competitiveness of many Hong Kong service firms as they
expand in China," said Ruby Zhu Dan, China economist at the Hong Kong General
Chamber of Commerce.
"In the future, China will be forced to offer other foreign service firms access
to the mainland market under World Trade Organization rules.
"But CEPA 4 goes much further and will give Hong Kong firms a considerable
advantage."
As a sign of the dwindling importance of Hong Kong's manufacturing base, the
city's companies had only been able to claim duty-free access to the mainland
market on just HK$4.8 billion worth of goods since CEPA 1 was unveiled in 2004 -
a fragment of Hong Kong's HK$1.382-trillion-a-year economy.
Under CEPA 4, Hong Kong lawyers qualified to practice in the mainland will be
allowed to represent clients in marriage and succession-related lawsuits, and
barristers will be permitted to act as agents in mainland civil cases.
Hong Kong travel agents will be able to take advantage of the rapidly growing
mainland tourism market by setting up wholly owned entities in Guangdong
province to operate tours to Hong Kong and Macau.
SAR construction firms will be able to set up wholly owned consulting firms in
the mainland.
CEPA 4 was also expected to contain provisions for new yuan businesses for Hong
Kong banks and financial firms. Hopes were raised by remarks last week from
Premier Wen Jiabao, who said the central government is mulling plans to set up
an offshore yuan bond trading center in Hong Kong, and allowing companies here
to pay for imports from the mainland in yuan.
"It is clear that there are problematic foreign exchange issues to sort out
before the new yuan businesses can be launched," said Bank of East Asia chief
economist Paul Tang. Beijing is wary that offshore yuan bonds may be exploited
by foreign investors betting on yuan appreciation, he said.
June 23, 2006
First Set of Service
Standards for Shoes and Bags Take Effect in July 2006
The first set of local standards for commodity services relating to shoes and
bags will go into force in Guangdong on 1 July. The new standards will provide a
norm for services in the sale of shoes and bags in the province. Consumers will
have something to go by if they wish to make complaints about the quality of
these commodities.
According to the standards, shoes and bags on sale in the market are subject to
their corresponding product standards. Products without indication of the name
of manufacturer, address of manufacturer or relevant standard code will be
regarded as "non-compliant" products. Business operators must strictly adhere to
the system of marking prices clearly and provide a minimum of 30 days of
after-sale service.
The new standards set out detailed provisions governing returns and
compensations with regard to the sale of shoes and bags. Consumers buying shoes
may ask the shop for full refund if the sole of the shoes comes off or breaks,
the colour coating of the shoes peels off or cracks, or other serious problems
occur under normal wear and tear within seven days of purchase. They may also
return the shoes for repairs in the event of the serious problems mentioned
above or minor problems such as broken threads, detached glue, dislocated
accessories, broken laces or loose lining. If the shoes are beyond repair or
cannot be used after repair, they can ask for replacement within the after-sale
service period.
Consumers buying bags and luggage may demand the shop for full refund within
seven days of purchase if problems such as cracks, discoloring, defective zipper
or defective number lock occur. They may also return the bag or luggage to the
shop for repairs in the event of the serious problems mentioned above or minor
problems such as coating peel-off, sticky edges or dislocated accessories. If
the bag or luggage is beyond repair or cannot be used after repair, they can ask
for replacement within the after-sale service period.
The consumer may ask for full refund if the same problem recurs after the goods
are being repaired or replaced twice within the after-sale service period.
The new standards will apply to shoes, backpacks, luggage, wallets, belts and
leather gloves sold within the administrative region of Guangdong but do not
cover shoes and bags for medical and military use.
June 21, 2006
Nationwide Law Enforcement
Campaign in Cultural Market
The Ministry of Culture will launch a nationwide campaign named "intensive law
enforcement season" in the cultural market from 1 July through 30 September to
strengthen supervision over law enforcement and tackle serious problems in the
market.
According to an official of the Ministry of Culture, the campaign aims to check
the market everyday and standardise law enforcement. Local departments of
cultural administration will formulate their own work plans and set their
priorities in the light of their actual situation and step up inspection of
business venues in the cultural market in order to achieve better market order.
The campaign has two priorities. First, major efforts will be made to check
venues such as cyber cafes, video game parlours and karaokes to see if they are
letting minors into their establishments against regulations during the summer
holiday season. Second, in conjunction with "Operation Sunshine II" in the
audiovisual market, efforts will be made to crack down on the sale of pirated
audiovisual products at legal wholesale, retail and retail outlets.
Local departments of cultural administration will make public all illegal
practices uncovered and accept supervision from members of the public. The
cultural market department of the Ministry of Culture will open a special column
on its China Cultural Market website to keep the whole country informed.
The Ministry of Culture has also opened a telephone hotline for people to report
market offences. Cultural departments are asked to put up posters for the
hotline in conspicuous positions in business venues concerned. They must
promptly act on reports and complaints made by the public and announce the
actions taken.
June 9, 2006
US retailers expect textile
trade restraint after 2009
US apparel manufacturers and importers are watching from different standpoints
at the likelyhood of the new era of free trade come 2009, when temporary quota
on 34 categories of China-made apparel and textiles goods expire and cannot be
renewed.
Some apparel executives are warning that 2009 may, in fact, not see the trade
barriers lifted but given new strength. Gary Ross, corporate vice president for
global manufacturing and sourcing at apparel company Liz Claibourne Inc
reportedly believes that safeguards will continue after 2009, but probably in
some other form.
The US$4.8 billion fashion company that produces for labels such as Ellen Tracy,
Dana Buchman and Lucky Brand Jeans expects anti-dumping duties, higher tariffs
and product-specific safeguards to remain up to 2013. "Quotas are a hard habit
to break," is the comment from Brian Murphy, a Los Angeles attorney specialising
in customs regulations, in an interview with the California Apparel News
publication.
Murphy is reported to have lived in Hong Kong and is well acquainted with the
Chinese mainland apparel industry. US domestic producers are said to be capable
of tightening free trade definitions on the import market, with textile industry
lobbyists studying alternatives for maintaining barriers on China-made clothes
and fabrics that they fear could overwhelm the US domestic market. One of the
most influential groupings is the American Manufacturing Trade Action Coalition
(AMTAC) in Washington, which has pressed the US government to parlay the recent
round of clothing and textile safeguard measures.
Such measures have been the most common form used for curbing Chinese originated
products since global quota expired in 2005. China agreed to safeguard measures
as a means of curbing damaging export practices in the lead up to joining the
WTO in late 2001, but some officials believe the measures are being used to
protect industries that have not adapted to the cheaper supply chain of the post
2005 era. Currently, 34 categories of clothing, from cotton trousers to
sweaters, are "under safeguard" with the Committee for the Implementation of
Textile Agreements (CITA), under petition from aggrieved US bodies.
Late in 2005, CITA decided that safeguard measures would be imposed on the 34
categories until December 2008, while the EU invoked similar measures that are
due to expire by the end of 2007. While safeguards measures (as currently
conceived) cannot be lodged with CITA from 2009, "product-specific safeguards"
can be invoked up to 2013, according to experts. Although theoretically more
difficult to be approved, these can be implemented by the International Trade
Commission (ITC), which is composed of three Republicans and three Democrats
appointed by the US president and confirmed by the senate.
The last time the ITC approved a product-specific safeguard measure was in 2002
for steel imports, which were lifted in 2003. Anti-dumping provisions could also
curb Chinese imports if the prices of goods can be shown to be less than those
offered by domestic producers for the same items. The ITC can determine whether
anti-dumping duties should be imposed on the imported goods. Anti-dumping duties
can be particularly harmful for importers, as they are more unpredictable,
according to attorney Murphy.
Importers can receive additional bills long after goods have been delivered to
the customer because these duties may have been fully determined when the goods
were shipped.
Standardized Use of Drug
Names Required for Advertising from June 2006
According to a circular recently issued by the State Food and Drug
Administration, local drug administrations must tighten control over drug
advertising by requiring the use of standardized names.
The circular pointed out that the commercial name of drugs may not be used on
its own in advertising. In print ads and TV commercials, the use of commercial
names must be accompanied by their generic names. While unregistered trademarks
may not be used in advertising, registered trademarks may not be used instead of
drug names (except for textual trademarks approved to be used as commercial
names). When the registered trademark of a drug appears in an ad, the generic
name of the drug must also be used.
In print ads and TV commercials for drugs, the size of the characters in the
commercial name may not be bigger than half the size of the characters in its
generic name. The characters and color of the generic name must be clearly
recognizable. For textual trademark, the size of the characters may not be
bigger than a quarter of the size of the characters in its generic name.
The circular became effective on 1 June 2006. Drug advertisements which have
already obtained approval codes may continue to be released until the approval
expires.
June 4, 2006
New Road and River Freight
Invoice to be Used After 1 August
According to the State Administration of Taxation, China will start using the
new Road and River Freight Consolidated Invoice on 1 August 2006. The use of
this new freight invoice issued by tax registers aims to strengthen the
administration of tax collection in the road and river freight sector. The old
Freight Invoice and Consolidated Invoice for National Through Freight will no
longer be used from the same date.
All units and individuals that provide road and river transport services within
the Chinese mainland must issue the new freight invoice for the settlement and
collection of their freightage.
The new freight invoice will come in two forms, namely taxpayer-issued invoices
and tax agent-issued invoices, depending on the issuer. Taxpayer-issued invoices
are purchased and issued by taxpayers, while agent-issued invoices are purchased
and issued by tax departments or their designated organs. Taxpayers in the road
and river through freight business may purchase and use the new freight invoice.
The State Administration of Taxation stipulates that the new freight invoices
must be computer-printed by tax registers. Hand-written invoices will not be
accepted.
Individually-Owned
Businesses May Now Register Locally
The State Administration for Industry and Commerce issued a set of opinions on
the administration of decentralising the registration of individually-owned
businesses in April this year, allowing individually-owned businesses to
register at the local industry and commerce administration offices from now on.
According to the opinions, industry and commerce administration bureaus at city
level may designate qualified local industry and commerce offices to handle and
approve the establishment and the alteration and cancellation of registration of
individually-owned businesses.
Industry and commerce administration bureaus at city level must report their
designation to the industry and commerce administration authorities at the next
higher level for the record. Designated industry and commerce administration
offices should publicly display at their offices the rules, scope, conditions
and procedures of registration, list of materials to be submitted, and standards
and basis of charges in respect of the registration of individually-owned
businesses. Applicants that submit all the required materials in the correct
format will be registered immediately. There is no need to issue acceptance
notice and registration notice to those that are registered and issued business
licenses on the spot.
Unilateral Taxation for
Hong Kong Residents in China in 2007
The arrangement for avoidance of double taxation between Hong Kong and the
Chinese mainland will be implemented in the 2007/08 financial year at the
soonest. According to Commissioner of Inland Revenue of HKSAR, Mrs Lau Mak Yee-ming,
the Arrangement between the Mainland of China and the HKSAR for Avoidance of
Double Taxation clearly sets out where tax will be paid for a Hong Kong resident
taking up employment or deriving income from indirect investments such as share
dividend, interest and royalty fee on the mainland. Under this arrangement,
double taxation can be avoided. The new measure will help attract more foreign
direct investment to establish companies in Hong Kong and make use of the Hong
Kong platform to enter the mainland market or go global.
Mrs Lau said the governments of both sides had in the past focused primarily on
direct taxes. The new arrangement initialled in mid-April is more encompassing.
In particular, it clarifies certain grey areas such as the tax liabilities of
Hong Kong residents who earn salary or derive income from indirect investments
on the mainland. The arrangement specifies which side (mainland or Hong Kong)
has the right to collect tax under different circumstances, as well as the tax
liabilities of the individual versus the company, so as to avoid taxation by
both sides or by neither side. This will provide more comprehensive protection
to Hong Kong residents working or investing in the mainland, as well as
mainlanders investing in Hong Kong.
It is understood that many Hong Kong residents are being employed to work on the
mainland nowadays. If a Hong Kong resident works more than 180 days a year on
the mainland, he or she is liable for paying tax to the mainland authorities and
is hence subject to double taxation. Many professionals and management
executives considering working in the mainland are put off by this provision.
Some Hong Kong companies with operations on the mainland agree to pay the
mainland taxes for their Hong Kong employees in order to attract them to work
across the boundary. This has in turn increased the investment cost of the
company concerned. After the arrangement takes effect, Hong Kong residents
working in the mainland will be entitled to the tax treatment stipulated
therein. Implementation details will be announced after the governments of the
two sides have signed the official documents.
May 9, 2006
China to Announce Six
Measures to Tighten Imported Waste Management
According to Ge Zhirong, deputy director of the State Administration of
Quality Supervision, Inspection and Quarantine, six measures will be adopted to
improve supervision and control over the import of substandard waste materials
and eliminate potential environmental risks.
Ge made this announcement at the inauguration of the renewable materials branch
of the China Entry-Exit Inspection and Quarantine Association.
The six measures include:
1. Amend the current regulations on the management of imported wastes as soon as
possible; formulate measures for the inspection and quarantine of imported
wastes; and implement departmental regulations governing the registration of
suppliers, pre-shipment inspection overseas, inspection and quarantine at port
of entry, and follow-up inspections.
2. Fully enforce the newly amended national standard on environmental control,
namely GB16487.1-13 2005, for the import of solid wastes to be used as
materials.
3. Strengthen internal management and enhance supervision and inspection.
4. Further strengthen cooperation with other countries in cracking down on the
cross-border transfer of rubbish and dangerous wastes.
5. Register all receivers of imported wastes in accordance with relevant laws
and regulations.
6. Further foster and bring into play the role of intermediaries in the imported
waste inspection and quarantine business.
According to official figures, the Chinese inspection and quarantine authorities
recorded the import of 326,600 shipments of waste materials worth US$11.5
billion in 2005. Among them are 5,039 shipments of substandard wastes with a
combined weight of 1.21 million tones and a total value of US$209 million.
Do not blame China for job
losses in the US - By Guo Di, he author is a
Beijing-based economics researcher.
Many Americans, influenced by US media, believe that their jobs are being stolen
by competitors from China. This opinion, which is widely bought by workers in
manufacturing sectors, has great influence on the US Government.
In view of this, it is necessary to analyze the employment situation in the
United States.
The transfer of traditional industries overseas constitutes one of the major
reasons for job loss in the United States.
Expensive US labor costs have led to the shifting of primary manufacturing
industries to other countries where the price of labor is much lower.
The core competitive edge of the US economy lies in technological innovation,
service industries and high-tech manufacturing. Transferring traditional
industries overseas helps the country focus on developing the industries in
which it enjoys advantages over other economies. This strategy can enhance its
international competitive power as much as possible and also brings fat profits
to US companies. But workers in sectors that have become hollowed out have to
look elsewhere for employment, and this is a major problem. When their old
skills fail to meet the requirements of new posts, they face unemployment.
On the other hand, China is not the only country affected in this kind of
industrial transfer. The bulk of Chinese exports to the United States are
labor-intensive products. If China stopped exporting such products to the United
States, the Western nation would not engage in making these goods anyway. And
other countries would fill the vacancy.
Scientific and technological progress and the increase of productivity have
robbed many Americans of their jobs.
Since the beginning of the 1990s, US companies have invested heavily in IT,
automation and artificial intelligence technologies, which have helped raise the
productivity by large margins. But wide application of new technologies and the
sharp enhancement of productivity have led to job redundancies. Of course, there
is still a huge demand for workers in newly emerging sectors. But the posts
created by these new industries are less than the jobs lost in traditional
sectors. This renders the employment pressure all the more serious. In addition
to those in traditional sectors, many US high-tech workers have also lost their
jobs recently as a result of the bubble burst of high-tech shares on the stock
market.
Worst of all, US high-tech firms, big and small, compete with each other to
transfer IT-related jobs to countries such as India, where the pay and welfare
level are much lower than those in the United States. They do this in order to
cut costs to the minimum and reap the highest possible profits. This again costs
many Americans their jobs. Statistics indicate that about 300,000
computer-programming jobs have so far been transferred from the United States to
India. And the tendency looks likely to continue.
At the same time, some financial institutions on Wall Street, following the
examples of the high-tech companies, have also shifted some high-salary monetary
analytical posts to India. US research firm ForrestResearch predicts that about
3.3 million US white-collar jobs in service industries will be transferred to
lower-wage countries, chiefly India, by 2018. This is bound to give rise to more
serious problems.
The situation is compounded by the fact that many Americans find it difficult to
adapt to new posts once the sectors where they are working decline, owing to
their inability to keep up with the changing times, or to their low educational
or training levels. Many employment opportunities are therefore missed. Job
hunters have been subjected to higher education requirements because the United
States is shifting from a manufacturing-orientated economy to a knowledge-based
economy over the last decade or so.
The figures released by the US Labor Department show that the unemployment rate
for those who received education below senior high was 6.5 per cent in November
2000 but rose to 9.2 per cent in January 2003. Many unemployed people with low
education levels are unwilling or unable to learn new skills, while keeping
their job expectations high and hoping to get posts in their old sectors with
generous pay.
In the meantime, the US economy is suffering, which drags down the US public's
consumption confidence and their consuming power as well. This necessarily
results in weak domestic demand, and 70 per cent of the US economic growth is
powered by demand.
Insufficient domestic demand makes it hard for the US economy to recover. This,
in turn, worsens the employment situation. Rising unemployment renders
consumption all the weaker. A vicious cycle is triggered.
Recent statistics, however, suggest that the US economy shows signs of recovery.
It is believed that the employment situation will take a turn for the better if
the recovery maintains its momentum.
Taking all this into account, the blame on China for robbing Americans of
jobs is unfounded.
Some Americans see only the transfer of funds, technology and employment
opportunities to China but turn a blind eye to the fact that good and cheap
Chinese consumer goods lower Americans' consumption costs. They also forget that
the US-headquartered multinational corporations are the biggest beneficiaries of
the industrial transfer.
They should realize that the unemployment problem is the necessary consequence
of economic globalization and that the problem signifies a necessary phase
through which the US economy is undergoing.
April 26, 2006
China welcomes foreign
cooperation on press and publication
China encourages foreign media, press and publication groups to cooperate with
China to tap the international cultural market potential for common prosperity
and bring China's cultural products to the world.
Liu Binjie, Vice Minister of the General Administration of Press and Publication
made the remarks when answering questions by foreign journalists in Beijing.
Liu Binjie said China has honored its WTO commitments on opening its publishing
market and Chinese laws and regulations have clearly framed the sectors that are
accessible to overseas investors.
He reiterated the rule of prohibiting non-Chinese mainland citizens from setting
up press and publication entities within the Chinese territory. But he said that
does not rule out cooperation with overseas press and publication industry.
Foreign publications can come to Chinese market - As long as approved by the
Chinese government, foreign and overseas media groups and organizations of press
and publication can establish offices in China and arrange interviews and
business activities.
There are three ways for overseas newspapers, journals, books and audio & visual
products to get into China legally. The first is through relevant Chinese
imports and exports companies. China has imported a large number of such
products in recent years. The second is subscription. Any Chinese or foreign
units or individuals in China can subscribe freely any publications legally
published in any country. Copyright cooperation also have brought many
newspapers and journals into China.
Any publication against the Chinese law or produced and brought into China
illegally is not allowed. Market for publication is fully open to overseas and
foreign investors. Cooperation on distribution is possible, either in retail,
wholesale or other forms.
Market demand decides imports of foreign books - With fast growing economy and
social undertakings in China, readers are more interested in foreign books in
science and technology, rather than those in politics or religion. Since foreign
publications in politics and religion do not comport with the Chinese culture,
there isn't much demand in this field. Thus it is natural that there are fewer
such products in the Chinese market.
The further opening up will lead to more cooperation on press and publication
and more opportunities for foreign companies. However, cooperation between press
and publication entities within China and those overseas based is always subject
to the approval of the regulators under the central government. The US based
rock magazine Rolling Stone was suspended in China because it had not gone
through legal procedures required for such cooperation.
Laws and regulations are made long time ago - Liu stressed that the Chinese
government had clarified the opening of the press and publication sector long
time ago. The printing sector is open. Foreign media groups and overseas capital
can seek for cooperation chances in this business. Distribution of publications
is also fully open. Foreign investors can make presence here in forms of either
sole ownership or partnership. Foreign companies can participate into the
research and development of game and animation software. The technical fields of
the media is accessible, including the network, digital, publishing and
distribution technologies.
When it comes to the content, there are also a lot of opportunities of
cooperation to exploit. Any domestic or overseas media groups can join hands
with Chinese publishers. Copyright trade is another choice. China has bought
more than 4,000 copyrights from the United States in recent years while the US
has imported only 16 from China. That proves the Chinese market is open.
Newspapers can collaborate on columns, information exchanges and the
international pages. However, no commitment is made on the editing and publicity
by China out of the consideration of the cultural security. Most developed
countries didn't make that commitment either.
Well-established overseas magazines can team up with their Chinese counterparts.
There are many examples in this sector, which have been initiated by Chinese
publishers or foreign publishers. The regulator is responsible for approving the
specific projects. A wrong partner or any partnership without permission
constitutes illicitness.
Foreign equipment is imported through the fully open market. The exhibition for
equipment of audio-visual and animation production in Shanghai and the trade
fair for printing machines and duplicators in Guangdong are two examples of
platforms of such imports. There are very few supplies of China-developed
equipment for printing and duplicating.
Investors can refer to the investment catalogue issued by the National
Development and Reform Commission for detailed information about the opening of
the equipment sector.
April 22, 2006
New Regulations on
Valuation of Dutiable Import Commodities Traded on Formula Pricing
In response to the use of formula pricing for goods in international trade and
to standardize the valuation of dutiable import and export commodities traded on
formula pricing, the customs administration has promulgated new regulations on
the valuation of dutiable import goods transacted under this pricing method. The
major stipulations are as follows:
Within 10 working days of the signing of a formula pricing contract, taxpayers
should file a copy of the contract with the local customs of the importing
region;
If the transaction price of the import goods has been determined based on
formula pricing, the customs will assess the goods' dutiable value using the
transaction price;
In the case where the transaction price is not yet determined, a taxpayer can
take delivery of his goods first after paying a tax deposit. The goods' dutiable
value will be calculated based on the transaction price once the latter is
determined.
Formula pricing refers to the pricing method sometimes used in trade agreement
on sale of goods to China in which the buyer and seller do not specify an exact
amount as the price, but agree to adopt a formula to determine the actual
transaction price. A main feature of formula pricing is that when the trade
agreement is signed, a pricing formula, instead of a specific transaction price,
is laid down, and its computation is based on factors in the market at a
particular point in time as agreed by both sides. The advantages of such a
pricing method are that the predictable state of a market, the need for
flexibility as well as price fluctuations are taken into consideration.
Following changes and recent developments in international trade, the pricing of
goods in many long-term international trade agreements on bulk purchase of
commodities is now based on formula pricing. For instance, formula pricing is
being used in the pricing systems of most of the world's crude oil markets. In
China, formula pricing is also getting more popular among bulk transaction of
commodities in import and export trade. In recent years, formula pricing has
been used in Tianjin's import of crude oil and bulk cargo of petrochemical
products, raw materials for the metallurgy industry and food such as soyabean.
April 20, 2006
Changes in the Labels
Approval System for Import and Export of Food and Cosmetics
The State Administration of Quality, Supervision, Inspection and Quarantine (AQSIQ)
issued a circular on implementing changes in the labels approval system for
import and export food and cosmetics. The changes were introduced in response to
the State Council's drive for administrative approval reforms and to simplify
import and export procedures.
The key points of the circular are as follows:
Labels of imported food and cosmetics must meet with the requirements in Chinese
laws, regulations and mandatory industry standards. (For the relevant laws and
standards, please visit the sections on safety of import and export food and
cosmetics/administration of food and cosmetics labels in the AQSIQ website at
www.aqsiq.gov.cn). Labels of food and
cosmetics for export must conform to the requirements of the importing country
or region.
From 1 April 2006 onwards, the procedures for approving labels of imported food
and cosmetics are to be combined with their inspection and quarantine
procedures. Approval of labels in advance is no longer required, and the
relevant authorities at all levels will no longer entertain such requests.
Moreover, entry-exit inspection and quarantine authorities will no longer demand
for Import and Export Food and Cosmetics Label Approval Certificates to be
presented on a compulsory basis for customs clearance.
When carrying out inspection and quarantine procedures on g food and cosmetics
for import and export, entry-exit inspection and quarantine authorities must
examine whether information on the products' labels comply with the relevant
laws, regulations and standards, and in particular whether wordings relating to
product quality are truthful and accurate. The words "labels approved" will be
stamped on the inspection certificates of products which pass the examination.
Labels of food and cosmetics imported before 1 October 2006 not complying with
Chinese laws, regulations or mandatory standards may be changed under the
supervision of the entry-exit inspection and quarantine authorities. Upon their
conformity with the relevant requirements, the goods will be released.
From 1 October 2006 onwards, imported food and cosmetics labels not meeting
Chinese laws, regulations and mandatory standards will be handled in accordance
with Article 19 of the Regulations for the Implementation of the Law on Import
and Export Commodity Inspection. Labels of export food and cosmetics failing to
comply with the requirements of the importing country or region will be handled
in accordance with Article 27 of the aforesaid regulations.
Existing Import and Export Food and Cosmetics Label Approval Certificates will
continue to be valid. For food products, if information on their labels matches
with their label approval certificates' content, they will be exempted from the
label approval procedure.
For food products in need of renewed label approval certificates as a result of
new requirements under the General Provisions for the Labelling of Pre-Packaged
Food (GB7718-2004) and the General Provisions for the Labelling of Pre-Packaged
Food For Special Dietary Use (GB13432-2004), their certificates are to be
renewed in accordance with the Circular on Approving and Renewing Import Food
Label Approval Certificates issued by AQSIQ's import and export food labelling
office on 9 December 2005. The deadline for certificate renewal is 1 May 2006.
Thereafter, certificates failing to meet new requirements brought about by
changes in laws, regulations or mandatory standards will cease to be valid.
In their inspection and quarantine procedures on import and export food and
cosmetics, inspection and quarantine authorities should approve the products'
labels and conduct product tests and inspection. Fees are to be charged in
accordance with the fee schedule for inspection and quarantine, and no separate
fee should be levied on the label approval procedure.
April 17, 2006
China-bashing due to
'oversight' By Josephine Ma in Washington
Poor lobbying is partly to blame for the mounting pressure from the US
Congress over America's trade imbalance with China, according to a former top US
trade representative. Charles Freeman, a former assistant US trade
representative for China Affairs, said that ironically, in the years leading up
to China's accession to the World Trade Organization in 2001, the annual hearing
to grant Most Favored Nation status (MFN) motivated the US business community to
lobby Congress for free trade with China.
"The US business community had to go to Capitol Hill every year before 2001 to
make a case for trade with China because of an annual debate on MFN statutes,"
Mr Freeman said.
"When China joined WTO, the business community packed up shop and went home and
they don't lobby the Congress to promote trade with China any more."
Mr. Freeman became managing director of China Alliance, a venture of three law
firms, after he left the Office of the US Trade Representative in September.
He said the business community now brought complaints about the impact of piracy
and regulatory problems in China when they lobbied senators and congressmen.
The lack of active lobbying had made it hard for Beijing to counter the rise of
China-bashing ahead of the mid-term elections.
"Frankly, every country in the world that has trade relations has its own lobby
and does not depend on US business to do that," he said.
"The fact that China does not have an active lobby in this town or does not have
a lobby is a terrible oversight."
Mainland sources said scholar Su Ge was sent to Washington as minister counselor
of the Chinese embassy to oversee the lobbying effort while a firm of lobbyists
had also been appointed years ago. However, lobbying was only conducted on a
case by case basis.
Mr. Freeman said China bashing in Congress would only get worse in the run-up to
the mid-term elections. "Both sides (the Democrats and the Republicans) will
distance themselves from the administration to compete to appear tougher on
China," he said.
Mr. Freeman said he disagreed with critics who blamed China's currency policies
for the more than US$200 billion trade deficit the US had with China last year
and revaluing the yuan would have little impact on the trade imbalance.
"Certainly there is no question that China's currency is undervalued but the
impact on the trade balance, either bilateral or multilateral, is zero," he
said.
He said trade relations with China had just accelerated the problems the US
would have to go through under globalisation, but that was not a message
politicians could deliver to voters.
"The administration will be absolutely horrified if Mr. Hu does not say
something about currency," Mr Freeman said.
"I think they are just hoping and crossing their fingers that Mr. Hu will say
there will be more movement in that direction."
April 14, 2006
China relaxes foreign
exchange control
China's central bank announced on Thursday the relaxation of controls on
foreign exchange accounts, simplifying approval procedures for foreign exchange
payments in the service trade, and procedures for individuals to buy foreign
currencies.
According to a document made public on Thursday by the State Administration of
Foreign Exchange (SAFE), the three policy readjustments will be effective as of
May 1. They include the readjustments on foreign exchange accounts, simplifying
approval procedures for foreign exchange payments in the service trade, and
procedures for individuals to buy foreign currencies. Under the aforementioned
readjustments, it will be easier for corporate and private citizens to open
foreign exchange accounts.
The ceiling of foreign exchange retained by enterprises under current account
will be raised based on certain portions of their foreign exchange income and
expenditure, the SAFE said.
The administration said each domestic resident may buy up to 20,000 U.S. dollars
worth of foreign exchange from the State-owned banks each year, and they may
apply to the banks for additional amount of foreign exchange with certificates
that prove their needs.
The bank said it will also allow qualified banks to pool capital in Renminbi,
the Chinese currency, from domestic institutions and individuals for overseas
investment in products with fixed returns under an unspecified quota system.
It will allow fund management firms and other securities institutions to invest
in a combination of stocks and other overseas securities using foreign
currencies gathered from domestic institutions and private sources. The bank
said it would allow qualified insurance institutions to buy foreign currencies
for investment in overseas products with fixed returns and money market
instruments.
The amount of foreign currency purchased would be under a "certain portion" of
the total assets of the insurance institution. The bank said other new policies
would be implemented in cooperation with other departments, while closely
monitoring international payments, and readjusting policies to prevent risks and
safeguard the country's economic and financial security.
The central bank said the new policies are designed to deepen the country's
foreign exchange management system, boost trade facilitation and further
cultivate foreign exchange market, and promote basic balance of international
payment.
Economics of shirts, jets
How many shirts does China have to sell to make the money for 80 Boeing jets?
At first glance this question may appear irrelevant as the Chinese trade
delegation visiting the United States signs a deal worth about US$5 billion to
purchase Boeing planes.
However, by asking this question we can gain perspective on one significant part
of the so-called trade imbalance between China and the United States.
For US politicians who focus only on their country's record trade deficit and
believe that it is all that matters in Sino-US trade relations, the question
will more than likely bewilder them. What is the use of calculating the terms
for an assumed shirt-for-jet barter transaction?
For Chinese people though, such a comparison will be a bittersweet reminder of
both China's growing export prowess and the worsening terms of trade.
Last year, China's commerce minister pointed out that the country needs to sell
"800 million shirts in order to buy an A380," a reference to the latest aircraft
being developed by the European consortium Airbus Industrie.
To come up with an exact number of shirts China has to export to purchase 80
Boeing planes, one has to take into account the price difference between these
Boeing jets and the Airbus A380, and the current profit margin of Chinese
textile exports. But a rough guess can easily put that number at the level of
billions, if not more.
It is clear evidence of China's trade power that its delegation is going on a
shopping spree in the United States, ostensibly to help reduce a massive trade
gap between itself and the world's largest economy.
Making full use of its comparative advantage has allowed China to stand out in
the manufacture of cheap low-end products like shirts. But its tiny profit
margin contrasts sharply with that of developed countries' high-tech exports
such as airplanes.
While making many Chinese people uncomfortable, the vivid comparison of an
astronomic number of shirts being exchanged for just one jet may not be heeded
by US politicians eager to be tough on China's trade surplus over the United
States.
Yet, the shirt-for-jet story does tell us much about the driving forces behind
the growing trade volume between the two countries.
Obviously, the bilateral trade is mutually beneficial.
US consumers can benefit hugely from imports of cheap but good quality
made-in-China shirts; and the latest airplane purchase can also help China meet
the rising market demand for domestic air travel.
Less obvious but more important, both the making of billions of shirts and the
manufacture of Boeing airplanes are in themselves a cause and a result of
economic globalization.
China imports cotton and textile machines from a number of countries, including
the United States, to produce shirts for the world. The US-based Boeing company
assembles jets with outsourced parts and components, a considerable portion from
China, and then flies them around the world.
If such interwoven economics is a reflection of the times, one should better
accept exports of made-in-China shirts and imports of Boeing airplanes as the
two sides of a coin. It makes little sense to try to have a one-sided coin.
April 12, 2006
90% of US Companies in
Guangdong China Optimistic About Pearl River Delta (PRD)
The American Chamber of Commerce in Guangdong has recently published a survey
report entitled Economic Situation in Guangdong and the Pearl River Delta.
According to this report, 90% of US companies are optimistic about the business
environment in the PRD, rating it "good/acceptable", "very good" and
"excellent".
Compared with previous surveys, the present survey objectively shows that the
business environment in Guangdong, especially the PRD, has greatly improved and
that the region remains the best option for US investment. Cost Advantage No
Longer First Preference for Investors
The survey questionnaire was designed by the US Chamber of Commerce in Guangdong
and conducted by Hewitt Associates at the beginning of this year.
A total of 161 organizations were interviewed, including member companies of the
US Chamber of Commerce in Guangdong, other US companies in Guangdong, foreign
embassies and consulates in China, foreign chambers of commerce and their
institutions in China, as well as US government officials. Over 50% of the
respondents are US companies in Guangdong.
On the question of "reasons for investing in Guangdong", the first reason given
is "use PRD as the base to provide products and services to the whole country",
followed by "make use of cheap labor to reap greater profits". In other words,
the majority of companies chose to invest here because Guangdong, especially the
PRD, offers a huge customer base.
Compared with land, labor and other cost advantages which were Guangdong's main
attractions in the early days of reform and opening up, the present survey finds
out that huge market demand is gradually becoming Guangdong's biggest attraction
to US companies.
76% of US Companies Have Started Making Profits - Based on findings about the
progress made by a large number of investment institutions, especially
enterprises, in their earnings in Guangdong, the report reveals that US
companies are making profits more quickly in the PRD than elsewhere although 16%
of the respondents only came to Guangdong?less than five years (2-5 years) ago
and 8% arrived less than two years ago.
Among the US companies interviewed, 76% have started making profits. Even those
that have not yet started making profits are optimistic about the future. Among
these companies, 8% expect to start making profits next year, 7% expect to see
profits in two years; 4% say they would make profits in 4-5 years, and less than
2% say they might have to wait a longer time before they would see profits.
On the evaluation of PRD's investment environment, 90% of the US companies give
ratings of "good/acceptable", "very good" and "excellent". A further analysis
shows that over 50% of them give ratings of "very good" and "excellent".
Great Momentum of Increases in Investment - According to the survey, two-thirds
of the companies interviewed increased their investment by at least US$10
million to expand their business in the whole of China in 2005. For 2006, 60% of
these companies plan to increase their investment by US$10 million or more. Most
of the US companies said they would definitely increase investment by more than
US$10 million over the next three years.
It is worth noting that over 78% of the respondents said they are not affected
by PRD's labour shortage as reported in the media. According to Hewitt
Associates, a possible reason why not too many companies are affected is that
the remuneration and working conditions provided by US companies are attractive
enough to keep their staff.
Based on the above conclusion, chairman of the American Chamber of Commerce in
Guangdong Harley Seyedin said Guangdong remains the best choice for investment
by US companies.
April 11, 2006
China plans to set up special service
centers in 50 cities within three years to handle domestic complaints on the
infringement of intellectual property rights (IPR), Chinese Vice Minister of
Commerce Jiang Zengwei said here Tuesday.
Also Director of the State Office of Intellectual Property Protection, Jiang
told a press conference held by the Information Office of the State Council that
these centers will provide IPR-related consulting services so as to raise the
general public's awareness of IPR protection.
Upon completion, these service centers will be connected to official websites of
departments in charge of IPR protection, he said. According to Jiang, the
emphasis of China's IPR protection in 2006 is to establish a vertical IPR
protection system from the central government to local governments at all
levels. IPR protection will be high on the agenda of local governments and their
programs for economic and social development, said Jiang.
In 2006, China plans to establish and improve the supervision system for IPR
protection, establish the system of accountability and improve its IPR
protection system that has a unified leadership with different departments in
charge of its own duties, said Jiang.
Jiang said that this year China will combine the routine supervision of IPR
protection with special campaigns and make more efforts in investigating big IPR
infringement cases.
China will strengthen its efforts in combating pirated cads, handling trademark
and patent right infringement as well as enhancing the administration of
expositions to prevent fake or IPR infringement goods, said Jiang.
April 5, 2006
China is poised to become
the world's second largest consumer market by 2014.
In a recent study, analysts from one of the world's leading banks, Credit
Suisse, say China is poised to become the world's second largest consumer market
by 2014. The bank has issued a report entitled "The Rise of the Chinese Consumer
Revisited", indicating that China now represents 3.8 percent of global household
consumption spending and remains on track to become the world's second largest
consumer market in US dollars.
In the report, Credit Suisse cites results from a proprietary survey conducted
in China in December of 2005. This is the second major survey by Credit Suisse
on this topic, with the first one released in September 2004.
The 2005 study confirms Chinese consumption spending will likely represent
approximately 11 percent of total global consumption spending for 2014, or about
3.7 trillion US dollars, versus 3.8 percent for household spending in 2005, up
from an estimate of 2.9 percent in 2004. By 2014, Chinese consumers are expected
to incrementally spend more US dollars than their US counterparts.
China remains the seventh largest household consumer marketplace but looks
poised to overtake Italy in 2006, France in 2007 and Japan by 2014.
Head of Emerging Equity Market Strategy and Global Coordinator of China Research
at Credit Suisse, Jonathan Garner has commented on the survey. He is quoted as
saying: "The new survey increases our confidence in our original base case that
China is set to become the world's second largest consumer spending market
within ten years. However, it also points to the challenges of tapping into this
growth with only a handful of companies achieving dominance within their
individual sectors."
March 28, 2006
MOFCOM Delegates Power of Approval and
Administration in Certain Sectors of Trade in Services
In order to simplify and make more efficient the examination and approval of
contracts and articles of association of foreign-invested enterprises and
expedite the attraction of foreign investment in trade in services in line with
the State Council¡¦s requirement to streamline the administrative approval
system, MOFCOM has decided to delegate the power of approving and administering
foreign-invested enterprises in certain sectors of trade in services to
provincial-level commerce departments and the management committees of
state-level economic and technological development zones.
These foreign-invested enterprises in the service sectors include
foreign-invested road transport enterprises (except road passenger transport
enterprises), non-vessel-operating carriers, construction enterprises and
printing enterprises. The delegation of power becomes effective on 31 March
2006.
Ten Policy Initiatives to Support
Technological Development
The State Council has recently promulgated the Policy Initiatives for
Implementing the Guidelines on National Medium- and Long-Term Plan for Science
and Technology Development (2006-2020), outlining a total of ten policy
initiatives.
The policy initiatives cover the following areas: investment in technology, tax
incentives, financing support, government procurement, introduction and revamp
of technology, creation and protection of intellectual property rights, building
professional teams, education and popular science, bases and platforms for
technological innovation, as well as strengthening coordination.
In the area of tax incentives, enterprises will be allowed to deduct 150% of
their actual technological development expenditure from their taxable amount in
the current year. In the case where full deduction cannot be made in the current
year, the remaining amount can be deducted over a period of five years in
accordance with tax laws. Moreover, if an enterprise¡¦s staff education
expenditure accounts for less than 2.5% of its total taxable staff salaries, it
can be deducted from the enterprise¡¦s corporate income tax.
In addition, upon approval by the authorities, newly-established new- and
high-tech enterprises in state-level new- and high-tech development zones can
enjoy exemption from corporate income tax for two years starting from their
first profit-making year. Thereafter, a reduced 15% corporate income tax will be
levied.
China Issues Email Regulations
The Ministry of Information Industry (MII) has just announced the Measures for
the Administration of Internet Email Service, which will go into force on 30
March 2006. The new measures clearly spell out rules governing the sending of
commercial emails. Articles 13 and 14 of these rules may have an impact on the
publicity and promotional activities of Hong Kong companies on the mainland.
The new measures are applicable to the provision of Internet email service, the
provision of Internet email access service and the sending of Internet email
within the territory of the Chinese mainland.
Under the new measures, Internet email service providers are required to obtain
a value-added telecommunications licence or complete filing procedures for
non-commercial Internet information service beforehand, and to register the IP
address of their email servers. Internet email service providers must register
the IP address of their email servers with MII or the telecommunications
administrations at the provincial, autonomous region or municipal levels 20 days
before the email service becomes operational.
As regards the two rules governing the sending of emails, according to Article
13, no organisation or individual may send emails of their own accord or on
behalf of clients if they: (1) deliberately conceal or forge envelop
information; (2) send email with commercial advertisement content to recipients
without their permission; (3) fail to include the word "AD" in English or "guanggao"
in Chinese character in the subject header when sending emails with commercial
advertisement content. Under Article 14, if an email recipient has expressly
agreed to receive emails with commercial advertisement content but later refuses
to receive further mail, the sender must stop sending such mails unless there
are other agreements between the two parties.
An email sender who sends emails with commercial advertisement content must
provide its recipients with a means of contact, such as sender's address, for
them to reject such mail, and must ensure that the means of contact provided is
valid for at least 30 days.
March 26, 2006
China not to blame for huge
U.S. trade deficit: WTO official
A senior World Trade Organization (WTO) official said on Friday in Geneva that
China was not to blame for the huge U.S. trade deficit and Washington could not
solve this problem through protectionism.
"Trade imbalance with China has given rise to certain proposed measures in the
Congress, and clearly the U.S. administration is watching that particular
imbalance rather carefully," said Clemens Boonekamp, director of the WTO's Trade
Policy Review Division.
"But it's not bilateral imbalance that you need to worry about, and to put it in
more economic terms, the actual overall trade imbalance, the current account
imbalance, is a result of policies elsewhere," Boonekamp told reporters after
the WTO's three-day policy review of the United States.
Boonekamp reminded reporters that the U.S. administration and the Congress were
actually divided on the U.S.-China trade deficit issue.
"I don't think the U.S. administration is actually blaming China. There is,
however, a lot of political pressure, political noise particularly in the
Congress that says China is to blame for this in some way or another," he said.
The official said the current situation with China was in some way a repeat of
what happened with Japan in the early 1980s, except that that the U.S. was not
taking the same kind of measures that it took very quickly against Japan.
"The U.S. administration is certainly resisting what's taking place in the
Congress at the present moment," he noted.
According to the official, nearly all WTO members expressed their concerns about
the U.S. "twin-deficits" during the three-day policy review meeting.
The WTO members also expressed worries that the U.S. fiscal and trade imbalances
might give rise to protectionist sentiments.
Asked whether he had given some direct recommendations to the U. S. on the
imbalances, Boonekamp said he had only indirect suggestions: protectionism is
not an answer.
"This clearly is a macroeconomic phenomenon, part of the global trade imbalance
phenomenon, and not a problem to be addressed by trade protectionism," he
stressed.
March 20, 2006
Nobel Prize laureate on China's 11th
five-year plan
China's 11th five-year plan is another major step in China's transition to a
market economy, Joseph E. Stiglitz, a Nobel Prize laureate said here on Sunday.
Addressing the China Development Forum 2006, Stiglitz said one of the
distinctive aspects of China's development plan is its comprehensiveness, which
is indispensable for a successful strategy.
China in its 11th five-year plan reiterates construction of a "harmonious
society", which put an emphasis on balance, said Stiglitz.
He said the Chinese government has recognized the transition of its role in a
market economy and one of its main responsibilities is to establish the
institutional infrastructure for a market economy.
Stiglitz said it is clear that China is seeking a distinctive form of the market
economy, noting there is more than one form of market economy.
A market economy with Chinese characteristics emphasizes balance, including
limiting disparities between urban and rural areas, between the advanced and
less advanced regions, between the rich and poor, which is necessary for both
social and political stability and economic progress, he said.
As for China's policy of building new socialist countryside, he said that the
policy will contribute a lot not only to the harmony of the society but also to
stimulating China's domestic demand.
The new policy will help increase farmer's income and establish the medical and
educational systems in rural areas, he said.
March 17, 2006
China Issues Email Regulations
The Ministry of Information Industry (MII) has just announced the Measures for
the Administration of Internet Email Service, which will go into force on 30
March 2006. The new measures clearly spell out rules governing the sending of
commercial emails. Articles 13 and 14 of these rules may have an impact on the
publicity and promotional activities of Hong Kong companies on the mainland.
The new measures are applicable to the provision of Internet email service, the
provision of Internet email access service and the sending of Internet email
within the territory of the Chinese mainland.
Under the new measures, Internet email service providers are required to obtain
a value-added telecommunications licence or complete filing procedures for
non-commercial Internet information service beforehand, and to register the IP
address of their email servers. Internet email service providers must register
the IP address of their email servers with MII or the telecommunications
administrations at the provincial, autonomous region or municipal levels 20 days
before the email service becomes operational.
As regards the two rules governing the sending of emails, according to Article
13, no organisation or individual may send emails of their own accord or on
behalf of clients if they: (1) deliberately conceal or forge envelop
information; (2) send email with commercial advertisement content to recipients
without their permission; (3) fail to include the word "AD" in English or "guanggao"
in Chinese character in the subject header when sending emails with commercial
advertisement content. Under Article 14, if an email recipient has expressly
agreed to receive emails with commercial advertisement content but later refuses
to receive further mail, the sender must stop sending such mails unless there
are other agreements between the two parties.
An email sender who sends emails with commercial advertisement content must
provide its recipients with a means of contact, such as sender's address, for
them to reject such mail, and must ensure that the means of contact provided is
valid for at least 30 days.
March 13, 2006
Investment in the mainland's beleaguered
health care system is badly needed from Hong Kong and overseas to help fund its
reform programs, the health minister said.
Gao Qiang said the Ministry of Health would cut the number of public hospitals
and clinics to focus its resources on helping the poor.
"At the moment we have too many public hospitals and the government can't
support all of them," he said. "I'd rather just keep some of them and turn these
into high-quality, inexpensive hospitals for those on low incomes."
The mainland has about 17,000 public hospitals, but many are short of funds and
have to rely on their own sources of income.
Mr. Gao said the central government would further open up the medical services
market to private and overseas business.
"We welcome foreign investors, including those from Hong Kong, Macau and Taiwan,
to come to the mainland and provide medical services. It will help us solve the
supply shortage," he said, while admitting it would "take time".
"We need to attract investors who are willing to commit money and effort to
develop [hospitals and clinics]. I think this will be a gradual process."
Foreign firms have been allowed to own up to 70 per cent of medical joint
ventures since the central government opened up the market in 2000. The move was
initially viewed with great enthusiasm by Hong Kong companies eager to tap the
vast market - particularly in Guangdong, where tens of thousands of Hong Kong
people live and work.
But so far no foreign firm has set up a substantial enterprise in the sector.
Many Hong Kong investors say the minimum investment of US$20 million set by
mainland authorities is too high and makes investment risky.
They are also concerned about a lack of transparency in government policies and
difficulties controlling the quality of services.
The problematic health care system was one of the most-criticized issues at this
year's National People's Congress meeting. Many delegates were not satisfied
with the soaring costs and inaccessibility of public medical services.
At the same time, health authorities are struggling to find money to improve the
system. Government funding of the health sector dropped from 6 per cent of total
expenditure in the 1980s and 1990s to 4 per cent in 2002.
In this year's budget of more than 3 trillion yuan, only 120 billion yuan was
allocated for health care. Mr Gao admitted he was facing "great pressure" to
meet the challenges with limited resources.
"The public, media and delegates have voiced their concerns over our medical
care problems in the past 10 days," he said after attending the closing session
of the Chinese People's Political Consultative Conference yesterday.
"This reflects the importance of this issue. It affects everyone and is crucial
to our social and economic stability. As the head of the ministry, I feel great
pressure and responsibility. I will work hard to solve these problems."
In 2004 Mr. Gao took over from Vice-Premier Wu Yi , who was brought in to steady
the boat after then-health minister Zhang Wenkang was sacked during the Sars
outbreak in 2003. Mr Gao said China's public health system was now in much
better shape.
"China's medical care system has improved a lot since Sars. If there is another
sudden outbreak like Sars or bird flu, the public won't panic because we have
established an effective system to handle such incidents," he said.
But Mr. Gao said medical reforms were still far from finished. "We have many
problems and can't solve them with one stroke. It will probably take 10 or 20
years."
March 11, 2006
China Special court to tackle product
piracy cases
A special court to prosecute product piracy cases has been created, according to
a government spokesman, amid demands for Beijing to step up action against
rampant illegal copying of movies, music, software and other goods.
A special court to prosecute product piracy cases has been created, according to
a government spokesman, amid demands for Beijing to step up action against
rampant illegal copying of movies, music, software and other goods.
The supreme court has named a Judicial Court of Intellectual Property to handle
such cases nationwide, court spokesman Sun Huapu said on the sidelines of the
annual meeting of the National People's Congress.
China is regarded as the world's top producer of illegally copied goods, and the
United States and other trading partners say the problem is getting worse
despite repeated crackdowns. Last year, courts convicted 741 people in 505
criminal product piracy cases, Sun said. He didn't say what penalties they
received or give figures for the previous year.
Courts handled 16,453 civil cases of intellectual property rights violations in
2005, up more than 20 percent from the previous year. US officials say mainland
copying of goods such as software, golf clubs, Hollywood movies and heart
medications costs legitimate producers worldwide up to US$50 billion (HK$390
billion) a year in lost potential sales. Jiang Zhipei, a supreme court judge who
handles product piracy cases, defended enforcement measures and called on
foreign companies to help get cases to court. "If we don't get them into the
courts, we can't judge them," he said.
Some 95 percent of the cases involve violations against mainland companies, with
only about 5 percent stemming from complaints from foreign companies, Jiang
said.
"So it's a strange phenomenon that foreign governments, and some US congressmen,
have made very strong complaints about this," he said. Sun said authorities have
launched a Web site to publicize product piracy cases - possibly a strategy to
use the threat of public shaming to deter pirates. "We shall reform and perfect
the legal system and work mechanism relating to intellectual property," he said.
A US trade envoy who visited China this month said the problem was getting
worse.
March 3, 2006
Chinese mainland to enrich
trade ties with Hong Kong, commerce minister
Bo Xilai, China's minister of Commerce, has said the mainland will continue to
"enrich the content" of the Closer Economic Partnership Arrangement (CEPA) with
Hong Kong as it has already played an active role in promoting two-way trade.
In a meeting on Friday with Donald Tsang, chief executive of the Hong Kong
Special Administrative Region (HKSAR), Bo said the mainland, willing to
strengthen exchanges with the SAR government, is taking serious consideration of
its concerns.
Bo made the remarks in response to Tsang's hope to "further substantiate the
CEPA and broaden economic and trade ties between the two places."
The CEPA has produced active results since its implementation more than two
years ago, Tsang said, citing stable increases of trade and investment between
the two areas and Hong Kong people's enhanced confidence in the "one country,
two systems."
The CEPA, a free trade pact-analogue, was signed in 2003 and put into effect in
2004. The mainland implements zero tariff for imported goods of Hong Kong origin
as of Jan. 1, 2006 as the CEPA is phased in.
Tsang is here to attend the opening ceremony of an annual session of China's top
legislature.
"This is the busiest time for national leaders. What I am going to do on this
occasion are practical things, which may bring greater benefits to Hong Kong
people and bring new opportunities for economic development, and help further
modernization of the nation as a whole," he said.
"I was in Beijing not too long ago in December and had a very thorough
discussion with the President, the Premier and other senior officials," Tsang
added, speaking before departure.
Another Ministry of Commerce official predicted Wednesday in Hong Kong that
trade between the Chinese mainland and Hong Kong is expected to pick up speed in
the coming years with further implementation of the CEPA and economic
integration between the two areas.
The agreement has witnessed a "favorable prospect," said Chen Xing, director of
the Department of Taiwan, Hong Kong and Macao Affairs of the ministry.
In 2005, trade value between mainland and Hong Kong amounted to 136.7 billion
U.S. dollars, reflecting a year-on-year increase of 21.3 percent and accounting
for 9.6 percent of mainland's total external trade, ministry figures show.
March 1, 2006
China to Implement Compulsory
Certification for Six Types of Toys
China has recently published the Catalogue for Compulsory Product Certification
for Toys and the first batch of toy products requiring compulsory certification
covers six major types of toys. Products listed in this catalogue cannot leave
their factory or be sold without certification after 1 June 2007.
China will require compulsory product certification, i.e. the China Compulsory
Certification (3C) mark, for six types of toys, including children's vehicles,
battery-operated toys, projectile toys, metal toys, dolls and plastic toys, as
of 1 March this year. Children's vehicles include children's bicycles,
children's tricycles, baby strollers, baby walkers, toy bicycles,
battery-operated children's cars and other toy cars. Battery-operated toys
include battery-operated toys, video toys and toys that produce sound and light,
such as battery-operated train sets and accessories, battery-operated toy
animals, toys with video games and battery-operated toys that produce sound and
light.
Plastic toys include static plastic toys and mechanical plastic toys, such as
clothing and accessories for static plastic dolls, static plastic building
blocks and building sets, and various non-battery-operated plastic toys. Metal
toys include static metal toys and mechanical metal toys, such as metal bridge
building sets, metal toy towers and metal toy dogs. Projectile toys include toy
bows and arrows and toy darts. Dolls include dolls with clothing or dolls
without clothing, as well as clothing and accessories for dolls.
There are about 8,000 toy manufacturers on the mainland. Many of them overlook
the special requirements and laws governing children's products and are
producing substandard products. They fail to have a comprehensive and accurate
grasp of national standards for various reasons. People in the industry believe
that compulsory product certification will help raise the level of design and
manufacturing of Chinese toys, thereby improving their safety performance.
After 1 June 2007, toy products listed in the catalogue cannot leave factory or
be sold, imported or used without obtaining the 3C certificate and bearing the
3C label. Toy manufacturers may apply to designated certification authorities
for certification from 1 March this year.
February 21, 2006
China Tightens Control over
Pollution Caused by Electronic Information Products
The Ministry of Information Industry has recently announced its
Administrative Measures for the Control of Pollution Caused by Electronic
Information Products. With the promulgation of this new legislation, the growing
problem of pollution caused by electronic information products will soon be put
under control.
The products covered by the new measures include electronic radar equipment,
electronic communications equipment, broadcast and television equipment,
computer products, household electronic products, electronic measuring devices,
special-purpose electronic products, electronic components, applied electronic
products and electronic materials.
The measures will apply to the acts of producing, selling and importing
electronic information products in China, while the acts of producing electronic
information products for export and selling electronic information products with
the name of the primary producer clearly indicated are not covered.
According to these measures, electronic information products marketed in China
must use environmentally-friendly materials, technologies and processes in
compliance with national or industrial standards for the prevention and control
of pollution caused by electronic information products, and must bear labels
indicating the safe-use period, names and content of toxic and harmful
substances, and whether or not they are recyclable. Packaging materials should
be non-toxic and easily recyclable, and the names of the materials must be
clearly indicated. A catalogue listing the toxic and harmful substances banned
or subject to restricted use in the production of electronic information
products will be published.
Scope of Consolidated
Enterprise Income Tax Defined
The State Administration of Taxation (SAT) has recently issued a circular
defining the scope of consolidated enterprise income tax in a bid to improve
consolidated tax collection and management.
The following are the main points of the circular:
1. Regulations regarding the examination and approval of consolidated tax will
be strictly enforced. Under the existing regulations, the consolidated payment
of enterprise income tax must be approved by SAT. Tax authorities at various
levels must strictly enforce the relevant regulations and may not transgress
their power in granting approval. Any unauthorised approval of consolidated tax
payment or widening of the scope of consolidated tax must be rectified.
2. The following categories of enterprises may apply for consolidated tax
payment:
(1) The 120 large-scale pilot enterprise groups designated by the State Council;
(2) Enterprise groups approved by the State Council to implement the pilot
enterprise group policy and consolidated tax policy;
(3) Enterprises engaged in the operation of railways, civil aviation, postal
service, telecommunications, financial services and insurance (including
non-banking financial institutions such as securities companies) covered by the
Provisional Regulations of the PRC on Enterprise Income Tax and its implementing
rules.
(4) Pilot enterprise groups set up in the reform of the cultural system;
(5) Enterprises that continue to exist as enterprise groups after restructuring.
3. In accordance with the Provisional Regulations of the PRC on Enterprise
Income Tax and its implementing rules, subsidiaries without independent
accounting will pay tax at the place where accounting takes place. Disputes over
the place of accounting would be handled according to the following principle:
(1) If the parent company and its subsidiaries are in the same province, the
provincial tax authority will decide on the place where tax returns are to be
filed.
(2) If the parent company and its subsidiaries are in different provinces or
municipalities, SAT will decide on the place where tax returns are to be filed.
SAT Calls for Better
Management of Expatriate Individual Income Tax
In a bid to strengthen the collection and management of the individual income
tax of expatriate employees (including Hong Kong, Macau, Taiwan compatriots and
overseas Chinese), the State Administration of Taxation (SAT) has issued a
circular on tax management for expatriates.
The main points of the circular are as follows:
1. Setting up expatriate accounts by enterprise
Local level tax authorities are required to set up management accounts by
enterprise for enterprises within their jurisdiction employing expatriate staff,
regardless of the number of expatriate staff or whether they are on permanent or
temporary employment. The management account should include such information as
the name, nationality, position and service period of all the expatriate
employees.
2. One-man one-file management
On the basis of the expatriate management accounts by enterprise, the local
level tax authorities would open a personal tax file on each and every
expatriate employee. The file should include the following information: the
expatriate employee's name (both Chinese and foreign language), place of birth
(both Chinese and English), date of birth, residential address outside China
(both Chinese and English), name of dispatching unit, duration of work or
service in China, duties, duration of stay, date of entry and exit, residential
address in China, telephone number, postal code, amount of income, place of
payment, withholding agent, amount declared, amount taxable, amount of tax paid
and date of payment.
3. Dynamic management
Dynamic management is exercised in the expatriate management accounts by
enterprise and personal tax files of expatriates. Information on the increases
and cuts in expatriate employees, changes in their duties, duration of stay,
date of entry and exit, and changes in their income would be updated in a timely
manner to ensure the scientific and meticulous management of expatriate
individual income tax payment.
4. Verification of accounts
All local level tax authorities must abide by the requirements of SAT and have
their mechanism for the management of individual income tax files ready before
the end of June 2006. A summary of their management work should be submitted to
the International Tax Department of SAT before 31 July 2006.
February 8, 2006
Hong Kong Companies Well
Poised to Tap into Cultural and Creative Industries Markets
Creative industries bring together cultural and artistic creativity and goods
production. They cover a wide array of sectors including performing arts, film
and television, music, publishing, arts and crafts, antiques, architecture,
advertising, digital entertainment, computer software development, animations
production, fashion design, and product design.
As the further liberalization of CEPA and Pan-PRD regional cooperation get under
way, economic and trade ties between Hong Kong and the mainland are growing
stronger, the integration of the two economies is accelerating, and the scope of
cooperation is expanding from economic and trade sectors to social and cultural
arenas. Thanks to long years of development, Hong Kong's cultural and creative
industries have grown to a significant size today. This, coupled with the "East
meets West" tradition, has placed Hong Kong in an advantageous position in terms
of the availability of talent, techniques, capital and overseas market
development expertise. As such, Hong Kong companies are well positioned to
capitalize on opportunities emerging in Pan-PRD's cultural and creative markets.
Pan-PRD Cultural and Creative Industries Markets: Development Prospect and
Opportunities - Huge potential of the cultural consumption market. Today, the
vast majority of the Pan-PRD region has achieved a basic level of economic
well-being while large- and medium-sized cities and coastal areas have become
relatively well-off. Consumers are increasingly going after higher-end and more
diversified consumption. As cultural consumption has become a new hot spot of
consumption, cultural products and services are making up an increasingly large
share of consumer spending. According to preliminary estimates of the government
authorities concerned, the potential spending power of the mainland cultural
market amounted to Rmb300 billion in 2000, or 3% of the country's GDP for the
year. However, the actual consumption of cultural products stood at about Rmb100
billion, which was less than one-third of the potential figure. It is estimated
that the cultural consumption market in Guangdong alone is worth Rmb80 billion
to Rmb120 billion. Hence, Pan-PRD's huge market size and growth potential
present a substantial scope of development for creative industry players.
Regional cultural resources have yet to be tapped. The Pan-PRD region is rich in
cultural resources, boasting a great variety of local cultures ranging from
Lingnan and Yue (Guangdong) cultures to those of Hong Kong, Macau, Hunan, Yunnan,
Guizhou, Hakka and a number of ethnic minorities. The region is characterized by
the diversity of its cultural resources, huge room for development, strong
industrial foundation and enormous development scope for the cultural and
creative industries. At the moment, these cultural resources have yet to be
utilized in greater depth. There are also no established models for the
integrated development of resources or downstream marketing and sales activities
in the creative industry market. Hence, cultural products have yet to form their
competitive advantage.
Strengthening of IPR protection augurs well for the development of the cultural
and creative industries market. Under the Pan-PRD Intellectual Property
Cooperation Agreement, the nine mainland provinces and regions will collaborate
on IPR protection, transfer of patented technologies, and industrialization to
foster a favorable environment for IPR protection. The agreement aims to provide
safeguards for the healthy growth of the cultural and creative industries market
in Pan-PRD. According to statistics, the 9+2 Pan-PRD provinces and regions filed
a total of 540,361 patent applications and were granted 334,353 patents during
1985-2004, accounting for 28.8% and 30.6% of the national total respectively. In
2004, the region filed 85,689 patent applications and were granted 50,142
patents, making up 30.7% and 33.1% of the country's total respectively. Among
these, applications for 15,210 invention patents were submitted and 3,936 were
granted, representing 23.1% and 21.6% of the national total respectively.
Compared to 2003, the numbers of patents applied for and granted rose by 15.7%
and 4% in 2004 respectively, both higher than the average national levels. In
particular, the growth of invention patent applications and patents granted
stood at 20.9% and 69.7%.
Growing trend for manufacturers to build brands fuels demand for product design.
With a booming economy and rising standard of living, the people's consumption
mentality has been moving gradually from primarily practical considerations such
as product features to a greater emphasis on product design, functionality and
individuality. Meanwhile, companies are increasingly aware of the importance of
distinguishing their products from others and of the fact that product design
can serve as the means to bring out individuality. At the same time, companies
are developing a growing level of brand awareness. They realise that product
design can greatly enhance product image and unique product design can play a
decisive role in a company¡¦s success amidst fierce market competition. In
handling product design, some companies choose to outsource the design work and
focus their efforts on brand management and better integration with the industry
chain, while others whose in-house design capability is unable to cope with
short product cycles and fast changing market needs turn to professional design
houses for solutions. Hence, there is an unprecedented scope of development for
creative and design services.
The rapid growth of the exhibition industry spells opportunities for creative
graphic design service providers. The exhibition industry in Pan-PRD has
expanded rapidly in recent years to become one of the most advanced in the
mainland. Guangzhou and Shenzhen now form the core of the region's exhibition
economy, while Chengdu and Kunming are exhibition centers in the central and
western regions. Kunming's exhibition economy is worth an estimated Rmb1 billion
a year and Sichuan hosts many large- and medium-sized exhibitions every year.
The growth of the exhibition industry generates demand for creative design such
as exhibitor's brochure, poster and booth design. Besides, the amount of
branding and promotion advertisements placed by companies in newspapers, trade
magazines, on the Internet and outdoor has been increasing steadily. In the
first four months of 2005, the placement of print ads increased by 5.77% in
China. The growth of advertising bodes well for the graphic design industry.
Excellent prospects for interior design. With rapidly growing incomes, rising
standards and quality of living, the living conditions of the people are
steadily improving. Consumers are increasingly going after finer things and
individuality. As the pace of urbanization accelerates, residential and
commercial developments are mushrooming and the real estate market is expanding
rapidly, creating excellent opportunities for the interior design industry.
According to incomplete statistics, 800,000 people are engaged in the
architectural and decoration design sector. More than 100 universities and over
200 secondary education and technical institutions offer interior design related
courses. About 20,000 students graduate from these courses every year. Although
the pool of design professionals is growing steadily, there is still unmet
demand in the market. Interior designers can find much room for development.
Capitalising on opportunities in e-government and e-commerce sectors. In June
2005, a joint meeting of leaders of the information industry took place during
the 4th Pan-PRD Joint Conference on Regional Cooperation held in Jiangxi. The
meeting explored the prospects for further cooperation between Hong Kong and the
rest of the Pan-PRD region in the software sector. Two plans were passed at the
meeting: one on cooperation in informatisation in Pan-PRD in 2006-2010 and the
other on software cooperation and trade fair in Pan-PRD in 2005. With the growth
of the software industry, investment opportunities in the e-commerce,
application software and online games sectors are set to increase.
In September 2005, the first conference on the informatisation of Pan-PRD cities
was held in Guangzhou. The meeting called for raising the overall level and
effectiveness of informatisation, increasing the usage of e-government
applications, and promoting the development of informatisation of the whole
Pan-PRD region by promoting it in the cities first. Under the Pan-PRD regional
cooperation framework, the e-government applications market offers tremendous
cooperation opportunities for IT players from Hong Kong and the mainland. Hong
Kong's IT service providers can capitalise on these opportunities and promote
and demonstrate their e-government and e-commerce solutions to the authorities
of various provinces and regions in Pan-PRD.
The informatisation drive in the various industry sectors in Pan-PRD such as
telecommunications, finance, securities, fiscal and taxation, transportation,
electricity, tobacco, public security and social security is set to generate new
opportunities for application software, systems and platforms. Besides, using
information technology to revamp traditional industries such as machine building
and light textiles as well as SMEs using IT to modernize management will spur
demand for various kinds of software such as financial management, human
resources management, and logistics management. Hong Kong's IT firms can offer
their diversified, value-added services to this market according to the needs of
division of labor.
The online games, animations and comics industry offers enormous growth
potential. According to survey findings, China's animations and comics market is
the largest potential market in the world. The market consists of an estimated
500 million consumers of comics and video products. In Beijing, Shanghai and
Guangzhou alone, young consumers aged between 14 and 30 spend over Rmb1.3
billion on comics, cartoons and related products a year. Under the set of
opinions issued by the State Administration of Radio, Film and Television on the
development of China's video and animations industries, the number of children's
cartoon channels has been increased and the share of cartoons in children's
programs both in terms of air time and quantity of titles has also been
increased. It is estimated that 250,000 minutes of domestically produced cartoon
programs will be in demand in the mainland each year in future. Given the
current production capacity of about 20,000 minutes, demand far outstrips
supply. Under the development plan formulated by the State Press and Publication
Administration for China's online games, animations and comics industry,
Guangzhou and Chengdu are slated to become the two bases for the industry.
According to statistics, in 2004 Guangdong's online games, animations and comics
industry was worth Rmb700 million, with the number of users accounting for
10.46% of the national total and seven games operators offering their service in
the province. By comparison, Sichuan's online games, animations and comics
industry was worth Rmb30 million in 2004, with users accounting for 5.15% of the
national total and the number of games operators at 13. Thanks to the strong
backing of the government authorities, development of network applications and
technologies, and the growing popularity of the Internet, the prospects of the
mainland online games, animations and comics industry are highly promising. In
view of this, Hong Kong's creative talent should take advantage of the SAR's
edge in creativity, techniques and production know-how and capitalize on
opportunities in the rapidly growing mainland market by teaming up with their
mainland counterparts. They can consider setting up R&D organisations in the
form of joint venture or wholly-owned operation to develop online games,
animations and comics for different age groups in the Hong Kong, mainland and
international markets. Furthermore, Hong Kong companies' wealth of business
knowledge and track record of project management experience can be combined with
the rich human resources, technological strength and competitive investment
environment of the mainland. Together, Hong Kong and mainland industry players
can jointly develop software products and services for the international market
as well as the outsourcing market.
Cultural and Creative Industries Aggressively Promoted - Over the past few
years, the nine Pan-PRD provinces and regions have drawn up their own strategy
plans for developing their cultural sectors, ushering in a new phase of
development. For instance, cities such as Guangzhou, Shenzhen and Chengdu have
established dedicated industry bases to promote creative industries. Guangdong's
cultural sector is growing rapidly under the province's all-out drive to become
a leading province in cultural activities. In 2004, the value-added of cultural
and related activities in Guangdong amounted to Rmb112.276 billion, up 17.6%
over 2003, accounting for 7% of the provincial total GDP. In recent years,
cities such as Guangzhou, Shenzhen and Zhuhai have developed a new model for
clustering cultural production forces and established various types of cultural
and creative industry parks targeting animations, comics, multimedia and network
services. The Nanfang cultural and creative industry park in Zhuhai and the
Chaozhou animations and comics industry base have both reached a certain
development scale today. To develop Guangdong into the most vibrant distribution
hub for cultural products and publications, the provincial authorities are going
to set up a Guanagdong cultural and media products exchange centre, establish a
publishing industry belt dedicated to content development in Guangzhou, build an
international publishing base serving the whole PRD region, establish in eastern
Guangdong the largest compact disc production base in China, and develop
Shenzhen into a base for copyright works.
With the same strategy as Guangdong to become a leading "cultural province",
Yunnan has identified the cultural sector as one of its six pillar industries.
Yunnan was the first mainland province to adopt a statistical indicators system
incorporating the cultural sector into the "Green GDP" index system. The output
of the cultural sector is projected to make up 6% of the province's GDP in 2006.
By the end of the 11th Five-Year Plan period, the cultural sector is targeted to
become a comprehensive and strong sector accounting for 8% of the province's
GDP.
Hunan has announced policies in support of the development of the cultural
sector. The province will devise a mechanism to support a diversified cultural
sector, implement support measures in the areas of taxation, land and key
cultural project construction, and encourage more enterprises to increase
technology R&D input and expand beyond the mainland market.
Sichuan has announced plans to build the Sichuan Cultural Industry Park
featuring 11 zones, including R&D, videos, art education, and the works of
famous artists.
Points to Note in Tapping the Cultural and Creative Industries Markets -
Although the cultural and creative industries markets in China are characterised
by soaring demand, excellent growth potential and lucrative returns, they are
still far from mature. Unstable demand, incomplete industry chain, and the lack
of overall development and planning strategy are the risks involved in investing
in these markets. Creative industries tend to thrive in markets that have a
relatively more developed financial sector and sound IPR protection. Given its
robust economy, language and lifestyle affinity with Hong Kong, high
receptiveness to new concepts, and sound industrial foundation, PRD with its
huge market size is certainly the preferred entry point for creative industries.
In terms of the mode of operation, wholly-owned, equity or contractual joint
venture can be adopted for launching creative and design services in Pan-PRD.
Alternatively, the "shop in front, factory at the back" model can be adopted
with the creative work done in Hong Kong and production carried out in the
mainland.
Cultural works should be sensitive to public opinions as reflected by the mass
media. Due consideration should also be given to the ethnic and local
characteristics of the culture of the target market. Healthy and positive
contents are the best bet.
Shenzhen and Hong Kong to
Jointly Develop Comics and Games Industry
According to Chen Wei, director of the Shenzhen municipal cultural bureau, the
government will support expediting the development of the comics and games
industry through establishing industry bases, investment and financing, talent
training and importation, and reward offers. The city will soon launch a series
of subsidy and reward schemes, one of which is to attract Hong Kong’s creative
talent.
Enterprises engaged in comics and games will be divided into two categories:
general and key enterprises. General enterprises are entitled to interest
subsidy on a maximum bank loan of Rmb300,000 a year whereas key enterprises can
enjoy interest subsidy on as much as Rmb1 million. Bank loans obtained up to
three years prior to the date of application are eligible for this subsidy.
For original animations that are developed in Shenzhen and broadcast by the
Shenzhen Television Station, a Rmb500 per minute reward will be offered to
two-dimensional animations and Rmb1,000 per minute for three-dimensional
animations. The reward will double if the animation is aired on the Chinese
Central Television Station (CCTV). Meanwhile, publishing companies in Shenzhen
which release such original comics and games will be given rewards equivalent to
5-10% of their sales proceeds. Works which receive state- or provincial-level
commendation will also be rewarded on the same basis. For works that are
recognised as significant breakthroughs, rewards in excess of Rmb1 million may
be offered.
The relevant government departments, industry associations and financial
institutions are currently stepping up efforts to formulate a set of standards
to determine the value of the intangible assets of comics and games enterprises
such as creativity, image and software. At the same time, they will give greater
credit support to the comics and games industry, encourage more social
investment institutions to invest in the industry, as well as support more small
and medium-sized industry players to raise funds through initial public
offerings.
Under the existing policy incentive, comics and games enterprises recognised as
new- and high-tech enterprises or software enterprises in Shenzhen are eligible
for the respective tax concessions. Projects that are categorised as technology
upgrade or innovative technology projects in accordance with the industrial
policies of the state and Shenzhen are eligible for preferential treatment
offered by both the state and Shenzhen authorities, such as interest subsidy,
fiscal funding and low-interest loan. Technology enterprises engaged in comics
and games are entitled to the same treatment during project establishment as
well as application for three kinds of technology fee. Furthermore, comics and
games enterprises which set up in dedicated industry parks can enjoy rental
subsidy of up to 50% of the payable rent.
Shenzhen is planning to organise the first nationwide contest of comics design
and production skills. Winners may be offered domicile in Shenzhen without going
through any examinations.
The Shenzhen municipal cultural bureau plans to construct a base for the comics
and games industry on the foundation of an existing facility of the Shenzhen
Media Group. To be named Yijing comics and games industry base, the new base
will serve as a platform for creativity, production and broadcasting, programmes
trading, development of related products, and personnel training. It will
facilitate the industrialisation and intensive development of the comics and
games industry. To satisfy the specific needs of the comics and games industry,
the base will provide different public services platforms including technical
services; qualifications evaluation, testing and training of comics designers;
copyright protection and distribution of audio-visual products; international
co-productions; and project management.
It was learned that the Shenzhen municipal cultural bureau is stepping up the
implementation of a plan to promote information exchanges between cultural and
creative industry players in Shenzhen and Hong Kong. Great efforts will be made
to attract Hong Kong's creative companies and talents to set up in Shenzhen and
to encourage Hong Kong’s comics and games companies to relocate their operations
to Shenzhen, including business development, production, processing, training,
and sales and marketing. The Shenzhen authorities will lobby the relevant
supervisory government departments to extend national treatment to these Hong
Kong-invested establishments.
Guangzhou to Develop
Headquarters Economy and Financial Sector
Guangzhou, as the economic and trade centre of the PRD and of south China at
large, realised a GDP of Rmb411.58 billion in 2004, an increase of 15% over the
previous year; while its utilised foreign direct investment exceeded US$2.4
billion, ranking first in Guangdong. So far, companies from more than 70
countries and regions have set up 7,933 foreign-invested enterprises in the city
alongside 127 Fortune 500 companies.
In the early days, the regional headquarters of multinational companies in China
were mostly set up to liaise with the government. This role has since been
switched to research and development and regional administration. As such, the
base has also been extended from Beijing to Shanghai and other cities.
Guangzhou, as the country's third metropolis in terms of overall development
capacity, now boasts an industrial system covering 34 major types of industries
and intends to exert to develop the headquarters economy by drawing strength
from its automobile, iron and steel, petrochemicals and other heavy and
high-tech industries. On this basis, it encourages financial institutions to
come and set up corporate or regional headquarters. The New Yuexiu District that
embraces the old Yuexiu and Donghsan districts will be an important carrier in
this regard.
Over 100 of the Fortune 500 companies have set up subsidiaries in Yuexiu
district. Among the companies in this district, 250 are designated as
headquarters. There are 22 foreign consulates in Guangzhou and 14 of these are
in Yuexiu. Guangzhou now boasts 116 financial institutions, including 18
branches of foreign banks, the majority of which are located in Yuexiu. There
are also six administrative departments of banks and provincial-level branches
of state-owned banks in this district. The New Yuexiu District thus enjoys a
distinctive advantage in Guangzhou's efforts to develop the headquarters
economy.
It is understood that Guangzhou is establishing a special fund for the
development of the financial sector. The city's financial authorities will
allocate Rmb50 million annually to this fund for three years starting 2005.
Financial institutions that purchase land in the central business district of
the Pearl River New City for building their own office will be offered a certain
percentage of the land transfer fee payable as subsidy. Those buying their own
office will be granted a lump sum payment of Rmb1,000 per sqm as subsidy, and
those signing new leases for offices will be given rental subsidies equivalent
to 30% of market indicator price for a number of years (initially fixed at three
years).
Yuexiu has also introduced green channel services for enterprises with their
headquarters in the district. The district leadership maintains close ties with
these enterprises, identifies the development of the financial sector and modern
services as its future priority, and promotes the development of service
clusters in the district.
It is understood that a central business district and business clusters have
been developed in several blocks of land in Yuexiu. These include the Eastern
Ring Road International Central Business District, the Eastern Dongfeng Modern
Services Industries District, Huanghuagang Informational Industry Park, and
Yongfu International Auto Accessories Trading Centre.
January 25, 2006
Shanghai Restricts Excessive Packaging for
Cosmetics and Health Care Products
Director of Shanghai's environmental protection bureau Xu Zuxin disclosed
earlier that Shanghai would be taking steps to further reduce merchandise
packaging on the basis of restrictions on excessive packaging for mooncakes.
This policy will mainly target cosmetics, health care products and food over the
next three years.
Xu made these remarks at a meeting to launch the city's three-year action plan
for environmental protection and construction between 2006 and 2008. Taking into
consideration that products such as cosmetics, health care products and food
items may be bought for own consumption or as gifts, the government will
encourage manufacturers to supply these products in two types of packaging, with
simple packaging for own use and luxury packaging as presents for others.
Drawing on the experience of restricting excessive moon cake packaging, Shanghai
will strive to reduce solid wastes at the source by restricting packaging in
major industries. This will mainly be achieved through government policy and
self-discipline. The cosmetics, health care products and food industries will
formulate and implement self-regulatory measures to package their products
appropriately.
Another major area of concern in the reduction of solid wastes is the
consumption of disposable items in hotels. According to the three-year action
plan, Shanghai will push for the reduction of these disposable items and
encourage star-class hotels to take measures to reduce or cancel the free
provision of disposable items.
January 18, 2006
China to Abolish Forex Quotas on Outbound
Investment
As disclosed by Hu Xiaolian, director of the State Administration of Foreign
Exchange (SAFE), China will abolish foreign exchange quotas on outbound
investment this year in an effort to give offshore investment enterprises
greater policy support.
It is understood that SAFE will step up its reform of the system of verification
and cancellation of foreign exchange payments for imports and receipts from
exports and establish a system of non-on-site checks. At the National Work
Conference on Foreign Exchange Administration recently held in Nanchang, Hu said
that SAFE had steadily implemented trade and investment facilitation in support
of enterprises "going out" in 2005. In the first 11 months of the year, domestic
enterprises had purchased US$1.9 billion in foreign currency for offshore
investment, up 310% year-on-year.
China Further Lowers Import Tariffs From 1
January 2006
In accordance with its WTO commitments, China has further lowered import tariffs
on more than 100 taxable items, including vegetable oil, chemicals, automobiles
and auto parts, effective 1 January 2006. Since China has already fulfilled most
of its tariff reduction obligations before this round, both the extent and items
of tariff cuts for 2006 are substantially lower. The overall tariff level in
2006 remains at 9.9%, with the average import tariff for farm produce at 15.2%
and industrial products at 9.0%.
According to the China-ASEAN Free Trade Agreement, China will offer agreed
tariff rates that are more preferential than most-favoured-nation rates to
commodities originating from the 10 ASEAN members and will offer zero tariff
rates to all their products under the "Early Harvest" programme in 2006.
Meanwhile, under the Asia Pacific Trade Agreement, China-Pakistan Free Trade
Zone "Early Harvest" programme, and the Closer Economic Partnership Arrangements
with Hong Kong and Macau, the mainland is also offering agreed tariff rates to
certain products originating from the countries and regions concerned.
January 13, 2006
EU's Anti-dumping Investigations on
Chinese Footwear -- Latest Development
Hong Kong's footwear exporters are reminded that the EU is in the process of
undertaking anti-dumping investigations on certain safety shoes with a
protective toecap and leather shoes originating from the Chinese mainland.
Reportedly, the EU has just refused the applications by 13 companies for a
market economy status, which, if granted, can let the successful applicants to
exempt from anti-dumping measures or to enjoy a lower anti-dumping duty rate if
the measures are to be imposed at a later date.
Notably, all Hong Kong companies which engage in exporting the concerned Chinese
mainland-origin footwear to the EU will be affected by the possible imposition
of anti-dumping measures, e.g. provisional or definitive anti-dumping duties.
According to the EU's rules, any anti-dumping measures will be applied to the
concerned products originating in the mainland, regardless of the origin of the
companies that produce or export the products (unless exemption is granted).
Shanghai treasure hunt for second-hand items
Treasure hunting for second-hand items is a new niche in Shanghai. It is a great
treasure hunt that many are being drawn towards, for many a chance to find a
favourite comic book in second-hand bookstalls around the Confucian Temple. For
others, it is a thrill to find a device that is good value for money among the
electronic gadget stores on Qiujiang Road, or stumbling upon a mobile phone that
is in excellent condition from one of the websites for second-hand digital
devices. In the universities, new students are forever buying second-hand
computers and articles from their seniors.
For some time now, lecture notes have become a major source of "income" for
students. Next to lecture notes on undergraduate courses, notes taken in
tutorial classes for postgraduate school entrance examinations in previous years
are selling well on the Internet. Even jottings made during tutorial classes
have been selling particularly robustly, following orders from the Ministry of
Education to stop running these "special" tutorials.
Just as Beijing's Liulichang, Dongdan and Changdian are favourite hangouts for
bookworms, Shanghai's Confucian Temple in the city's old Huangpu district is a
place also well frequented by booklovers. The Confucian Temple was built in 1291
and rebuilt in 1855 for the worship of the sage. When Shanghai was established
as a county seat, it was a place where county-level candidates gathered to
prepare for their imperial examinations. This typical example of a
temple-cum-college was called (interchangeably) the Confucian Temple and the
Shanghai County College.
The ever-popular weekend book mart has brought even more fame to the already
aged and beloved Confucian Temple. It is said that famous book collectors and
scholars like Zheng Zhenduo, Tang Tao and Huang Chang were all regular visitors
to the mart. Although these legends have yet to be confirmed, they have added
spice to the seat of cultural heritage.
Qiujiang Road specialises in electronics - In Shanghai, people think primarily
of Qiujiang Road when they want used parts and all manner of electronic
products. The place abounds with dealers of all kinds for used computer parts,
notebook computers, other digital products and computer peripherals. In fact, it
is Shanghai's largest centre for electronics goods. Virtually every type of
electronic gadget can be found, from Apple brand earplugs to imported hi-fi
systems - and from fingerprint readers to integrated computers and top-range
display cards with manufacturers' guarantees.
Visited every two months, the market will allow treasure seekers to discover
that the variety of goods on sale changes on every occasion. It is easy to miss
out on the goods, and seekers won't necessarily be able to find them again once
they are sold out. That must be the most potent enticement for people bitten
with the treasure hunting bug. Shopping on Qiujiang Road is not only fun, it is
also a cultural experience. When shoppers proudly show off bargain-price
treasures to admiring friends, there is hardly a prouder moment for many!
January 4, 2006
HK's financial
catchment for Shanghai outward investment
Shanghai's more
pronounced use of Hong Kong as a financial leverage point into the international
business markets has been underlined by the Closer Economic Partnership
Arrangement (CEPA) that allows Hong Kong service providers to set up more freely
on the mainland. Apparently an ideal scenario at present is for Shanghai's
growing band of private enterprises to prepare corporate models in Hong Kong (or
with Hong Kong expertise) that can arm them for international ventures and
acquisitions. Private companies have indeed seen breathtaking growth in the
Yangtze River Delta (YRD), especially in Shanghai. Private undertakings in fact
now account for 64% of the total number of enterprises in Shanghai and
contribute to about 17% of its GDP.
Shanghai's new-generation of private enterprises have in the process
demonstrated much vitality in forming their investments and operations. Banks
are bending over backwards to offer loans to them. Shanghai's private companies
are given greater scope of access.
The Shanghai branch of the Industrial and Commercial Bank of China (ICBC)
recently granted Rmb10 billion (HK$9.6 billion) in loans to private-funded Fuxi
Investment Holding Co Ltd. The Changning sub-branch of ICBC in Shanghai has
increased its loans to select private enterprises more than 20-fold since 1997.
But the problem of raising funds has obstructed the development of the smaller
private players. In the light of the situation, Shanghai's financial
institutions are in the process of improving their services.
Part of that process involves streamlining the public sector finance guarantees,
giving private enterprises greater support in the form of loan guarantees,
establishing a credit evaluation system that is suitable for SMEs, as well as
providing greater encouragement in capital funding. Inevitably, the more mature
private enterprises are finding their feet to make international forays, with
some success. For instance, Shanghai's Huasheng Group, a private enterprise
producing high-pressure steel cylinders, bought over the brand name of its rival
in Germany, Welz Gas Cylinder GmbH, and used its market network to establish a
marketing base.
According to the general manager of Shanghai's Xinghualou (Group) Co Ltd, the
process of "going out" will give greater scope to China's economic and
industrial structure while eliminating waste both of energy and funding in lower
value industries. About 100 private enterprises have made forays externally each
year. From the perspective of long-term development, the strategy of "going out"
is seen as giving Shanghai greater access to capital and manpower, while
attracting foreign investment. The process is only beginning to gain traction.
There were nearly 400,000 private enterprises in Shanghai at the end of 2004,
but less than 100 private enterprises have actually made forays externally each
year. Due to low levels of international experience, a lack of technological
know-how, faulty policies and questionable services, many Shanghai companies
still have far to go to attain international standing. There is also a general
lack of experienced international managers and hence coherent development
strategies for "going out".
Listing strategies of Shanghai companies - Hong Kong companies cross the border
to forge partnerships with private enterprises on the mainland. Following the
implementation of CEPA, mainland private enterprises have thus become major
partners for Hong Kong companies. According to officials, CEPA has also made it
easier for Hong Kong service suppliers to better serve private enterprises on
the mainland and strengthen Hong Kong's role as the springboard to the world for
mainland enterprises. Mainland companies also expect to leverage their
advantages, such as familiarity with local market conditions and extensive
business networks, as they go into deals with Hong Kong firms.
Xinneng Industrial Holding Co Ltd set up two institutions in Hong Kong in 2002
and 2003. Zou Rong, general manager of Xinneng, said they have made good
progress in the past few years, conducting studies to bring Xinneng into line
with international standards, while creating more opportunities for future
development. Xinneng Industrial Holding is the result of several significant
mergers over the past five years and is the parent company for the Renji
Hospital Management Group, which also has equity investments in the media and
insurance fields. Xinneng is currently working with relevant ministries to set
up technology park services in Shanghai. Zou Rong said many Chinese mainland
companies have a Hong Kong scenario in mind: they may only be setting up
companies and carrying on day-to-day business in Hong Kong at present, but their
ultimate aim is to be listed in the SAR. The reason is that the securities
market on the mainland is underdeveloped and under-regulated, while in contrast
the Hong Kong market can be extremely valuable in raising capital.
In Hong Kong, mainland private companies can make themselves compatible with
international business and equip themselves for the international market, Zou
added. Meanwhile, Zhou Haimin, chairman of Shanghai's Zonda Group and of the
Investment and Financing Committee of the Shanghai Overseas Chinese Chamber of
Commerce said China's WTO accession had been a trigger for Hong Kong listings.
Zhou is also chairman of the Xiangsheng Group in Hong Kong, and described how
the Zonda Group set up a company in Hong Kong and has taken part in mergers and
acquisitions. Zonda is also currently involved in long-term real estate
investments and offers financial services. In Zhou's opinion, caution is needed
when it comes to listing. At present, buying listed companies will turn out less
costly than seeking direct listings. Zhou said that Shanghai needs to draw on
Hong Kong's experience and practices as it moves towards economic globalization
and market integration. In terms of capitalisation, the mainland financial
market is not regulated and Hong Kong may serve as a bridge to the international
marketplace.
Given that China has yet to lift foreign exchange and capital controls, Hong
Kong's diversified market operations offer broad financing channels for mainland
companies, Zhou said. Hong Kong also gives breadth of vision to mainland
companies as a place of convergence for information flows, capital and other
modern corporate concepts.
Familiarity with market regulations - Service sector in Shanghai can draw on
Hong Kong's expertise. In Zou Rong's view, there is still something to be
desired when it comes to setting up institutions in Hong Kong. The drawback is
that Hong Kong is not an easy market to enter without a pre-existing network of
financial and legal contacts. Zou wished that small firms existed to serve
mainland enterprises by helping them get in touch with relevant government
departments and fund managers. Zhou Haimin emphasised the importance of legal
services. He pointed out that mainland private firms need to understand Hong
Kong's laws and market regulations as quickly as possible on arrival.
On the other hand, Hong Kong professionals are hard to find for global companies
with a presence on the mainland, said Zhou. He hoped that mainland enterprises
could find more Hong Kong professionals versed in the rules of the international
markets so that mainland firms could make use of domestic and overseas resources
to open up opportunities. Corporate listings, particularly in Shanghai, will be
a major attraction of the capital market in 2006, according to some analysts.
Most will be seeking further listings in Hong Kong. According to some experts,
since a "second board" has not yet been launched on the mainland, many mainland
private enterprises will be eyeing Hong Kong's growth enterprise market (GEM)
with a view to quick market access.
January 1, 2006
Guangdong Sees Number of Private
Enterprises Soar by 30,000 Monthly
There were 2,694,000 private enterprises in Guangdong at the end of September
2005. This represented a net increase of 273,000 over the figure at the end of
2004 and a net monthly increase of 303,000.
In the first three quarters of 2005, the added value realised by the private
sector accounted for 37.3% of Guangdong's GDP, up 2.9% from the corresponding
period in 2004 and an increase of 2.2% over 2004. The added value realised by
Guangdong's private sector in the third quarter of 2005 was Rmb521.67 billion, a
year-on-year increase of 13.5%. The majority of the 2,694,000 private
enterprises in Guangdong are individually-owned businesses, totalling 2,634,000
in number, or 566,000 and 400,000 more than Shandong and Jiangsu respectively.
Private enterprises in Guangdong were employing 14,776,900 people at the end of
September 2005. Their total registered capital amounted to Rmb696.8 billion,
averaging Rmb260,800 per enterprise. Between January and September, fixed assets
investment made by private enterprises amounted to Rmb2.3 billion, up 24.1% year
on year.
Four of the just announced 50 enterprises with the highest industrial income in
Guangdong were private enterprises. Among them, Huawei ranked fifth with an
annual income of Rmb31.5 billion, Midea came sixth with Rmb30.1 billion, Glanz
came 28th with Rmb10.3 billion, and Kelon came 32nd with Rmb10.1 billion. (Information Source & Credit: Hong Kong Trade
Development Council)
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