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A Turbulent Year Ahead in 2004 for China-US Trade Relations? Special Report - China Northeast updated on Oct 14, 2004
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December 29, 2004
China to Abolish Import License for
All General Goods in 2005
Cotton and man-made fibre dressing gowns
Cotton and man-made fibre brassiere
To keep track of the utilization of US textile quotas, please go to CBP's website: http://www.customs.gov/quotas/files/cntxtrpt.htm
China to Decentralize Offshore Investment
To encourage Chinese enterprises to invest abroad, the Ministry of Commerce (MOFCOM) has recently decentralised to local provincial departments of commerce the right to examine and approve applications by local enterprises to invest in setting up companies in 135 countries. At the same time, the number of documents required to be submitted by applicants for examination has been reduced from 10 to five.
The principle of equality among enterprises of different forms of ownership is further realised in the Provisions for Approving Enterprises to Establish Companies Abroad promulgated lately by MOFCOM. The regulations stipulate that “the state supports and encourages enterprises of various forms of ownership with comparative advantages to go abroad and invest in setting up companies”. There are no detailed provisions in the regulations specifying different rules for enterprises with different ownership, thereby ensuring them equal treatment in setting up companies outside the country.
In accordance with the principle of “he who invests will make decisions, he who reap benefits will bear risks”, the regulations also set out that the onus is on the mainland company which invests in setting up companies abroad to decide if the venture is economically and technically viable.
MOFCOM and provincial departments of commerce will no longer screen feasibility study reports when examining and approving mainland enterprises’ applications for establishing companies in other countries (regions). Instead, they will approve applications based on the following:
(1) the investment environment of the country (region);
(2) the security status of the country (region);
(3) the political and economic relations of the country (region) with China;
(4) the guiding policy on offshore investment at home;
(5) the rational distribution of the country (region);
(6) any obligations to fulfil relevant international agreements;
(7) protection of the lawful rights of the enterprise.
Guangzhou used car market gears up to
The mainland's used car market is lagging behind its new car sector in sales growth. Many potential car buyers are held back by the absence of after-sales service, complicated formalities and inadequate access to information in respect of used cars.
Statistics show that used cars account for 75% of all car sales every year in the US, hitting more than 43 million cars in 2002, roughly 3.5 times the number of new car transactions in the same year.
In China, used cars take up just 30% of total car sales, with auctions playing only a small part in the trade.
According to Shenzhen Pengqi Vehicle Auction Centre, the largest of its kind in the city for used cars, only some 100 of the 300 or so used cars that change hands through the centre every year are sold by auction.
Following the implementation of the new policy on development of the automotive industry by the National Development and Reform Commission on 1 June, the Policy on Trade in Automotives is in the pipeline.
Meanwhile, the long-awaited Measures for the Administration of the Used Car Market were released at the end of September to canvass public opinion. The official version may be introduced by the year-end. All these measures are believed to be set to invigorate the used car market.
Recently, 12 distributors were awarded licences by the Shanghai Economic Commission to deal in used cars. They launched a promotion, Shanghai Volkswagen Select Used Cars, in September.
One of the distributors, Shenyin Volkswagen, offered to sign a quality warranty covering the first six months, or alternatively 10,000 km in mileage with every car buyer, partially solving the problem of after-sales service for secondhand cars.
Attracted by the considerable potential of China's used car market, foreign auto makers are trying to enter the market through partnering with local players.
Some foreign auto companies specializing in the used car business have embarked on detailed research on the mainland market.
Hong Kong companies should be ready to tap the market by introducing to the mainland proper trading formats for used cars that are practicing in the international arena.
These services include offering technical talks, test driving, business consultation and free evaluation and acquisition of used cars.
Shilihe lights up Beijing
Located along Dayang Road east of Shilihe Bridge on the eastern third ring road in Beijing's Chaoyang district, Shilihe Lighting City was established in 1999 and started business in the second half of 2000. Though not the oldest among the capital's specialised lighting marts, the facility has firmly established itself as the largest in terms of business area in less than five years, covering 23,000 sqm.
In 2003, Shilihe was rated by the industry as one of the top 10 lighting cities in the country, the only one in Beijing.
Today, Shilihe Lighting City has not only been shaped into a major distribution centre specialising in the wholesaling and retailing of lighting products to the whole country, but is also the market leader in Beijing.
Either for personal consumption or construction projects, users who need to source lighting products will first check out Shilihe before visiting other marts in the city.
Space at Shilihe Lighting City is rented out to lighting manufacturers and companies to set up shops, which range from 100 sqm to several hundred sqm in business area.
Rentals vary according to location, and averages Rmb150 (HK$141) per sqm monthly, which is at medium rental in Beijing.
Thanks to the increasingly heavy visitor traffic, Shilihe Lighting City is currently fully occupied, with a total of 166 tenants, 80% of which are from Guangdong, Fujian and Zhejiang.
According to market sources, for want of space, some lighting companies that intend to open shops can only do so by buying existing tenants' occupation rights. It is understood that there have been successful cases of transfer of such rights at Rmb380,000 (HK$358,490) per transaction.
Hu Chunming, deputy general manager of Shilihe Lighting City, said expansion works of the mart are underway, which will hopefully increase its business area by 3,000 sqm in 2004, in a bid to satisfy tenants' demands. There are plans to take in some 40 more tenants, bringing the total to above 200.
According to the home market division of Beijing Marketing Association, the trend for home decoration first emerged in Beijing a few years ago, leading to a mushrooming of building material and lighting marts able to do good business.
Even two to three years ago, new entrants to Beijing's lighting market were still making a profit, according to the association.
From 2002 onwards, however, there has been an over-supply. As at the end of 2002, there were more than 40 large and small lighting marts and shops in the capital, of which over 10 were of a considerable scale.
The figure further increased at an annual rate of 300,000 sqm in business area in 2003. While demand is growing, consumers are also increasingly conscious about branding and require closer attention to be paid to shop image and scale.
Last year's SARS outbreak catalysed the fall of lighting marts with weak foundations while this year has further witnessed the transformation of many larger ones.
In the face of such fierce competition, Shilihe Lighting City has been able to maintain a busy visitor flow. Its annual sales turnover is conservatively estimated at up to Rmb700 million (HK$660 million), with an average of over 2,000 visitors daily.
The success of Shilihe Lighting City could be attributed to its geographical advantage. Dayang Road, which houses the lighting city, is also home to a number of building and decorative materials marts.
Led by Baojia Building Materials Mart which first set up there several years ago, over 10 other large home centres have subsequently moved in, forming a 1,500 m-long building materials street along Dayang Road. They include Dongfanghuimei Home Furnishings Plaza, Jiahejiamei Home Furnishings Mart, Juranzhijia Shilihe Branch, Shilihe Lighting Wholesale City, Shilihe Caihong Fabrics City, Minlong Ceramics Wholesale Mart, Caixuan Hardware World, Minle Building Materials Mart and Dayang Road Building Materials Wholesale Mart.
Today, more than 5,000 building materials shops cluster there with business area totalling some 300,000 sqm. Such a heavy concentration naturally makes it the first choice for consumers looking to source building materials and lighting products.
The geographical advantage of Shilihe Lighting City is also manifested in its ease of access. Located in the southeastern part of Beijing between two major thoroughfares - the third and the fourth ring roads, 500 m from the former and 800 m from the latter, the lighting city is in the inner part of Beijing's ever-expanding metropolis, just 25 minutes' drive from the city centre.
Furthermore, the mart is easily accessible by means of public transport, such as bus routes number 28, 300, 368, 378 and 907 as well as minibus routes number 10 and 35, making it convenient for consumers to go there to make purchases.
In order to attract car owners, there is also a 10,000-sqm parking lot offering free parking to visitors. In addition, the Beijing-Tianjin Highway just 1 km away, along with the Beijing-Shenyang and Beijing-Kaifeng Highways which are just 10 km away, provide an unparalleled advantage in extending the sales reach of Shilihe Lighting City to neighbouring provinces and cities. According to Hu, aside from Beijing residents and local engineering purchasing teams, people who patronise Shilihe Lighting City are mostly merchandisers from the northern and northeastern regions while Russian traders form the bulk of foreign buyers.
Wide variety, low prices - Another major advantage of Shilihe Lighting City lies in its economies of scale, comprehensive product variety and low prices.
The mart is divided into two zones, namely household lighting zone and construction lighting zone, covering both international and domestic lighting fixtures, products and materials of differing brands and for different purposes.
The household lighting zone mainly sells various kinds of hanging lamps, wall lamps, ceiling lights and standing lamps for home decoration use as well as special-purpose lighting such as cabinet lights, range hood lights, mirror lights and night lights. The construction lighting zone primarily offers professional lights, light source equipment and lighting accessories.
Due to the busy visitor traffic and massive turnover, new products are offered in the mart at an amazing speed, reflecting the styles in vogue in the country. Development of the logistics sector has made it possible for the latest products designed and made by manufacturers at the country's major lighting production bases such as Guangdong's Guzhen and Zhejiang's Yuyao to be presented to customers at Shilihe Lighting City in five to seven days.
Hu pointed out that the huge trading volume of the mart enables high-quality goods to be sold with small profit margins at low prices, thereby enhancing their appeal to consumers. It is understood that lighting products are priced at 5%-10% lower at Shilihe Lighting City than its peers in Beijing. Many consumers, after having visited other lighting marts in the capital city and decided on their preferred brands and styles, would eventually make their purchases at Shilihe. A business operator at Shilihe said the brand he carries sells three times more there than at supermarkets.
Enhancing facilities to provide comprehensive services - Investment has been made in enhancing both the hardware and software of Shilihe Lighting City for its long-term development.
In respect of hardware, the mart is equipped with central air-conditioning, an automatic smoke-detecting alarm and sprinkling system and an 800-kVA electricity distribution capacity.
The lighting city is installed with automatic teller machines and operates a car fleet in a bid to provide consumers with financial and transportation convenience.
October 12, 2004
China to Regulate Alcohol Wholesalers and
Following the guidelines of the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) and the Standardization Administration of China (SAC), the Ministry of Commerce (MOFCOM) is drafting two sets of standards for the regulation of alcohol wholesalers and retailers in a move to establish a mechanism for the management of alcohol distribution. As disclosed by a MOFCOM official, opinions are now solicited for the draft regulations, which are expected to be introduced before the end of the year.
According to the MOFCOM official, the following measures will be taken to establish an effective mechanism for managing the distribution of alcohol.
Accelerate the establishment of legal standards for the management of alcohol. Two sets of industry standards for the regulation of alcohol wholesalers and retailers will be launched before the end of this year. At the same time, MOFCOM will, in association with other departments concerned, accelerate the drafting of regulations on the distribution of alcohol in line with international practice.
Implement a system of market access control. Commerce departments at all levels will strictly control access to the alcohol market in accordance with the requirements of the State Council’s decision on further strengthening food safety work. A screening system for alcohol business operators will be implemented. To operate in the alcohol market, a company must have good credit standing and financial strength. It must also have the necessary permit and business licence and carry out strict management. A system of market inspection will be introduced, whereby substandard goods will be rejected, recalled, destroyed and publicised to ensure that all alcohol products on sale are safe.
Establish credit records on the distribution of alcohol products. Making use of the e-government system and information technology, MOFCOM has already established a system of credit records on the safety of alcohols, meats and vegetables in distribution in the country. This will become the honour roll for outstanding enterprises, blacklist for discredited enterprises, and safety guide for consumers. Meanwhile, efforts will be made to modernise the distribution of alcohols, develop modern forms of distribution such as chain operation and modern logistics, and publicise scientific concepts of alcohol consumption and the importance of lawful operation.
The world's largest city of stone shaped in Fujian Province
Nanan is the most populous provincial city in Fujian and has earned itself a reputation as the country's home for building materials. It has a nationally renowned market for stone products, Minnan First Building Materials Market, or more colloquially, China Stone City.
The market has drawn the attention of the construction and engineering industries since it opened for business in May 1999. Mining, processing and trading companies, as well as dealers from other provinces and from Hong Kong, Macau, Taiwan or abroad have flocked in. The working area is in great demand, despite the constant expansion.
The market has a business area of 300,000 sqm and is divided into different specialty sections that include the stone slab city, Minnan raw stone market, the stone and ceramics area and the stone processing zone.
The stone slab city and the stone and ceramics area have a total floor area of over 50,000 sqm, with 800 shops of various sizes. More than 500 businesses are operating, selling all the 625 varieties of registered Chinese stones and over 100 types of imported ones.
Granites, marbles, large slabs, stripes, cut-to-size and thin slabs, ultra-thin laminated slabs, stone carvings and various types of stone sculptures are all on sale, as are cultural stones and stone processing machinery, as well as tools.
Minnan raw stone market is the largest of its kind in the country and handles over 1,000 tonnes of stones a day. Its imported raw stones account for 80% of national demand. Meanwhile, the stone and ceramics area brings together prominent brands of foreign and domestic architectural ceramics, aesthetic stones and sanitary products.
The entire facility handles Rmb3 billion (HK$2.8 billion) in direct transactions, Rmb5 billion (HK$4.7 billion) in indirect transactions, and Rmb1.5 billion (HK$1.4 billion) in exports, accounting for 80% of China's stone exports.
Business is carried out both in shops and in the open. Rent is Rmb35 (HK$33) per/sqm/month for shops and between Rmb15 and Rmb25 (HK$14.1 and HK$23) for raw space.
All 900 shops are rented out. It is understood that one company actually paid Rmb100,000 (HK$94,339) for every shop, to buy the leasing rights for four of them in prime location. This shows just how sought after shop space has become.
The market has various supporting facilities, including an e-commerce platform, legal services, foreign trade and financial services, post and telecommunications, forwarding facilities, guesthouses, restaurants, supermarkets and entertainment outlets.
In fact, China's Stone City exemplifies the smooth interaction of market and industry.
The market itself has developed into the largest distribution centre for stone products in China, and more than 500 stone enterprises, including more than 50 large and medium-sized domestic enterprises - each with a capital of over Rmb10 million (HK$9.4 million) - have built up around the market, creating an economic zone for the stone industry.
Some large, backbone enterprises have invested millions of yuan to import advanced technology and equipment from abroad and set up modernised stone processing factories.
The city hosts the Nanan Building Materials Fair and Shuitou International Stone Materials Expo on 18th May each year.
The fair and expo are now in their fifth year and have become crucial business negotiating platforms, as well as being important for information and technology exchange for the building materials industries. The fair and expo attract a large crowd of domestic and foreign traders.
The stone market is still expanding. The large slab market, which sits on a 13.3 hectare site and involves an investment of Rmb30 million (HK$28 million), is now taking shape. When completed, annual transactions will top Rmb3 billion (HK$2.8 billion) from the sale of large stone slabs alone.
A centre devoted to stone sculptures and stone art is currently under construction. The project includes an Rmb60 million (HK$56.6 million) multifunctional exhibition and trading centre, with an area of 3.335 hectares for display, business negotiations, international conventions and exhibitions, and e-commerce.
When all projects are completed, the stone market will have a total area of over 66.7 hectares and is expected to become a modern stone materials logistics centre for all categories and varieties of stones in a global context, with facilities for regular exhibitions, traditional trading, processing, warehousing and e-commerce. It is shaping to become the largest stone works of its kind in the world, with the aim of being run with the aid of advanced management expertise.
The market is at the midway point and intersection between Quanzhou and Xiamen, and easily accessible. In addition to the national highway, the Quanzhou-Xiamen Expressway also has an exit and the market is only 58 km from Xiamen International Airport, or 15 km from Jinjiang Airport.
Nearby Shuitou also boasts five piers for 100-tonne class vessels and is only eight km from Nanan, where ocean-going 5,000-tonne class vessels can berth. This network of air, land and sea transport is a great asset to the market.
Kunming's property boom begets agency upturn
Kunming's steady secondary property market has suddenly seen rapid growth this year, with turnover increasing by 150%. The secondary market now overwhelmingly dominates the real estate sector in the city.
Some 21,000 second-hand properties, with a total area of 2.5 million sqm, exchanged hands in Kunming between January and June this year, with total turnover amounting to Rmb3.5 billion (HK$3.3 billion), up 20% year-on-year.
About 4,800 units are classified as public housing, up 83% year-on-year in numbers on the market and involving a total floor area of 340,000 sqm. Overall in this subsector, there has been an increase of available space up 113%, with gross turnover of Rmb600 million (HK$566 million) up 150% over the January to June period.
There are many reasons for the huge growth in real estate transactions. Apart from rapid economic growth and greater purchasing power, the city owes its secondary market property boom to the efforts made by the Yunnan provincial government and Kunming city government to expedite the drafting and implementation of liberalization measures.
The introduction of regulations for purchasing public housing and housing reform scheme units, more freely-given provident fund housing loans and lower taxes and fees on deeds and transactions have each helped to free up the sector, as has the waiver of market access approval and consent required from original owners.
Property prices have also been traditionally quite high in downtown Kunming and these are going up fast as demand increases.
Many salaried city workers, even with limited incomes, are also turning their eyes to secondary housing in areas with lower property prices.
Moreover, secondary properties, with their economic sizes and prices, as well as better facilities and locations, are more affordable than homes in the suburbs.
Inevitably, Kunming's fast growing secondary market is making a lot of property agents very happy. At present, agents charge both buyers and sellers between 1% and 3% of the transaction price, as commission. Normally a 3% commission is charged on a two-bedroom flat, for example.
There are about 1,000 real estate agents in Kunming, but only 30% are registered and have legal status, while the remaining 70% have only opened for business this year. The demand for professional agencies and instructors is already definitely appearing.
October 7, 2004
US Chamber Criticizes China for Inadequate
On 22 September 2004 the US Chamber of Commerce released its third annual report on Beijing's efforts to meet China's World Trade Organization (WTO) accession obligations. The report is highly critical of Beijing's implementation efforts. In particular, the US Chamber finds fault with China's lack of effective intellectual property rights (IPR) enforcement.
In a statement, Myron Brilliant, the US Chamber's vice president for East Asia,
stressed that "China needs to do more to protect intellectual property rights
and we are urging Chinese authorities to take action in this area this year". He
added, "We want to see prosecutions". The report underlines that rampant piracy
of copyrighted products, including music, movies and software, as well as
counterfeiting of patented and trademarked goods has long been and remains one
of the greatest irritants to Sino-American trade relations.
The US Chamber's report bluntly observes that China's IPR enforcement efforts are "inadequate". It adds the following prescription, "The US business community is seeking immediate and demonstrable evidence from Chinese authorities that the IPR climate in China is improving. Short of that evidence emerging quickly, the US business community will be fully justified in working with the US government to explore other courses of action to address China's failure to comply with its IPR commitments under its Trade-Related Aspects of Intellectual Property Rights (TRIPS) obligations".
For the time being, however, the US Chamber would prefer the US government to continue to pursue a policy of constructive engagement with China. Nonetheless, its patience is beginning to wear thin. Brilliant went as far as to indicate that the US Chamber may at some point in the future request a Section 301 investigation into China's IPR enforcement if the situation does not improve. Presumably, that point may come in the not all-too-distant future.
Earlier in September, C. Fred Bergsten's renowned Washington-based Institute for International Economics (IIE) issued a new 53-page policy brief, entitled China Bashing 2004. The report, authored by Gary Hufbauer and Yee Wong, presents an overall optimistic assessment of Sino-American trade relations. And as its title suggests, the IIE's report attributes much of the current China-bashing to the political season, presenting extensive evidence refuting some of claims that by sheer repetition have come to be regarded as gospel by China bashers and those who are receptive to the arguments of the latter. That said, the IIE also underlines, "Despite considerable progress, China remains the principal exporter of counterfeit and pirated goods, both to the United States and the world. Counterfeiting and piracy pay, and some Chinese firms take advantage of their technical skills and marketing opportunities to pursue these activities".
The IIE report also cites International Intellectual Property Alliance (IIPA) estimates, which claim that Chinese piracy cost US firms US$2.6 billion in lost sales in 2003. Echoing corporate America's assessment, the IIE report notes, "Poor enforcement of IPR is partly rooted in a weak legal system. It also emphasises, "Fines for retail piracy are reportedly as low as between US$6 and US$25. Another problem is the high monetary threshold (about US$6,000 in the Supreme People's Court) before a criminal investigation for IPR theft can be initiated".
Chinese IPR piracy has also incurred the wrath of some very important members of Congress. At a hearing of the House Government Reform Committee on 23 September, Thomas Davis (Republican-Virginia), the committee's chairman, stated that counterfeiting and piracy of US intellectual property in several countries, but most notably in China, costs US businesses US$200-250 billion annually in lost revenue. In 2003, the US Department of Homeland Security (DHS) seized counterfeit products at the US border worth US$90 million, with Chinese-made goods accounting for some two-thirds of the total value.
Also at the House panel's hearing, Congressman Robert Simmons (Republican-Connecticut) complained that counterfeiting of American products hurts small and medium-size US businesses as much as large American corporations. To illustrate his point, Simmons explained how counterfeit gauges made in China, knock-offs of gauges made for vehicles and boats by a small Connecticut company, had a devastating ripple effect. Not only was Faria Corp, the company in his Connecticut district, deprived of millions of dollars in revenue, in an attempt to defend its reputation it lost yet more money replacing for free the defective Chinese-made gauges that were returned to the company.
The Office of the US Trade Representative already announced on 16 September that it will conduct a widespread survey of US businesses regarding China's IPR enforcement efforts. USTR has sent a letter to companies and trade associations requesting IPR-related information, such as market surveys and statistical data on enforcement actions by Chinese authorities. USTR will conduct this survey as part of an out-of-cycle review of China's IPR enforcement efforts, part of the annual "Special 301" process that USTR will complete early next year. USTR has acknowledged that the requested information would be necessary if the US government decided to bring an IPR complaint against China at the WTO.
Specifically, USTR's letter requests detailed reports on (1) particular geographic areas or sectors where China's enforcement of IPR is either positively or negatively notable; (2) whether infringing products are made by individuals, companies, state-supported corporations or organized criminal organizations; and (3) estimates showing the effect of IPR-infringing goods on trade.
Beyond the IPR protection issue, not all is gloom and doom in Sino-American trade relations. There is some significant praise in the report from the US Chamber of Commerce as well. For example, the report notes, "The process by which the business community in both China and the US and their governments are working together to fully implement China's WTO commitments is fostering positive changes in China's trade and investment regimes".
Among the positive achievements cited are China's early phase-in of trading rights for wholly-owned companies, the reduction in "burdensome" capitalization requirements for foreign investment in the insurance and trading sectors and growing transparency in the way China's Ministry of Commerce drafts new regulations. The US Chamber also states that China has made some progress in addressing such longstanding problems as the implementation of its tariff-rate quota (TRQ) system.
Yet, in its overall tone, the US Chamber of Commerce's report this year is far more critical than its two predecessors. It stresses unequivocally that Beijing needs to fully open its market in such critical areas as agriculture, automotive, construction and engineering, express delivery, insurance and telecoms. Moreover, China's record on standards and granting trading rights and distribution services to foreign companies is an issue that needs to be clarified in the coming year as well.
It should be noted that there are significant differences in the overall assessment between different sectors and even within industries, depending on the aptitude of individual US firms to come to terms with the opportunities and challenges posed by China. While the report notes concerns about continued confusion in the regulatory environment for foreign companies, Richard Holwill, Alticor, Inc's vice president for public policy and the co-chair of the US Chamber's East Asia Task Force, noted that his company has seen significant progress with regard to regulations governing sales away from a fixed location. Holwill stressed, "We praise Chinese officials for their efforts to consult with us on regulations that govern the direct selling industry".
In other words, while the criticism of Beijing actions in this year's US Chamber report is a bit more strident than was the case in the last two years, the US business community continues to have a positive attitude toward evolving commercial relations between the two countries. Nevertheless, it is clear that the IPR protection issue threatens to seriously disrupt bilateral relations if China does not redouble its enforcement efforts.
DOC Seeks Comments on Changes to NME
Practice in AD Proceedings, Targets China
The US Department of Commerce (DOC) has solicited public comments, which are to be submitted no later than 15 October 2004, on its "separate rate" practice in anti-dumping duty (AD) proceedings that deal with non-market-economy (NME) countries. In response to its previous request for comments, of 3 May 2004, the DOC had received twenty-three submissions. Taking into account these submissions, the current notice outlines revised options for such changes and gives the public the opportunity to comment on whether those changes would be consistent with the statute and would redress problems that have been identified concerning separate rates appropriately. The DOC intends to consider additional modifications to its NME practice and may solicit additional public comment in the future.
NME practice stipulates that producers in countries like China or Vietnam are subject to government control and thus should all be assigned a single, countrywide rate unless they can demonstrate an absence, both de jure and de facto, of governmental control over their export activities. AD orders are assigned only to exporters, regardless of which entity produces the subject merchandise. The DOC's "separate rate" test is not concerned, in general, with macro-economic or border-type controls, such as export licenses, quotas and minimum export prices. Instead, the test focuses on controls over the investment, pricing and output decision-making processes at the individual firm's level.
To establish whether a firm is sufficiently independent from government control of its export activities to be entitled to "separate rate" treatment, the DOC analyses each entity that exports the subject merchandise. If a company can prove that it is not subject to governmental control, then the DOC assigns the respondent its own, individually calculated rate. In the case of a non-investigated or non-reviewed firm, the DOC assigns a weighted-average of the rates of the fully analysed companies, excluding any rates that were zero, de minimis or based entirely on facts available.
Currently, DOC considers all submitted requests to review their eligibility and may ask for further proof in separate communications. However, the increasing number of requests for "separate rate" treatment in recent years as well as the increasing need to issue supplemental questionnaires have created a significant administrative burden for the US government.
Moreover, the situation has been complicated by foreign trade practices. For example, in cases where the rates vary from exporter to exporter, there exists an incentive for exporters assigned with a higher rate to ship the merchandise through an exporter assigned a lower rate. If NME producers sell subject merchandise through exporters located outside the NME country, the DOC applies a rate to the NME producer only where there is evidence that the NME producer knows that the ultimate destination of the merchandise is the US. In particular, the DOC has noted that recent AD actions have revealed that the relationship between Chinese producers and resellers outside the Chinese mainland can be complex and difficult to assess.
In an effort to remedy these shortcomings, the DOC has proposed to process only those "separate rate" requests from respondents that submit completed applications with all the required documentary proof certifying their eligibility for separate rates. In addition, the DOC will require respondents to complete and submit the application forms electronically on the Import Administration's website. Moreover, to prevent the potential evasion of dumping duties by NME producers that ship through exporters enjoying lower AD rates, the DOC has proposed to assign exporter-producer combination rates, instead of exporter-specific rates, as is currently the case.
Finally, to prevent the evasion of AD orders, the DOC has proposed to institute a rebuttable presumption that NME producers are aware that their goods will be destined for the US market, and that they set the export price of the goods. The DOC will assign AD rates to these producers, not the resellers
APHIS Issues Rule on Importation of Wood
The Animal and Plant Health Inspection Service (APHIS), US Department of Agriculture (USDA), has issued a final rule amending the regulations for the importation of un-manufactured wood articles to adopt an international standard. The standard, entitled "Guidelines for Regulating Wood Packaging Material in International Trade" (ISPM guidelines) was approved by the Interim Commission on Phytosanitary Measures of the International Plant Protection Convention on 15 March 2002.
The final rule, which will take effect on 16 September 2005, calls for "regulated wood packaging material" - a term which replaces the previously used term "solid wood packing materials" - to be either heat treated or fumigated with methyl bromide, and marked with an approved international mark certifying that the treatment has occurred. The US may demand immediate re-export of regulated wood packaging material without the required mark. The modification will affect all persons using wood packaging material in connection with exporting goods to the US. The final rule also exempts from the rule wood pieces that are less than 6 mm (0.24 inches) thick in any dimension.
October 6, 2004
Congestion at the Ports of the West Coast,
Due to the peak season for shipping holiday merchandise to the US, a congestion has built up recently at the ports of Los Angeles and Long Beach in California. It is now taking about six to eight days to unload the cargoes from a vessel, twice as long as the normal time.
To relieve the congestion, the port authorities are hiring an additional 3,000 to 4,000 workers and extending terminal gate hours. But the congestion may not be solved in a short period of time. As such, exporters should take into consideration a possible delay of their delivery. They are advised to try to make earlier shipments, and to check with their shipping companies for the latest developments.
HK officials to attend PPRD forum
Chief Secretary for Administration Donald Tsang will attend the opening ceremony of the "Pan-Pearl River Delta Provincial Capital City Mayors' Forum" in Guangzhou on Thursday.
Secretary for Commerce, Industry and Technology Mr John Tsang will speak at the forum, which is jointly organised by the nine PRD provincial capital cities: Fuzhou, Nanchang, Changsha, Guangzhou, Nanning, Haikou, Chengdu, Guiyang and Kunming.
The forum will open on Thursday afternoon, to be followed by the formal session on Friday morning. The mayors will address the forum on how to make full use of the advantages and synergies of these cities, Hong Kong and Macau in promoting co-operation and development of the Pan-PRD region.
HK Gov't to showcase IT at Guangzhou Fair
Mr Tsang will also attend the opening ceremony of the Guangzhou Fair which will be held on Thursday morning.
Government Chief Information Officer Alan Wong's office will take part in a thematic exhibition on electronic government application and exchange to showcase the achievements of the Hong Kong government in e-government and information infrastructure.
Hong Kong Economic & Trade Affairs Director for Guangdong Peter Leung, Deputy Secretary for Constitutional Affairs Grace Lui and a few other related officers will also attend these events.
Green Light for Four Major Incentives to
According to Zhang Guobao, deputy director of the National Development and Reform Commission and director of the State Council's Northeast Revitalization Office, the central government has given the green light to four major policies in support of revitalising the old industrial bases in the Northeast. These are:
The State Council has approved the overall policy for VAT pilot reforms, and the Ministry of Finance and State Administration of Taxation have issued the implementation details which went into effect on 1 July 2004.
The pilot reforms in social security have been extended from Liaoning to Heilongjiang and Jilin, and full-scale implementation is now under way. The 3.75% contribution by central coffers and 1.25% by the employer now make up the 5% personal account. This paves the way for further reforms of state-owned enterprises.
Pilot reforms have been launched to relieve enterprises from certain social duties in the Northeast. The authorities in the region and the four state-owned commercial banks have worked together and proposed policies and measures to resolve the issue of mounting non-performing loans. Also, the policy of extending pilot reforms in the economic restructuring of resource-type cities is under study.
Agricultural tax exemption and reduction have been introduced in Heilongjiang and Jilin to reduce the burden of farmers.
Zhang also revealed that the state is formulating policies to support the development of the key equipment industry in the Northeast. A total of 160 projects have been launched to renovate old industrial bases and industrialise new technologies in the region. Work has also begun on 15 subsided mine management projects.
Spain's air links with China grow, global cargo sales slow - report from Air Cargo Forum and Exposition 2004, Bilbao 5 Oct 2004
World air cargo is set to grow at only 5.3% between 2004 and 2006, according to data delivered by the International Air Transport Association (IATA) at the world's largest international air cargo show held this year in Bilbao, Spain.
The Air Cargo Forum and Exposition delegates heard that the estimated slower world traffic into the coming two years contrasts with a projected growth of 11.3% in 2004 over 2003, largely propelled by the massive leap of trade in and out of China.
The lower growth going forward will be due to expected large hikes in the price of aviation fuel, which will represent up to 16% of air cargo operators' costs, said IATA's director, Giovanni Bisignani.
But the uncertainty of the air cargo business was not the only issue in the minds of the 5,000 visitors, representing companies from 50 countries at the two-day event held in late September.
It emerged that Spain is beginning to take a more pro-active role in attracting Asian trade, with designs on becoming the major aviation passenger and cargo hub between the EU and China.
The leading Spanish tourism operator, Maresans-Spanair, reported that it plans to start direct flights between Barcelona and Beijing/Shanghai, with two or three departures per week. The company also intends to develop an aviation maintenance hub.
At Barcelona Airport, work is underway for a third runway (formally open on 29th September 2004), with a new passenger terminal - and officials expect passenger capacity to leap from 20 million a year currently, to over 50 million.
There are also moves by the Spanish Ministry of Industry to request that national carrier Iberia Airlines to establish regular routes between Madrid and Beijing, while no-frills Air Europa also plans to fly to China.
dash for the faux eyelash is a wink in the right direction
Over 100 beauty parlours in Kunming are in the business of eyelash grafting. The polyethylene eyelashes used for the operation are made in China and come in black, dark brown, deep purple, dark blue, as well as in other colours.
Customers can choose their favourite lash colour or take the advice of professional beauticians, and there is even a choice of glue to be used for the graft.
Imported glue mainly comes from Germany and Japan, while local products are made in Guangdong.
Prices vary according to the type of glue to be used, with the grafting taking place using imported glues. The actual glue costs between Rmb160 and Rmb300 (between HK$150.9 and HK$283), while grafting with glue made in China is priced at between Rmb100 and Rmb200 (between HK$94.3 and HK$188.6).
There is usually a three-month warranty, with free replacement any time within three months of the date of graft being offered.
Unlike traditional false eyelashes, these nifty eyelashes are grafted one by one onto the natural eyelash, and therefore look fuller and more natural. They can be applied to suit different features and effects, and make sparse eyelashes look much fuller.
These polyethylene lashes also make it possible to change the shape and colour of one's eyelashes at any time.
The drawback for grafted eyelashes? They do not last long, but it is precisely for this reason that beauty parlours can look forward to a steady source of income.
One beautician who specialises in eyelash grafting says she mostly handles four clients a day, sometimes as many as eight, with each client taking between one and two hours of her time.
Many women who want to look more fetching in these more dashing lashes are willing to try grafting, despite the relatively high price.
For some, the temptation of looking more attractive is so great that they go back at least once every three months, suggesting that this is a feature which is due to make a big difference to the fortunes of the parlours that accommodate the new "dash for the lash" craze.
October 2, 2004
Jiangmen: Gateway to Western PRD Market
With the implementation of CEPA, proposed construction of the Hong Kong-Zhuhai-Macau bridge, and launch of the pan-PRD and Greater PRD strategies, Jiangmen's role as the gateway for Hong Kong, Macau and PRD to the markets in western Guangdong and China's southwestern region has been further enhanced.
The city of Jiangmen is administratively divided into three districts, namely Pengjiang, Jianghai and Xinhui, and four county-level cities, namely Taishan, Kaiping, Enping and Heshan. Jiangmen boasts a well-developed transport network, with the total length of highways ranking top among all prefectural cities in Guangdong province. Plans are afoot to build a so-called "90-minute economic circle" incorporating Hong Kong, Macau and Jiangmen. The city is developing itself into a leading energy base in Guangdong. Construction of the 9 million-kwh Taishan Power Plant -- the largest of its kind in Asia -- is gathering momentum, with the first two generator units of 1.2 million-kwh each being operational. Its excellent ecosystem and living environment have won the city several awards in recent years, including "China's Top Tourist Cities", "National Garden Cities", "National Hygienic Cities" and "Cities with Excellent Living Environment in China". This year, Jiangmen strives to achieve the status of "National Environmental Protection Model Cities". The municipal government is also introducing the ISO quality management system to help raise administrative efficiency and provide quality service to investors in the city.
Advantages for Development Highly Recognised
Jiangmen is a pilot city for both the informatisation initiative in China and the Regional Infrastructure for Sustainable Economies (RISE) plan of the Pacific Economic Cooperation Council (PECC). In the investment climate survey report compiled by the World Bank in 2003, Jiangmen was ranked fourth among 23 mainland cities after Shanghai, Hangzhou and Dalian. Jiangmen's ratings are the most outstanding in seven areas, namely infrastructure facilities, labour supply, ratio of joint venture enterprises, government informal charges, taxation, productivity and investment rate. Jiangmen is also the only city in Guangdong that has been rated as one of China's top 50 zones with favourable investment climate.
Sound Manufacturing Base
The economic development of Jiangmen had topped the provincial league during the early days of reform and opening up, with a sound manufacturing foundation being laid in the city. However, due to the lack of convenient transport links, relatively low degree of informatisation of the traditional industries, limited clustering effect, and inadequate innovative capability, the pace of development of Jiangmen has gradually lagged behind that of cities on the east bank of the Pearl River such as Dongguan and Shenzhen. At present, the economy of Jiangmen ranks fourth among all cities in Guangdong. In 2003, the city's GDP reached Rmb73.1 billion, with per capita GDP reaching Rmb19,200. Industrial output value stood at Rmb153.9 billion.
A comprehensive, outward-oriented industrial sector spanning from traditional processing activities to new- and high-tech industries has taken shape in Jiangmen. The city boasts the capability to design and manufacture more than 5,000 types of industrial products. Among these, Jiangmen is the largest producer of 20 types in terms of production scale in Guangdong or across China. Today, the city has grown into one of China's leading production bases for textiles and garment, chemical fibres, leather goods, food and paper products. Of these, Jiangmen's motorcycle output accounts for 10% of the national total and commands over 6% of market shares. Its outputs of chemical fibres and washing machines make up 80% and 43% of the Guangdong market respectively.
The pillar industries of Jiangmen are: electronic information products, electrical machinery and equipment with home appliances as the core products, textiles, chemical fibres and garment, food processing and production, and transport equipment such as motorcycles and parts and components thereof.
At present, several industry clusters have emerged in Jiangmen, including motorcycles and related parts and components in the city itself; glass, jewellery and hardware and sanitaryware in Pengjiang district; stainless steel products, containers and ship breaking in Xinhui; food, textiles and chemical fibres, and water heating and sanitaryware in Kaiping; microphone and audio equipment in Enping; and footwear and printing in Heshan.
Continuous Improvement in Infrastructure
The natural barrier of the Pearl River estuary and inefficient transport links have for a long time put the city of Jiangmen in a disadvantaged position as a destination for relocating manufacturing activities from overseas. In view of its lag behind cities on the east bank in terms of development, Jiangmen attaches great importance to the construction of transport and infrastructure facilities.
Over the past few years, Jiangmen has spent an average Rmb2 billion a year to improve its infrastructure with emphasis on highways. A modern road network comprising highways, first-, second- and third-class roads has been established in the city. Highways that are now fully operational include the Foshan-Kaiping, Jiangmen-Heshan, Kaiping-Yangjiang, coastal western Guangdong, and Taishan south-north highways. Highways that are under construction include Jiangmen-Zhuhai and Jiangmen-Zhongshan. Upon completion, the total length of highways in Jiangmen will increase to 310 km, the longest among all prefectural cities in the province.
Jiangmen is served by six wharves totalling 360 berths with a combined annual throughput of 20.32 million tonnes. In 2001, the State Council approved the port of Xinhui to operate freight forwarding service and open to foreign-registered vessels. The 65 sqm Yingzhou Lake area, a national first-grade open port, enjoys the status of an open zone. During the Tenth Five-year Plan period, the 5,000-tonne class waterway access to international waters at Yamen and the ones at Laolonghu and Tanjiang have begun dredging work. Meanwhile, the 3,000-tonne class waterway section between Xinhui and Zhaoqing is being dredged, and the port of Yutang in Taishan is being upgraded to an international freight distribution centre comparable to the ones in western PRD and in western Guangdong.
With improvements in the pipeline and growing economic integration of the areas along the Xijiang River, Xinhui is poised to become a leading port in western PRD while Yingzhou Lake will become an economic zone specially targeted at both domestic and foreign investors. In 2003, the container throughput of Jiangmen port ranked tenth in the country and fourth in Guangdong.
As for railways, the Jiangmen section of the Guangzhou-Zhuhai railway and the Jiangmen line of the Guangzhou-Zhuhai Inter-city Express Light Rail are both in the preparation stage. Upon completion, these lines will significantly boost the city's infrastructure.
All these are paving the way for Jiangmen to develop into a logistics hub in western PRD.
Changes under CEPA
In the 1990s, Jiangmen had lagged behind cities in the east bank of the Pearl River because of its less advantageous geographic location. This explains why Jiangmen has been so pro-active in leveraging the new opportunities under CEPA to propel its development to a new level. Since the signing of CEPA, the city has hosted a series of promotions including a seminar on Guangdong-Hong Kong-Macau economic cooperation and the development of Jiangmen, and a seminar on SMEs going global in conjunction with a presentation introducing the services of the Hong Kong Trade Development Council. These events explored the benefits of CEPA to Jiangmen's economy and explained the investment climate and related policies of Jiangmen to prospective Hong Kong investors.
The Jiangmen municipal bureau of foreign trade and economic cooperation has established a dedicated unit to provide advisory service to foreign investors on issues concerning investment environment, laws, regulations and policies, and administration and registration procedures. Special counters known as "green channel" have also been opened at the city's industry and commerce administration offices to serve investors from Hong Kong and Macau.
In August 2003, the 6th Hong Kong/Guangdong Cooperation Joint Conference decided to set up a coordination committee for the preparation of the Hong Kong-Zhuhai-Macau bridge and the project formally entered the implementation stage. When the bridge is completed, the role of Jiangmen in linking western Guangdong with the transport hub in the PRD will become more important. Hong Kong's logistics services are expected to penetrate the whole western PRD market with the completion of the bridge. The increases in sea and air freight volume for Hong Kong are projected at 30% and 35% respectively.
In April 2004, the foundation laying ceremony for the Xinhua Guanhui Car City in Heshan, a Hong Kong-invested project with a total investment of Rmb200 million, was held. Occupying an area of 700 mu, the car city will feature 100 exhibition halls offering cars of different famous brands both from overseas and within China. A full range of support and logistics services will also be available. It is the largest Hong Kong investment project in the city after the signing of CEPA.
Opportunities for Hong Kong
The greatest opportunities for Hong Kong companies in Jiangmen under CEPA lie in services. Jiangmen has a sound economic foundation and comprehensive manufacturing sector but a relatively backward services sector. It urgently needs to raise the efficiency of its services sector to facilitate the further development of its industries. There is enormous development potential in services such as management consultancy, convention and exhibition, construction, logistics, franchising, advertising and tourism. These are promising sectors for Hong Kong service providers.
Due to limited land resources and the environmental constraint in the east bank of Pearl River, the core region driving economic growth in Guangdong may shift from the east bank to the west in future. Growing industrialisation has taken its toll on rising operating cost and saturation in eastern PRD both in terms of land, industry type and talent. Industries are seen to be gradually shifting to the west.
By comparison, wages and other operating costs are lower in western PRD. Besides, as mentioned above, the western part has its share of advantages including a strong manufacturing base. Home electrical appliances, motorcycles, lighting and furniture produced in Jiangmen are very well received. What the city lacks is experience in product design, sales and overseas marketing. Hong Kong can play an important role in these areas by providing a full range of top quality producer services and professional services to help mainland enterprises increase competitiveness and speed up the convergence of western PRD with international practice in terms of production.
As a gateway for Hong Kong to enter the western PRD market, Jiangmen has a unique advantage over neighbouring Zhuhai, Zhongshan, Foshan and Zhaoqing, thanks to its abundant land resources (10 times the area of Hong Kong). Besides, upon completion of the Hong Kong-Zhuhai-Macau bridge, Jiangmen will become closer to Hong Kong.
Jiangmen has always been an investment hot spot for Hong Kong companies among other western PRD cities. Hong Kong is currently the largest source of foreign investment in the city, accounting for 70% of the total. There are over 2,100 Hong Kong-invested enterprises operating in Jiangmen, making up more than half of the total number of foreign-invested enterprises, with total investment close to US$7 billion. Among these, more than 1,700 are engaged in manufacturing, with total investment exceeding US$4.4 billion. Investments in the services sector are concentrated in real estate, hospitality, restaurants, construction and other public services. Among these, investment in real estate alone amounts to nearly US$900 million, or one-third of the total in the services sector.
At present, due to state policy restrictions in areas such as wholesale and retail, warehousing and business services, less than 100 foreign-invested enterprises have been established in the services sector in Jiangmen. None has been established in the management consultancy and finance sectors. With the lowering of market entry threshold and decentralization of approval right under CEPA, Hong Kong companies will find more opportunities to invest in the above-mentioned sectors.
Catalogue of Priority Industries for
Foreign Investment in Central & Western Regions Revised
The State Council-approved Catalogue of Priority Industries for Foreign Investment in the Central and Western Regions (2004 Revision) was jointly released by the National Development and Reform Commission (NDRC) and the Ministry of Commerce on 23 July and went into force on 1 September 2004. The move signals the central government's support for expediting the development of the western region, fostering economic growth of the central region, and reviving old industrial bases in the northeast.
According to NDRC, it took two years to revise the catalogue which embodies four major principles:
Competitive advantage. Support will be given to priority industries and enterprises in the central and western regions with abundant supply of certain resources and niche products, and a good foundation in terms of foreign investment and cooperation.
Timeliness. Strong support will be given to key projects and enterprises which are in line with state industrial policy and attract the interest of foreign investors. Preferential policies will be offered.
Efficiency. Energy-saving, environmental protection, and avoidance of low-end, overlapping construction are encouraged.
Further liberalisation. All of the items listed in the catalogue belong to the permitted or restricted category under the Catalogue for the Guidance of Foreign Investment Industries, while the number of items under the encouraged category is significantly increased in the central and western regions. This further liberalisation is in line with China's WTO commitment and overall strategy of opening up.
The revised catalogue contains a total of 267 priority industries in 20 provinces and autonomous regions in the central and western regions, namely Shanxi, Jilin, Heilongjiang, Anhui, Jiangxi, Henan, Hubei, Hunan, Chongqing, Sichuan, Guizhou, Yunnan, Tibet, Shaanxi, Gansu, Qinghai, Ningxia, Xinjiang, Inner Mongolia and Guangxi. These industries come under the following sectors:
Exploration of certain mineral resources, such as the mining and processing of borax, szaibelyite ore and chrome ore, deep processing of tungsten and molybdenum, and exploration of nickel ore.
Reforestation of cultivated land and deep processing of special animal and plant resources, such as development of grains and oil seeds, deep processing of grease, comprehensive processing of tea leaves, planting and deep processing of lycium, processing of beet sugar, and comprehensive utilisation of by-products.
Development of priority industries at local level, such as the processing of auto parts and components, production and development of downstream chemical products of natural gas, production of chip solid tantalum capacitors, and other ethnic products.
Liberalisation of public utilities, such as the construction and operation of pipeline network for gas supply, heat supply and drainage in urban areas (originally under the restricted category), development of tourist scenic spots and construction and operation of supporting facilities, and development of grassland ecosystem, snowland tourist resources and forest tourist resources.
According to the Rules on the Guidance of Foreign Investment Industries promulgated by the State Council, this catalogue and the Catalogue for the Guidance of Foreign Investment Industries are the two sets of approval guidelines for foreign investment projects which form the basis of policies governing foreign-invested enterprises. Foreign investment projects covered by the revised catalogue are entitled to policies extended to "encouraged" projects under the Rules on the Guidance of Foreign Investment Industries and preferential policies listed in the Circular of the General Office of the State Council on the Views on Further Promoting Foreign Investment.
Compared to the Catalogue for the Guidance of Foreign Investment Industries, the revised catalogue features a new "encouraged" category of 267 projects and the number of projects subject to equity ratio restrictions has been reduced from 48 in the former to six. This reflects the policy support given to the further opening up of the central and western regions.
The revised catalogue replaced the 2000 version on the date of its implementation. Projects approved prior to the implementation date will continue to be subject to the relevant policies. Projects in the planning stage that come under the revised catalogue may follow the respective polices stipulated therein.
Details are available at NDRC's website at http://www.sdpc.gov.cn/
17 Retail Business Modes Clearly Defined
The new national standards on the Classification of Retail Business Modes, jointly promulgated by the Ministry of Commerce (MOFCOM), General Administration of Quality Supervision, Inspection and Quarantine, and Standardisation Administration of China and to be implemented on 1 October, give clear definitions on 17 retail business modes, their classification criteria and functions.
As stressed by MOFCOM, the standards should provide a basis for cities to map out their commercial layout and structure so that commercial, economic and social developments are in line with people's changing consumption trends and various business modes can develop in a complementary, coordinated way. Cities which have completed their commercial layout planning should further amend and refine it according to the new standards. During the planning process, attention should be given to combining the development of new business modes with the upgrading and reform of traditional ones, as well as coordinating mainstream and niche business modes. Development of convenience stores, discount stores and small- and medium-sized supermarkets will be encouraged while new business modes such as warehousing-style supermarkets, professional stores and specialty stores will be emphasised.
Under the new standards, retail outlets are classified by their structural characteristics, operation mode, product mix, functions, location, scale, in-store facilities, target customers and business premises into 17 business modes. The 17 are: grocery stores, convenience stores, discount stores, supermarkets, hyperrmarkets, membership warehouse-style supermarkets, department stores, professional stores, specialty stores, home centres, shopping malls, factory outlets, TV shopping, mail order, on-line shops, automatic vending machines and tele-shopping.
"Green Card" to Attract Foreign Talent
With State Council approval, the Ministry of Public Security and Ministry of Foreign Affairs promulgated on 15 August the Administrative Measures on the Examination and Approval of Permanent Residence of Aliens in China, a vital step towards instituting a standardised system regarding the granting of permanent residence to foreign nationals.
The move underlines the Chinese government's efforts to align with the rising trend of economic globalisation and to further reform and open up its domestic market, which have created an urgent need for attracting foreigners to China to invest, do business or engage in various technological and cultural endeavours. At the same time, a number of high-level foreign personnel have also requested permanent residence in the mainland.
In response to this need, the Chinese government has, in the past, announced a series of laws and regulations concerning foreigners' entry/exit and permanent residence. To date, over 3,000 foreigners have been granted the right to stay permanently in the country.
The new measures contain altogether 29 articles which stipulate clearly, in regard to foreigners' application for permanent residence in China, the eligibility criteria, examination and approval procedures, and legal validity of the Alien Permanent Residence Permit, offering legal protection to the granting of "green cards" in China.
Marked Prices for Property Management
In order to increase the transparency of charges of property management services and protect the legitimate rights and interests of property owners, the Ministry of Construction and the National Development and Reform Commission jointly promulgated the Regulations on Marked Prices for Property Management Services, which will take effect on 1 October 2004.
Under these regulations, property management enterprises must make use of notice boards, rate charts, fee lists, fee brochures or multimedia search terminals to implement marked prices. They must clearly indicate in prominent positions in their service area or fee collection points their name, the chargeable items, content and standard of services, charging method, charging period, items and standards of charges, forms of price management, basis of charges, and telephone number for fee-related complaints.
For government-guided property services, it is necessary to indicate the benchmark rates, floating rates and actual rates at the same time. Property management companies entrusted to collect charges for water, electricity, gas, heating, telecommunication, cable TV and other services should also clearly indicate the charging standards in accordance with regulations. For services outside the property service contract provided by property management companies to owners, the charging standards should also be clearly communicated to owners by appropriate means upon agreement between the two parties.
In case of changes in charging standards, property management companies must make the necessary adjustments one month before the new standards take effect and indicate the date the new standards become effective. Property management companies failing to implement marked prices or practising price frauds will be punished by the government's price department.
September 30, 2004
US companies urged to adjust to world
changes - Bing Lan
United States' companies that are less competitive in global trade may need to make adjustments to cope with "structural changes of the world economy that follow China's development," said Robert Kapp, president of the US-China Business Council, the principal organization for US companies engaged in business with China.
Kapp said he believed it would be inevitable that there would be job losses in the US because of exports of inexpensive Chinese products.
Sometimes when he heard accusations that Chinese products were making Americans unemployed, he would remind them that Chinese workers had been laid off in the process of the country's reform and opening up to the world.
"It is all about modernization," said Kapp, a former Yale professor on Chinese history, in an interview with China Daily at the World Economic Forum's Beijing meeting earlier this month.
Still, Kapp said the United States is now delicately balanced between supporting free trade and supporting protectionism and that was a reality that people doing business in China-US trade have to face.
But by and large, China-US trade is on a more predictable course than it used to be, he said.
Kapp, who took up his present position in 1994, said the most stressful years for US' companies doing business in China were 1994 to 2000, when they had to lobby hard for Normal Trade Relations (NTR) with China.
During those six years, the US Congress would engage in with politically-charged debate on NTR with China every year. Without NTR, the China-US trade would have been subject to high trade barriers that would have hurt the commercial interests of both sides.
In 2000, the US decided to have Permanent Normal Trade Relations (PNTR) with China, which paved the way for the endorsement of bilateral negotiations for China's joining of the World Trade Organization.
Kapp declined to tell in detail how US' business circles lobbied for the NTR and PNTR with China, but he said they did put considerable efforts into mobilizing forces in their favor.
"Our efforts are quietly effective," he said.
Now life seems more easy than those days.
There is no coalition in the US that fights for strong US-China trade relations despite expanding business ties between the two.
According to statistics compiled by China's Ministry of Commerce, bilateral trade volume reached US$126 billion last year. So far, US companies have invested more than US$45 billion in China.
But Kapp said US' businesses in China trade did not have to worry about an immediate crisis such as the NTR debate.
He said that in some US' businesspeople's minds, China was still stereotyped as a mysterious oriental country.
But as China's market economy develops and US' companies' experiences grow, they are seeing more familiar phenomena in the market and it is more "comprehensible," Kapp said.
He said romantic imaginings about the enormous Chinese market were already over. "Nobody is talking about selling to everyone of 1 billion people. They are now more sophisticated in spotting which part of the Chinese population they should target.
"However, as ever, new challenges keep emerging."
As China integrates into the global economy, the challenge now is that "every company has to decide how China fits into its overall operations," he said.
Lots of US' companies have been in the Chinese market for years, but today they still have to work out a new answer to the question about what they should do to be able to succeed in China.
But they might need to do it again tomorrow because "China is not static... it is moving."
September 29, 2004
China-made furniture, European design, US market - European furniture - but made in Asia
With the US construction boom has come a
major up-tick in opportunities for different styles of furniture - and China is
accommodating European styles, but at much lower prices, for American consumers.
The rising market has contributed to the success of retail giants such as Pottery Barn, Z Gallery, as well as smaller players such as West Elm.
Although much of the furniture may appear to be expensively made, labels printed with "Made in China" (or alternatively India, Malaysia or the Philippines) adorn the bottoms of an estimated 50% or more of the products.
With the ever-rising currency valuation of the Euro against the US dollar, this was the best idea US importers could think of to keep the trade active and their margins at acceptable levels.
The trouble is that importers are facing a bigger challenge as major retailers seek lower wholesale prices - and the thinnest margins are often the ones that make the deals.
"With the rising cost of the Euro, we can't stay competitive," says Emilio Mila of Mila International Corp, the Miami-based importer of mid to high quality glass and crystal decorations.
Although the company has imported for over 35 years in Europe, there could be new leads out of Hong Kong. Mila International attended the Hong Kong Gifts, Houseware & Toys fair in search of new leads, and plans to communicate with companies encountered.
Mila said that the quality of China-made goods have increased from when he encountered them earlier in his career, a welcome surprise and an incentive for exploring quality and competitive pricing in Asia.
Shenzhen Sets Penalty for Wage Arrears
The Standing Committee of the Shenzhen City People's Congress recently passed the Regulations on the Payment of Wages to Employees. The draft regulations set standards for the payment of wages and make provisions for the prevention and tackling of wage arrears and of withholding workers’ wages, relief for affected workers, and other aspects. Hong Kong companies must take note in order not to commit offences.
It is understood that over 70% of labour disputes in Shenzhen this year are related to wage payment. The draft legislation stipulates that "an employment unit that withholds its employees' wages or delays wage payment for no reason must pay its employees the full amount due within a time limit set by the labour department in addition to a financial compensation equivalent to 25% of the unpaid wages." It also provides that “the labour department may impose a fine of Rmb10,000 to Rmb50,000 if an employment unit refuses to pay the withheld or arrears wages within a prescribed period of time."
Some units do not issue pay slips to their employees or pay no attention to the safekeeping of information on the payment of wages. Such negligence on the payment of wages can easily lead to labour disputes. The draft regulations clearly stipulate that an employment unit should maintain a detailed payroll sheet on the payment of wages, and that these payroll sheets should be kept for at least two years. The employment unit should also issue pay slips to individual employees, the content of which should be identical to the payroll sheet, to be signed by the employees. The draft also states that the labour and social security department may impose a fine of Rmb20,000 to Rmb50,000 on units that fail to maintain or keep payroll sheets, issue pay slips to their employees or ask their employees to sign their pay slips.
Some construction units subcontract jobs to unqualified subcontractors who do not sign any labour contracts with migrant workers, resulting in serious defaults of wage payment. In view of this, the draft specially stipulates that if a construction unit, general contractor or other unit subcontracts jobs illegally to organisations or individuals that are not registered, not qualified to employ workers or do not have the necessary qualifications in construction activities, and these organisations or individuals delay wage payment, the unit that subcontracts the jobs should pay for the arrears wages.
The new measures also make clear provisions for issues such as overtime pay, holiday pay, wage payment under special circumstances, wage deductions and minimum wage.
pedestrian shopping area for Northwest China
The newly-completed Luomashi Pedestrian Shopping Area combines shops with leisure, catering, entertainment and tourism. Its completion will further expand the scope and influence of Xian's Bell Tower area and give a boost to commercial diversification of the area.
The project involves a total investment of Rmb1.5 billion (HK$1.4 billion), with a total construction area of 250,000 sqm.
The shopping centre is divided into three zones which comprise the central square, the northern district near Dongdajie and the southern district near Dongmutoushi.
The central square, with an area of 7,000 sqm, will include the Liyuan Cultural Square, a museum, a large performing arts centre and an artificial waterfall.
The 1,000 sqm theme museum is on the ground level, adjacent to which is a 27 m by 6 m waterfall cascading into a 700 sqm pool. The performing arts centre is on the first floor, with an area of 5,000 sqm and 800 seats.
The northern district has a total area of 78,000 sqm and comprises six levels. The first five levels are for shops and the sixth is taken up by key units: a cinema complex, an indoor ice skating ring, a large games parlor, and a food hall.
The southern district has a total area of 79,000 sqm and comprises seven levels, with a 1,300 sqm resting area. On the fifth to seventh levels is a 24,000 sqm complex which includes baths and spas, venues for performing arts and a star-class hotel.
The complex could well comprise the main form of night life in Xian, come 2005.
The northern and southern districts have an upper underground level with a combined area of 36,000 sqm.
There is an underground shopping street linking the two districts - which is lined with shops and supermarkets.
There is also an underground traffic lane 300 m long and 10 m wide to provide a waiting area for cars.
The lower underground level of the northern district has an area of 18,000 sqm encompassing streets of different styles. These include four western-style streets, named after European and American thoroughfares. They include Boulevard Champs-Elysee, Ancient Roman Boulevard, Las Vegas Boulevard and Hollywood Star Boulevard.
There is an auto exhibition hall in the northern district and a 20,000 sqm carpark for 800 cars in the southern district.
Luomashi Pedestrian Shopping Area includes five shopping streets above and below ground level, with each more than eight m wide and over 300 m long.
There are 140 escalators in the entire shopping area.
After the completion of the pedestrian shopping area, Luomashi Street will be widened from 20 m to 25 m, the North and South Liuxiang lanes will be widened to 15 m and Dongmutoushi will be widened to 25 m. Together with Dongdajie Street, Luomashi will be surrounded by thoroughfares on all four sides.
All transport stations are within 300 m of the shopping street.
Debenham Tie Leung, a leading property management company in Hong Kong, is said to have been appointed leasing manager of the project, which has Hong Kong brands and consumer goods as major targets.
September 21, 2004
It's hard to imagine that this modest
nine-storey building, sheathed in white tiles and jammed up against a
residential compound for traffic police, is the headquarters of the world's
largest TV manufacturer and one of China's first true multinationals.
Yet TCL, with 28.2 billion yuan (HK$26.59 billion) in sales last year, and an average annual growth rate of 40 per cent for the past 13 years, has been astonishing people for years. The Shenzhen-listed firm has mushroomed from a small-time maker of audio tapes to a 40,000-worker conglomerate producing everything from TVs and mobile phones to power plugs and batteries.
TCL got its start in low-tech manufacturing. Yet from its earliest days, there was something different about the company. Where other outfits focused on manufacturing, TCL was intent on building a brand name first and worrying later about where it was made.
September 16, 2004
China to Implement Energy Efficiency Label
System Next March
The National Development and Reform Commission (NDRC) and the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) recently jointly promulgated a new set of Measures for the Management of Energy Efficiency Labels, which will become effective on 1 March 2005 and will apply first to refrigerators. This represents a move by China in implementing a system of energy efficiency labels.
NDRC, AQSIQ and the State Commission of Certification and Accreditation Administration are responsible for the establishment and implementation of an energy efficiency label system for products with great energy-saving potential and wide applications. Meanwhile, the Catalogue for Products Subject to Energy Efficiency Labels defines universally applicable energy efficiency standards, implementation rules, and samples and specifications of energy efficiency labels, and enforces a system of compulsory energy efficiency labelling in the light of the successful experience in other countries. Products included in the catalogue must bear a standardised energy efficiency label in a conspicuous position on the product or its packaging, with explanations given in the manual. The system is implemented by way of self-declaration and registration by producers or importers and strict supervision and management by the government departments concerned.
According to an NDRC official, energy efficiency labels are information labels on the product or its packaging. As indicators of the energy efficiency level and other performance indicators of products, they provide users and consumers with the necessary information for making purchase decisions, so that they can choose energy-efficient products.
Ministry of Information Industry Sets Up
Examination Centre in Hong Kong
With the approval of the Ministry of Personnel and Ministry of Information Industry, an examination centre for the National Computer and Software Technology Qualifications Examination will be set up in Hong Kong. Starting from this year, Hong Kong IT professionals will be able to sit for this examination and obtain mainland qualifications locally. In light of the frequent exchanges between mainland and Hong Kong IT professionals in recent years, the establishment of the examination centre will further promote exchanges in information, personnel and technology between the two places.
The move also represents a step forward in the cooperation in trade in services under CEPA. It can be expected that following the certification of IT professional qualifications in Hong Kong, progress will be made in the mutual recognition of corporate qualifications.
The National Computer and Software Technology Qualifications Examination was first launched on the mainland in 1991. About 50,000 people take part in this examination each year. There are 20 examinations for senior, middle and junior positions, held twice a year, one in the first half of the year and the other in the second half.
The non-profit Beijing-Hong Kong Academic Exchange Centre in Hong Kong will be in charge of this new examination centre. The centre’s vice president Kwok Ming-wa said the fair and strict operation of this examination centre for mainland professional services, the first of its kind in Hong Kong, should effectively promote the entry of local IT professionals into the vast mainland market.
September 15, 2004
New tools to help US exporters
The US Commerce Department yesterday unveiled new tools in Beijing to help US companies expand exports to China's growing market, one of their fastest-growing export markets.
The tools include the China Business Information Centre, American Trade Centres and the Global Supply Chain Initiative.
According to US statistics, US exports to China were up 36 per cent in the first half of the year, making China one of the fastest-growing US export destinations and the sixth-largest US export market overall.
The US Under Secretary of Commerce for International Trade Grant Aldonas said one of the biggest hurdles US small and medium-sized companies (SMEs) face in trying to export to China is a lack of information.
Some 86 per cent of all US firms exporting to China are SMEs.
The China Business Information Centre is the first comprehensive US federal government resource aimed at helping US businesses take advantage of China's rapid integration into the global economy.
The centre consists of an 800 telephone number that the public can use to speak with a China specialist, a website with China-focused information and export tools, and a series of foreign-oriented events planned throughout the United States.
American Trade Centres are designed to increase the US Commerce Department's ability to help US companies tap export markets in second-tier but very large commercial centres in China.
The Global Supply Chain Initiative aims to help US small businesses identify global supply chains that will take US manufactured goods to China.
September 4, 2004
Foreign Retailers and Wholesalers have long realized that China's "opening" did not include them. But new regulations going into effect after December 2004 will allow fully foreign-owned enterprises to establish wholesale and retail operations anywhere in the country, and promise to dramatically change China's commercial landscape.
New Measures at a Glance
Rarely has a new set of regulations possessed the potential to expand the businesses opportunities of so many foreign enterprises in China. Below is a snapshot of the major changes introduced by the Administration of Foreign Investment in the Commercial Sector (a.k.a. Commercial Sector Measures) and the recently amended Foreign Trade Law.
What's new? Foreign investors will be able to set up wholly-foreign-owned wholesale and retail companies from December 11, 2004. This will allow them to engage in wholesale and retail, import/export, franchising (up to now this has been a gray area) and distribution.
Not on the Guest List
Just to make things interesting, foreign-invested commercial enterprises are still restricted from wholesaling or retailing certain categories of products.
They are as follow:
More Regulations Coming
Wholesaling and retailing of the following products are subject to additional (mostly as-of-yet-unwritten) legislation:
|Type of Company||Regulations Before||Regulation After|
|Wholly Foreign-owned Enterprises (WFOEs)||Not Permitted (only Joint Ventures (JVs) were allowed)||As of December 11, 2004: Foreign investors receive national treatment. Minimum registered capital: RMB$500,000 (US$61,000)|
|Joint Venture (JV) Wholesale Company||Minimum registered capital: RMB80 million (US$9.76 million). Asset, turnover requirements.||As of June 1, 2004: No minimum asset value. No annual turnover requirement. Foreign investors receive national treatment. Minimum registered capital: RMB$500,000 (US$61,000)|
|WFOE Retail Company||Not permitted||As of December 11, 2004: Foreign investors received national treatment. Minimum registered capital: RMB$300,000 (US$37,000)|
|JV Retail Company||Minimum registered capital: RMB$50 million (US$6.1 million). Asset turnover requirements.||As of June 1, 2004: Foreign investor receive national treatment. No minimum asset, no annual turnover requirement. Minimum registered capital: RMB$300,000 (US$37,000).|
|Manufacturing Enterprises||Can sell only products made by the company in China||As of December 11, 2004: Can sell self-manufactured products, sourced in China and imported.|
September 3, 2004
'Fortune' magazine publishes top 100
Chinese listed companies
US "Fortune" magazine, issue September 13, published ahead of time, has appraised and selected "top 100 Chinese listed companies 2003" in accordance with their annual business incomes, the first 10 companies ranked in order respectively are: Sinopec, Petro-China, China Mobile, China Telecom, China Life Insurance, China Unicom, the People's Property Insurance of China, Five Minerals Development, Baoshan Steel Group Co. Ltd. and the China National Offshore Oil Company.
The list of the "top 100 Chinese listed companies 2003" was completed jointly by "Fortune" (Chinese Edition) and HK-based Finet Group. The scope of selection through appraisal encompasses Chinese companies listed in the markets of China's inland, China's Hong Kong, New York, Singapore and London. The various companies are placed in order on the basis of the 2003 business volumes provided by these firms to related securities exchanges. It is reported that this year is the fourth time that "Fortune" (Chinese Edition) published the list of "top 100 Chinese listed companies".
The threshold for the inclusion of "top 100 Chinese listed companies" this year has again dramatically raised, with the business volume being raised from 4.45 billion yuan in 2002 to 5.99 billion yuan, a 35 percent rate of increase. On the ranking lists published in 2000 and 2001, the business income of the company placed the last one was 3 billion yuan and 3.3 billion yuan respectively, These figures reflect the rapid growth and change of the Chinese economy and its listed companies. According to the estimate of the "Fortune" magazine, in the next three years, the qualifications for being included into the "top 100 Chinese listed companies" will be raised to 10 billion yuan, equivalent to the scale of medium-sized enterprises in the world.
The year 2003 witnessed the continued growth of China's securities market. Under the background of sustained economic growth and the gradual standardization of markets, more listed firms were carrying out IPO (initial public offer) in internal and external markets, in the meantime, listed companies scored greater achievements. What's more, because large State-owned enterprises vie with one another for restructuring and listing, listed companies have augmented their strength. For example, the China Life Insurance Company and the People's Property Insurance Company of China were placed fifth and seventh respectively as they appeared on Hong Kong markets.
The enterprises chosen and included into the "top 100 Chinese listed companies" are distributed mainly in petroleum and natural gas, iron and steel, communication and auto-making industries. For instance, Sinopec, Petro-China and China Mobile, which were ranked the first three A for four straight years, the business incomes of the iron and steel industrial enterprises, such as Baoshan Steel (ranked 9th) the Shaoshan Steel Songshan (81st) and Guangzhou Iron and Steel (92nd) have surged dramatically, the incomes of auto-building enterprises represented by the Chang'an Automotive (ranked 33rd) and Beijing Auto Fukuda (38th) have grown by more than 50 percent, thus further raising their status on the list.
The gross incomes of communication enterprises in 2003 had a 70 percent increase year on year. . Besides the three telecommunication giants China Mobile, China Telecom and China Unicom which are placed among the top 10, the Zhongxing Communication (ranked 27th), Ningbo Bird (58th) and Amoi (88th) have continued to raise their position on the list.
September 2, 2004
Chinese Medicine Distributors Have New
Legal Status in EU
The European Directive on the Registration Procedures of Traditional Herbal Medicines released by the EU formally entered into force on 30 April 2004, under which various member states are to incorporate the EU's traditional medicine laws into their national drug laws within 18 months after the latter takes effect and implement them in accordance with their local conditions. May 2004 to April 2011 is given as the transition period during which traditional medicines already on the market can enter and be sold in EU countries. In the wake of this directive, Guangdong-based Chinese medicine manufacturers are among the first to make a foray into the EU market.
Albeit being national treasures, traditional Chinese medicine (TCM) including medicinal herbs and patent Chinese drugs has yet to be legally recognized in most countries with a western medical background due to the lack of theoretical support and standardisation in the dosage, composition and efficacy of TCM. As a result, China's TCM exports can only be marketed internationally as health products, food or food supplements and are mainly sold to overseas Chinese. Market expansion has long been an onerous task.
The new EU directive, however, represents a significant stride in recognising the status of TCM. Marked impact is immediately seen in pertinent exports from Guangdong to the 25 EU member states. Patent Chinese drug exports, for instance, jumped 3.4 times in May 2004 just after the directive became effective. Although exports to the EU only make up a fraction of the total exports, many Guangdong-based TCM exporters are excited about such robust growth.
While the new directive has opened a door for the export of TCM to the EU, it also means that a series of laws and regulations concerning drug administration now apply to the production, import and wholesale of traditional medicines. The impact on TCM entering the EU market is far-reaching, with TCM exports now having to pass various certifications such as GMP and complying with quality standards in the EU Pharmacopoeia. Fulfiling these two requirements alone is no easy task for mainland TCM enterprises.
Faced with such unparalleled opportunities and challenges, people in the industry reckon that it is high time for the mainland TCM industry to step up publicity to the outside world while expediting the establishment of a system standardising the dosage, composition and efficacy of patent Chinese drugs. Such attempts at meeting major international pharmaceutical standards and passing clinical tests may one day enable TCM to be recognized globally as drugs.
Safety Requirements for Toys to Come into
Force on 1 October
With the entry into force of the National Technical Safety Requirements for Toys on 1 October, China's toy industry will be subject to regulation. According to the Ministry of Commerce, most stipulations in the new requirements comply with ISO8124. Fulfiling them will bring the safety level of China-made toys to world standards and contribute to the growth of China¡¦s toy exports.
The new requirements, covering all toys on sale in the market including those for trial use and giveaway, contain more comprehensive stipulations and illustrations on safety labelling than before. For instance, toys unsuitable for children below the age of three due to their features, sizes or characteristics will carry safety labels as such together with illustrations on their potential risks. Signs of warning for certain small parts and toys containing such parts or beads or pellets must be shown on the toys or their packaging.
There are also detailed provisions on the criteria of classifying toys by age group. Consumers can choose the most suitable toys for their children of a certain age group based on their capabilities and interest and the safety level of the toys.
The new rules also contain explicit regulations on the testing of toys. Furthermore, the new requirements have lowered the heavy metals content of toys by half and widened the scope of inspection.
State Council to Deepen Investment Reform
The State Council recently promulgated its Decision on Reforming the Investment System. The reform aims to:
Fully bring into play the basic role of the market in resource allocation, separate government and enterprise functions, and reduce administrative intervention;
Establish the position of enterprises as investors whereby enterprises can make their own decisions on investment and be responsible for their own profits and losses, while banks can make their own decisions on loan approval and bear the risks;
Rationally define the functions of government investment and guide social investment through the formulation of development plans and industrial policies and the use of economic and legal means;
Improve the decision-making rules and procedures for government-funded projects, make investment decisions more scientific and democratic, and establish a strict system of accountability for investment decisions.
In implementing the reform, emphasis would be placed on the following:
Reform the investment management system and establish the position of enterprises as investors. Enterprises should have their own say in investment matters. Government approval will no longer be required for projects not funded by the government. Instead, the systems of authorization and record-filing will be implemented where appropriate. Large enterprises will be given greater power to make investment decisions, and companies will have more financing channels. The government encourages social investment and social capital will be allowed into sectors not prohibited by laws and regulations. Financial institutions must improve their system of fixed asset loans, continuously enhance their ability and level of loan approval, and effectively ward off financial risks.
Perfect the government investment system and improve the social benefits and efficiency of government investment. Government investment will mainly be used in economic and social fields related to national security and in which the market cannot make effective allocation of resources. A mechanism for government investment accountability should be established, and authority for examination and approval should be rationally determined. Approval procedures should be streamlined and the management of investment funds should be put under proper control. The contractor system should be put in place as soon as possible for non-profit government investment projects. Local governments at all levels should create conditions to attract social capital into public welfare undertakings and infrastructure projects.
Strengthen and improve the macro-control of investment to achieve an overall balance and an optimised structure. Investment in the whole society should be brought under indirect regulation and control through the comprehensive use of economic, legal and administrative means and economic levers such as investment approval, prices, interest rates and taxation. The government should guide social investment through planning and policy guidance, dissemination of information, and market access control.
Strengthen and improve the supervision and management of investment in order to regulate and protect market order in investment and construction. It is necessary to establish and perfect a system of supervision and control over corporate investment, government investment and investment intermediaries. Legislation on investment will be strengthened, stricter supervision will be exercised on law enforcement, and investors of all categories will be required to act within the legal framework.
NDRC Official: China to Actively and
Steadily Promote Investment Reform
The State Council's Decision on Reforming the System of Investment was recently promulgated. An official in charge of the National Development and Reform Commission answered questions relating to the deepening of the investment reform in an interview.
Q. Why is it necessary to push ahead with the reform of the investment system?
A. A series of reforms has been carried out in the field of investment since the beginning of reform and opening up, as a result of which a new pattern of investment featuring pluralistic investors, multi-channel financing, diversified means of investment and marketisation of project construction has emerged. However, deep-structured conflicts and problems have not been thoroughly resolved. In particular, the power of enterprises to make their own decisions has not been fully put in place and the basic role of the market in resource allocation has not been fully brought into play. The decision-making process for government investment has to be made more scientific and democratic, and the efficiency of macro-control and supervision of investment needs to be enhanced.
The deepening of investment reform has great importance and far-reaching historical significance under the new situation. Promoting the investment reform is an important measure for establishing and perfecting the socialist market economy system and is of special importance in strengthening and improving macro-control.
First, establishing the position of enterprises as investors and reducing direct government intervention in the production and operation of enterprises will help the market better play its role in resource allocation, optimise the investment structure, improve investment returns, and promote the sustained, rapid, coordinated and sound development of the national economy and the all-round progress of society.
Second, promoting the reform of administrative management, state-owned enterprises, revenue and taxation, and finance and credit will help enterprises and banks establish mechanisms of self-motivation and self-restraint and promote the further perfection of the socialist market economy system.
Third, improving the management of foreign investment and offshore investment will help open the country wider to the outside world, utilise the international and domestic markets and resources in a better way, and expand the scope of economic development.
Fourth, accelerating the change of government functions will help the government shift the focus of its work to economic regulation, market supervision, social management and public service.
Fifth, deepening the investment reform will help eliminate blind investment and other problems and increase the internal vitality and drive for sound economic development.
Q. What is the relationship between the deepening of investment reform and the current policy of strengthening and improving macro-control?
A. Deepening investment reform is an important measure for strengthening and improving macro-control. Objectively speaking, poor systems, sluggish change of operating mechanisms, irrational economic structure and crude mode of growth are fundamental reasons why conflicts and problems have repeatedly occurred in China's economic development. In order to thoroughly implement macro-control measures for the elimination of problems of blind investment and expansion at a low level in some sectors, it is necessary to tackle both the root cause and deepen the reform of the economic system. In particular, it is necessary to further reform the investment system, establish and improve a mechanism of self-determination and self-restraint by investors, enhance the responsibility of banks in independent loan approvals, reduce administrative intervention, and improve the system of government macro-control on investment. This will help fundamentally eliminate rash impulses for blind investment, resolve deep-structured conflicts and problems in economic development, and achieve steady and rapid economic expansion. On the other hand, strengthening and improving macro-control will create favourable conditions for promoting the investment reform.
Q. What are the major objectives of the deepening of investment reform?
A. It is aimed to give greater scope to the basic role of the market in resource allocation in accordance with the requirements of perfecting the socialist market economy system, and to ultimately establish a new investment system with market-led investment, autonomy for enterprises, independent loan approval by banks, diversified financing means, regulated intermediary services and effective macro-control. Specifically speaking, efforts will be made to reform the management of government investment in enterprises and allow enterprises greater autonomy in investment. The government's functions in investment will be defined rationally, investment decisions will be more scientific and democratic, and an accountability mechanism for investment decisions will be established. Project financing channels will be further widened and diversified financing means will be developed. Regulated investment intermediaries will be nurtured, industry self-regulation will be strengthened and fair competition will be promoted. Macro-control on investment will be perfected and the ways and means of regulation and control will be improved. Steps will also be taken to speed up investment legislation, strengthen the supervision and management of investment, and regulate and protect market order in investment and construction.
Q. What are the major new measures of the State Council's Decision on Reforming the Investment System?
A. In general, major new measures cover four aspects:
First, replacing the system of examination and approval for enterprise investment projects with the systems of authorisation and record filing. From now on, enterprises will not have to seek approval for construction projects if government investment is not involved. Government authorization will be required for major projects and projects of restricted categories, and only record-filing will be required for other projects.
Second, rationally defining the functions of government investment. Government investment will mainly be used in economic and social fields related to national security and in which the market cannot make efficient allocation of resources, in improving public welfare undertakings and infrastructure projects, protecting and improving the ecological environment, promoting economic and social development in the less-developed regions, and advancing scientific and technological progress and the industrialisation of high technologies. Government investment funds will be rationally utilised by means of direct investment, capital injection, investment subsidies, on-lending, discounted loans etc. For non-operational government investment projects, implementation of the contractor system will be accelerated.
Third, perfecting the system of macro-control on investment and improving the means of regulation and control. Making comprehensive use of economic, legal and necessary administrative means, investment in the whole society will be effectively regulated and controlled by indirect means.
Fourth, a government investment accountability system will be established to perfect the supervision and management of government investment; a system of post evaluation and social supervision of government-funded projects will be established to strengthen checks and balances on government investment; a coordinated enterprise investment supervision system will be established and put on a sound footing to strengthen and improve the supervision and management of social investment; a system of fiduciary duty will be established to strengthen supervision on enterprise investment; and a system of qualifications will be implemented on consultancies, assessment agencies, tendering agencies and other intermediaries to strengthen supervision over investment intermediaries.
Q. What are the differences between the system of authorisation and the system of examination and approval?
A. First, the scope of applicability is different. The examination and approval system is only applicable to government investments and government-funded projects of enterprises, while the system of authorisation is applicable to major projects and projects of restricted categories not using government funds.
Second, the content of examination is different. Under the examination and approval system in the past, the government examined investment projects from the angles of managers of society as well as investors. Under the system of authorisation, the government will examine investment projects from the angle of public managers of society and economy. It will make sure that the projects safeguard economic security, make rational utilization of resources, protect the ecological environment, optimise the structure of the economy, protect public interests and prevent monopolies, and will not look into market prospects, economic benefits, sources of funds and product technologies, which should be the concerns of investors. Third, the procedures are different. Under the examination and approval system, the project proposal, feasibility study report and project commencement report have to be approved. For the authorisation system, only the project application report will be required.
Q. What is the meaning and importance of the record filing system?
A. The implementation of the system of record filing forms an important part of the deepening of investment reform. Examination and approval by the government will no longer be required for the majority of enterprise investment projects. Instead, enterprises can make their own decisions and file records with the department of the local government in charge of investment. Through the effective implementation of the record filing system, the government can fully grasp information on the propensity to invest, promptly and accurately monitor investment, publish timely information on investment, and guide the direction of investment in society. The government will strengthen guidance and supervision over the filing of records, making sure that the system is effectively implemented and not turned into examination and approval in disguise.
August 31, 2004
Mutual Recognition of Qualifications of
Mainland Real Estate Appraisers and Hong Kong Surveyors
On 20 August the mainland and Hong Kong completed the mutual recognition of qualifications for the first batch of mainland real estate appraisers and Hong Kong surveyors under CEPA. A total of 97 surveyors from Hong Kong became chartered real estate appraisers on the mainland. This was the first instance of the mutual recognition of professional qualifications under CEPA.
According to an agreement reached between the Hong Kong Institute of Surveyors (HKIS)
and the China Institute of Real Estate Appraisers (CIREA) in February this year,
Hong Kong surveyors who have been professional members of HKIS for more than
five years and have worked for at least one year (could be cumulative) in real
estate appraisal, development, agency, research or consultancy on the mainland
in the past three years may apply for the mutual recognition of qualifications.
All applicants who meet the requirements and are recommended by HKIS will have
to sit for a short training session and a test. Those who pass the test will
become chartered members of CIREA and be allowed to practise on the mainland.
Vice Minister of Construction Liu Zhifeng said at the ceremony for the presentation of professional certificates that the mutual recognition of qualifications between mainland real estate appraisers and Hong Kong surveyors marked an important move in the implementation of CEPA, as it would help strengthen exchanges and cooperation between real estate professionals in the two places and improve their professional standards. Liu urged real estate appraisers and surveyors to conscientiously study the laws, regulations and appraisal standards in both places, observe professional ethics, and continuously improve their professional skills.
New Rules on Processing Trade Offcuts
The Measures of the General Administration of Customs for the Administration of Offcuts, Leftover Bits and Pieces, Sub-standard Products and By-Products from Processing Trade and Bonded Goods Damaged by Natural Adversities came into force in July 2004.
The measures, promulgated by the General Administration of Customs (GAC), represent the revised version of the Measures for the Administration of Offcuts, Saved Bits and Pieces, Sub-standard Products and By-Products from Processing Trade and Bonded Goods Damaged by Natural Adversities.
Article 2 of the measures sets out the revised definitions of "saved bits and pieces", "sub-standard products" and "by-products". "Leftover bits and pieces" are no longer differentiated. The stipulations concerning saved bits and pieces and leftover bits and pieces are now merged under leftover bits and pieces. The definition of sub-standard products and bonded goods damaged by natural adversities is revised to cover unfinished products. The scope of by-products has been extended and industry-specific restrictions on by-products have been lifted. The revisions are designed to make the definitions more comprehensive and accurate, as well as to clearly spell out the scope of the measures.
Articles 4, 12, 13 and 14 clearly set out the classification principle for offcuts, which is the classification as assigned by Customs based on their condition at the time of domestic sale.
Articles 8, 12, 13 and 14 clearly define the classification principle for by-products, which is the classification as assigned by Customs based on the condition declared by the enterprise at the time of domestic sale. And the corresponding tax rates will be applied. The revised measures cancelled the provision for depreciation of by-products under the previous version. The objectives are to simplify and speed up clearance procedures, giving greater convenience to enterprises.
Article 9 provides for different treatments of bonded goods damaged by different types of natural adversities. The major principle of differentiation is "lax treatment for force majeure and strict enforcement otherwise". In more concrete terms, it means that if the bonded goods are damaged by force majeure, the licence will be waived. If the goods concerned still have a value, the enterprise does not have to pay the tax that should have been due. If the bonded goods are damaged by factors other than force majeure, the enterprise has to pay the tax that should have been due and present the required licence to Customs. The reasons for these changes are to standardise enterprise management, increase the awareness of risk among enterprises, as well as their ability to avert risk.
Article 11 stipulates that: "Upon submission of application by an enterprise to surrender a certain shipment of bonded goods and presentation of proof that Customs is processing such a request, the verification and cancellation procedure will be processed after Customs has duly verified it." In the previous version, "proof of Customs having taken over and sold off the goods" was a prerequisite for verification and cancellation. The revision will help simplify the procedure and speed up the processing time of such cases. As for the workflow of goods confiscation and destruction, the previous requirement for "proof from authority supervising the destruction" and "supervision by Customs officers" have been cancelled. Under the revised stipulation, Customs will complete the verification and cancellation procedure upon presentation of proof pertaining to the confiscation and destruction.
Article 12 is a new provision concerning the administration of "offcuts, leftover bits and pieces, sub-standard products and by-products that are subject to import tariff and quota management and bonded goods damaged by natural adversities". Article 13 is a new provision concerning the administration of offcuts, leftover bits and pieces, sub-standard products and by-products that are subject to anti-dumping duty, anti-subsidy duty, safeguard measure duty or retaliatory duty (collectively known as special tariffs). Article 15 states that the measures do not apply to the administration of offcuts, leftover bits and pieces, sub-standard products and by-products that are produced with parts and materials imported by processing trade enterprises operating in bonded zones and export processing zones.
Unified Corporate Income Tax Likely by
With the proposed unified corporate income tax regime taking shape, the existing system where the tax rate of domestic enterprises is double that of foreign-invested enterprises (FIEs) will soon come to an end. The revised legislation will likely be passed this year and unified corporate income tax could materialise in 2005 at the earliest.
With accounting giant Ernst & Young as facilitator, senior officials of the State Administration of Taxation (SAT) recently had a useful dialogue on the new tax regime with senior managers of the world's 30 leading multinational companies (MNCs).
The message that emerged from the meeting was that the unified rate would be set at 25-28%. Although the spokesperson reiterated that the figures are not official, industry sources reckon the range is very likely the compromised outcome of the meeting. Sun Ruibiao, director of SAT's income tax division, once remarked that the shortcomings of China's tax system pose severe challenges to the survival and development of indigenous and domestically-funded enterprises. In other words, the real objective of "unified tax rate" is to boost indigenous industries.
In keeping with the "principle of neutrality" under WTO, unified tax rate will inevitably become a fact of life for FIEs in China soon. However, speculation that existing preferential tax treatment will be scrapped is causing serious concern. Reportedly, the MNCs at the meeting have strongly urged for the existing preferential treatment to stay.
No Change in Individual Income Tax Over
Next Two Years
Corporate income tax, individual income tax and value-added tax (VAT) are the key items of the current round of tax system reforms in China.
According to SAT deputy director Xu Shanda, the amendment of the Individual Income Tax Law is not scheduled for legislation over the next two years whereas "unified corporate income tax" may be submitted to the National People's Congress for approval in March 2005 at the earliest. Pilot VAT reform in the old industrial base in the Northeast is the only major tax reform at the present stage.
The pilot reform in the Northeast was launched on 1 July. However, as the reform will in theory stimulate investment, it goes against the current policy of investment curbs in certain overheated sectors and macro economic control. It is therefore questionable if VAT reform will proceed further before over-investment is considered to have been put under control.
Moreover, VAT reform is closely related to pension and old-age insurance. If the amount of tax payment is reduced due to VAT reform, the source of fund for such insurance could become an issue of concern. Liaoning is the only one out of the three northeastern provinces which has implemented pension and old-age insurance reform for four years and will be better off than Heilongjiang and Jilin when tax revenue drops. Besides, while the priority industry sectors vary in the three provinces, pilot VAT reform is designed to launch in eight sectors. Hence, the effectiveness of the trial and the exemplary function it serves to the nationwide implementation of VAT reform are both big question marks.
The prospect of tax revenue in the latter half of 2004 is also a cause for worry. If the tax revenue is not satisfactory, the commitment of senior government leaders to such reforms will understandably be dented.
Industry sources pointed out that major sectors contributing to tax revenue growth during the first half of the year have been raw materials such as building materials, steel, cement and oil, as well as tobacco products. The effect of macro-control measures implemented during the first half will be felt in the second half. Moreover, with the sale ban of high-tar tobacco products from 1 July, tax revenue from tobacco enterprises will likely decrease. The prospect of tax revenue growth in the second half will be less promising than the first. With the effect of macro-control becoming more apparent, economic growth in the second half of the year may slow down and impact on the pace of tax revenue growth.
Promising Outlook for Investment in YRD
Despite continued rapid economic development, enterprises in the Yangtze River Delta (YRD) are plagued by power shortage which has become a major complaint of many foreign investors. According to experts, the power shortage situation is manageable in Shanghai, serious in Jiangsu and critical in Zhejiang. It is estimated that shortfall will exceed 19 million kw for the entire YRD this summer.
To minimise loss to companies under the current circumstances, different provinces and cities in the YRD have come up with different measures. Jiangsu province, for instance, has in place a power staggering policy whereby electricity supply to companies remains normal for five days a week and during non-peak hours (i.e. other than 8:30-22:30) on the remaining two days. On the other hand, the Shanghai municipal government has adopted five measures to cope with the power consumption peak season, namely industrial policy guidance, leveraging on electricity prices, strengthening power demand administration, arranging company breaks by turns and encouraging community-wide energy conservation. Furthermore, a power consumption restriction policy has been introduced, and companies using more electricity than planned during peak hours (13:00-15:00) will be charged double.
To ease the power shortage problem and to further improve the investment environment, Jiangsu, Zhejiang and Shanghai have stepped up efforts in related infrastructure development. While Shanghai will invest Rmb20 billion in building electricity grids, Zhejiang has decided to inject Rmb50 billion and streamline relevant local approval procedures in order to accelerate the construction of power plants and electricity grids. Presently, 77 local power plant projects have been approved with a total capacity of 1.283 million kw. Meanwhile, Jiangsu has expanded relevant investments from Rmb13.1 billion in 2003 to Rmb16.1 billion in 2004.
It is predicted that investment in power infrastructure will grow at around 40% annually from 2003 to 2005, and will focus on the construction of electricity grids starting from 2006. This has led to a substantial increase in related equipment imports. Statistics compiled by Shanghai customs show that 1,806 power generation units worth USD68.92 million were imported through Shanghai in the first five months of 2004, up 120% and 220% respectively year-on-year. Imports of power generators and power generation units by Jiangsu in the first four months of 2004 also registered increases of 77% and 140% respectively year-on-year, totalling 400 sets.
August 25, 2004
WEBCAST: Licensing Your Property in China - Rebecca Lo, Esquire (English / Putonghua)
August 24, 2004
Individuals Allowed to Open Foreign Trade
Hong Kong residents who have registered as individually-owned business operators and obtained foreign trade rights will be allowed to open foreign trade settlement accounts for forex receipts and payments starting from 10 September. This means that individual foreign trade operators can purchase hard currency for external forex payments and settle forex receipts directly with the bank through their foreign trade settlement accounts. However, they may not use their personal foreign currency savings accounts to make external forex payments. Also, the foreign trade settlement account may not be used together with other foreign currency savings accounts.
The State Administration of Foreign Exchange (SAFE) issued a circular on 10 August on forex administration over individual foreign trade operators. According to this circular, individual foreign trade operators should register with the “Directory of Import Units Permitted to Make Outward Remittances” or file for forex receipt verification at the local foreign exchange administration office where they registered for business after completing customs registration online at China e-Port. They may open individual foreign trade settlement accounts for forex receipts and payments only after completing these formalities.
Individual foreign trade operators refer to individuals who have been granted foreign trade rights to engage in foreign trade activities after completing their business registration and obtaining their individual business licence in accordance with law and filing for registration in accordance with the regulations of the department of commerce under the State Council (except where registration is not required). Details for the registration of foreign trade rights are given in the Foreign Trade Operators Registration Measures issued by the Ministry of Commerce on 25 June 2004.
August 16, 2004
Hong Kong China Hawaii Chamber of Commerce (HKCHcc) is part of the International Business Delegation from Hawaii, California, Oklahoma, Hong Kong and Guangzhou visited Urumqi, Xinjiang China between Aug 10 - 15 to explore multi-million business opportunities in Real Estates, Wine, Meat Operation and Water Park worth RMB$400 millions. This successful business mission was lead by private sectors business leaders. There was no government official accompany the business delegation. During the 5 days visit, we have met with Honorable Wang Lequan - Full Politburo Members and Secretary of CCP Xinjiang Autonomous Region, Honorable Yang Gang - Secretary of CCP Wulumuqi City of Xinjiang Province, Honorable Shokrat Zakir - Mayor of Urumqi City of Xinjiang Province and Honorable Ms. Wang Jian Ling - Vice Major Urumqi City of Xinjiang Province. It was rare and exception for the top Officials from the Provincial and City level to receive the small but powerful business delegation to work on projects benefiting the City of Urumqi and the Province of Xinjiang.
When we first visited China to sign the Sister-City Agreement between the City of Honolulu and the Hainan Island in 1984. The entire visit must be handled by the 2 governments including all business meetings. Businesses in Hawaii were playing a minor role during the visit there. Increasingly the 1980 government/business model does not work for the modern China. More and more businesses in China want to engage Western businesses on the front line, prefer to have governments on both sides to play an important, but supportive role. China Government does not want to be in the way of business. In fact China has turned most of its State Owned Enterprises (SOE) into the hands of private business owners. They have further encouraged business enterprises to contact individual business directly.
Business Executives in China has been instrumental to set up meetings with Government Official when needed, rather than a requirement to do business there. Many preferred no Government Official to tag along with a business delegation as they must schedule meetings with local Governmental Officials even when there is no need to do so, thus taking away valuable time on serious business dealings and negotiations.
The Western Regions of China has presented exceptional opportunities for Hawaii and Smaller Companies. The impression by most Americans never visited Western China thought the area to be backward and difficult to do business there. But many upon their first visit were surprised on the ease to do business there without facing fierce competitions from the big Enterprises around the world. Most of the modern amenities are there. Internet and the tools of doing business are readily available at a very reasonable price. If the business delegation wish to schedule meetings with local government official, support letter from your own Federal, City and State Government Official is more than sufficient therefore saving the taxpayer 1,000s of dollars of travel expenses.
For a small State like Hawaii, Hong Kong China Hawaii Chamber of Commerce (HKCHcc) has been very successful working with businesses in Mainland USA and Asia to increase Hawaiian Companies' financial resources and diversities.
We are expecting to undertake more similar business mission and initiative in the future focusing on tangible and measurable results.
August 5, 2004
Construction Design Service in Enormous
China's construction market is worth an estimated Rmb1,600 billion. Given that construction design accounts for 0.5-3% of the construction cost, it translates into a market of Rmb8 billion to Rmb48 billion. To improve the environment, many cities in the Pearl River Delta (PRD) are stepping up urban construction. Demand for construction design service is set to surge over the next few years. With the recent signing of the Mainland/Hong Kong Closer Economic Partnership Arrangement (CEPA), Hong Kong's construction design service companies can expect greater room for development in the mainland market.
Urban Construction Fuels Demand for Design Service
With rising living standard and gradual transformation from a relatively well-off society to a wealthy one, the PRD currently ranks among the top regions in the country in terms of per capita income and consumption. Both government authorities and the residents are increasingly demanding about the living environment. In 2002, investment in real property development topped Rmb111.525 billion in Guangdong, accounting for 28% of the total fixed asset investment in the province and ranking first among all mainland provinces.
A new wave of construction boom is in the making in the PRD. To achieve the urban development goal of "major transformation by 2010", Guangzhou has earmarked more than Rmb180 billion for urban redevelopment and construction over the next 10 years as it targets to become a modern metropolis in southern China. The city will continue to focus on the three key construction projects involving its airports, ports and information infrastructure. It will also promote urban landscaping with an emphasis on natural ecology, greenery and human architecture. Furthermore, urban planning will be upgraded and landmarks such as city squares, parks and statues will be built. In the next five years, a number of landmarks will be completed in Guangzhou, including a new airport, an international convention and exhibition centre, a new port, a new youth centre, the Guangzhou Opera House, Guangzhou Newspaper Plaza, Haizhu City Plaza, a sightseeing tower, the South Yue Palace Museum, and the Shamian Modern History Museum. Priority will also be given to develop the Nansha Development Zone, modern city clusters such as Zhujiang New City and Baiyun New City, as well as science city, university city, international biology island, and new and high-tech industrial parks such as the four major logistics centres.
During its tenth five-year plan period, Shenzhen plans to invest Rmb50.764 billion in building roads, water and energy supplies, public venues and facilities, and dedicated zones. Another Rmb25.219 billion will be spent on a series of infrastructure projects including phase one of its underground railway, the Shenzhen-Hong Kong western corridor (Shenzhen Bay highway bridge), Shenzhen Tonggu Channel, Huanggang/Lok Ma Chau pedestrian footbridge, section B of Yanba highway, phase two of the underground railway, and a transport intersection in Zhuzilin district.
As for Dongguan, the following infrastructure projects are included in its tenth five-year plan: a technology service centre, an international convention and exhibition centre, an opera house, a guesthouse, and phase three of the cultural plaza project. In a bid to raise the cultural level of the city, several squares and parks will be built in the urban area, as well as country parks in the suburbs of Dongguan.
Other cities in the PRD such as Foshan, Zhongshan and Shunde are also understood to be either planning or implementing their respective urban construction projects.
The rapid growth of urban construction in the PRD cities, coupled with the lowering of entry threshold for Hong Kong players in the mainland construction design service market, translates into enormous room for development for Hong Kong.
Entry Threshold of Construction Design Service Market
The Regulations on the Administration of Foreign-invested Construction Design Enterprises introduced on 1 December 2002 stipulate that foreign investors may establish construction design enterprises in the form of Sino-foreign equity or contractual joint venture. Under CEPA, Hong Kong construction design firms may set up wholly-owned enterprises in the mainland. In Sino-foreign equity or cooperative JVs, the foreign equity ratio must not exceed 75%.
The regulations also require that a certain percentage of the certified professionals and key technical personnel of a construction design enterprise must be architects and engineers certified in China. Where a wholly foreign-owned construction and engineering design enterprise applies for the construction and engineering design enterprise qualifications, its foreign service providers who have been qualified as certified architects or certified engineers in China must not be less than one quarter of the total certified professionals required under the qualification grading criteria, and the foreign service providers who have the relevant design experience must not be less than one quarter of the total key technical personnel required under the qualification grading criteria. Where a Sino-foreign equity or cooperative construction and engineering design joint venture applies for the construction and engineering design enterprise qualifications, its foreign service providers who have been qualified as certified architects or certified engineers in China must not be less than one-eighth of the total certified professionals required under the qualification grading criteria, and its foreign service providers who have the relevant design experience must not be less than one-eighth of the total key technical staff required under the qualification grading criteria. The foreign service providers of a wholly foreign-owned enterprise who have been qualified as certified architects, engineers or technical personnel in China must reside in the Chinese mainland for no less than six months a year.
In a bid to introduce standardization to the construction design market in Guangdong, the provincial authorities will implement the Regulations of Guangdong Province on the Administration of Construction Engineering Exploration and Design on 1 October 2003. According to the Guangdong Department of Construction's website, the consultation paper of the regulations covers the following aspects: the grading and approval system governing entities engaged in engineering exploration and design activities; registration system for qualified technical personnel; documentation approval system governing construction engineering exploration and construction drawings and designs; and approval system for the preliminary design of large- and medium-scale construction engineering projects. Entities engaged in engineering exploration and design should apply for the relevant qualification certificate, namely for engineering exploration, design and general contracting work based primarily on design.
Market Competition and Entry Options for Hong Kong Firms
With a growing cluster of architects and construction groups from around the world, the PRD has become the largest construction market in China. Different players are competing in the market much like in a "design contest".
According to market analysts, foreign construction design firms often target large-scale public construction projects and upmarket apartments as an entry point to the China market. However, hefty design cost means it is not always smooth sailing for these firms. As a property developer who has the experience of using the services of a foreign designer points out, the designs and architectural concepts of foreign designers are admittedly more advanced, but cost is an important consideration. For instance, construction design usually takes up about 0.5% of the total investment cost of a local property development project, but the fee charged by a foreign design firm can go up to as much as 3%.
There are currently 1,254 organizations engaged in exploration and design work in Guangdong province. Of these, 267 are Grade A, 335 are Grade B, 627 are Grade C, 10 are Grade D, and 15 are at township-level. Among the 46,744 employees, 2,731 are certified architects (of which 906 are Class 1), and 2,141 are certified structural engineers (of which 1,737 are Class 1). Overall, certified practitioners with different qualifications make up 10.8% of the total.
In terms of revenue, the construction industry grew by 14.2% year-on-year to reach Rmb7.938 billion in 2002, while profits totalled Rmb557 million. To date, the industry has achieved 45 patents, 78 specialised technologies and 150 science and technology achievements.
At present, two major types of construction design organisations are active in the market. First, wholly state-owned large- and medium-sized architectural design institutes which have a relatively long history and are the key players in the market. Second, the smaller design firms which sprang up in recent years and have different ownership structures.
To encourage the establishment of professional design firms, Guangdong is in the process of easing the qualifying criteria for professional construction design enterprises (firms), including professional construction design consulting firms. The province is also committed to supporting the reforms of large state-owned construction design institutes, as well as fostering the development of a number of "celebrity" designers and "star" design firms. In 2002, the Ministry of Construction approved 108 private architectural firms across the mainland of which eight were located in Guangdong. These partnership private firms were encouraged to use the names of individuals as their company name.
According to sources from the Guangdong Exploration and Design Association, provincial authorities are currently carrying out system reforms of construction design enterprises. The reform package, which has been approved by the Guangdong provincial government, encourages state-owned exploration and design organisations to transform into popular company types found in the international marketplace such as engineering firm, engineering consulting and design firm, specialised rock and soil project firm, project exploration firm and design firm. In terms of company structure, these organisations can be reorganised into limited liability company, limited company, joint stock company or partnership through various means such as restructuring, merger and acquisition, and sale. Hong Kong architects are well-versed in international concepts, trends and standards, and have a wide international exposure. They should capitalize on these advantages to seek cooperation with well-established mainland counterparts in the form of equity or contractual joint venture.
New Tax Rules for Foreign-Invested Venture
The State Administration of Taxation has recently issued a circular on new regulations relating to enterprise income tax payable by foreign-invested venture capital companies in China. Some of the existing tax concessions will be abolished under the new regulations.
Pursuant to the Income Tax Law of the PRC for Foreign-Invested Enterprises and Foreign Enterprises and its implementing rules:
Venture capital enterprises engaged in equity investment and transfer as well as those providing venture capital management and consulting services to enterprises according to relevant regulations, do not belong to production enterprises and are therefore not entitled to the preferential taxation treatment granted to foreign-invested production enterprises in China's tax law.
A venture capital enterprise established as a corporate entity should take the venture capital enterprise as the taxpayer and declare and pay enterprise income tax in a unified way according to the provisions of China's tax law.
For a venture capital enterprise established as a non-corporate entity, the enterprise income tax may be declared and paid separately by its investors, or declared and paid in a unified way according to tax laws upon application by the venture capital enterprise and approval by the local taxation authority. If investors of a non-corporate entity venture capital enterprise opt to declare and pay enterprise income tax separately, the foreign investors should compute and pay the tax as foreign companies with organizations or business venues in China. If the non-corporate entity venture capital enterprise does not have any venture capital management organization and does not directly engage in venture capital management or consulting services but merely operate as a normal investment enterprise, it may declare and pay enterprise income tax as a foreign enterprise without organization or business venue in China.
Venture capital enterprises mentioned in this circular refer to foreign-invested enterprises established in accordance with the requirements and conditions of the relevant administrative regulations and legal procedures to engage in venture capital business. Their names must bear the words "venture capital".
July 27, 2004
First Individually-Owned Foreign Trade
Business in Shenzhen
The first individually-owned foreign trade business in Shenzhen was born 20 days after the Foreign Trade Law entered into force. The owner, Mr Fu, operates an individually-owned enterprise in Nanshan district for the production and marketing of hardware. He has never been involved in import-export business before and his products were mainly exported through other enterprises. His enterprise is the first individually-owned business to have completed registration as a foreign trader.
According to Fu, his overseas clients repeatedly asked him to handle his own exports, as this could lower costs for both sides and help him win more overseas orders. At the end of June this year, when he learned from the media that individually-owned enterprises were allowed to engage in foreign trade, he consulted his clients at once and decided to register. He registered online the day after the Foreign Trade Law went into force and submitted the registration form and other necessary documents on 16 July, completing the registration procedures the same day. Fu said foreign trade right is a big help to his business and gives individually-owned operations like his more room for expansion.
Many people are concerned about the provision in the Measures for the Registration of Foreign Trade Businesses on the submission of notarial certificate of property issued by public notaries. Fu said he went to a public notary on 15 July and received the notarial certificate the following day. In fact, public notaries are ready to issue notarial certificates upon presentation of proofs of credit standing issued by the bank.
Under the new Foreign Trade Law, foreign-invested enterprises, individually wholly-owned enterprises and foreign (regional) enterprises may apply for permission to engage in foreign trade by submitting the necessary documents. For details, please visit http://www.chinacourt.org/flwk/show1.php?file_id=94603.
As many as 92 Hong Kong and Macau individually-owned businesses have registered in Shenzhen between 1 January this year when CEPA went into effect and mid-May. They mainly engage in the retailing of jewellery, electronic products, health care products, garments, decorative materials and daily consumer goods.
July 14, 2004
Jiangsu Shoe City kicks in on fashion
Established in 1995, Jiangsu Shoe City has won a reputation among customers with its pledges: "money back guarantee" and "guaranteed return, replacement and repair". The Shoe City is known for its fine products, low prices, and positive business environment.
The market has six floors and nearly 200 shops, with some 5,000 visitors every day. About 30,000 pairs of shoes of different types are sold daily, so annual turnover exceeds Rmb100 million (HK$94.3 million).
There are standard shops on the first two levels, specialized boutiques on the third floor, and warehouses on the fourth to sixth floors.
About 10,000 types of shoes, including leather shoes for men and women, children's shoes, cloth shoes, slippers, cotton padded shoes, Wellington boots, sandals, students' shoes, baby shoes - as well as shoes for casual wear, the beach, sports, work and a host of specialist occupations or activities, are available.
Shoes come in all forms and quality, with medium and low-end products making up the bulk. The producing areas include Jiangsu, Guangzhou, Wenzhou, Fuzhou, Shanghai and Shenyang.
All goods are directly marketed by manufacturers without going through middlemen - the idea being to make small profits but on quick turnover. Prices here are the lowest in eastern China.
The market opens for business at six in the morning and is packed with visitors all day. Trading is brisk and cash transactions form the predominant medium of business. Most buyers are from large and small shopping centres in Jiangsu and Anhui, as well as from supermarkets and shoe shops in eastern China.
Jiangsu Shoe City has assigned great importance to the style of shoes since it was first established.
Every attempt is made to look for new styles and new sources of goods. Each year, the shoe city sends representatives to other markets to find out about the latest trends and information about the industry.
Today, all shoes sold at Jiangsu Shoe City reflect the latest styles at home and abroad and set consumption trends in the whole of eastern China.
The most recent designs can be found at Jiangsu Shoe City within three days of being presented on the market. At least 30 new designs are launched at the shoe city each day.
Footwear for women in the latest designs are prominently displayed, including the new open-toe styles, with their colourful designs and simple but elegant shapes.
At the same time, "cage-design" shoes, which were top sellers last year, continue to lead the trend. Currently, they are offered in colourful patent leather and with simple plaited leather straps.
With women's footwear designed to make legs look longer and slimmer, comfort and styling are at a premium.
Dancing shoes with slim or thick heels in silver, light sandy gold, rose gold, golden bronze and beige tend to be complementary, and with embellishments on the uppers and straps, they go very well with the graceful dancing dresses that are immensely popular this summer.
Two-tone shoes inspired by black-and-white dress shoes for men, look subtly refined when worn with long slacks and suits.
Round-toe shoes are making their appearance in the spotlight, as pointed toes decline in popularity. The new styles may have a fine strap across the instep or around the ankle and go very well with full pleated skirts, shorts or suits.
Wedge heels are back from the 1970s. With their thick soles, they are more easily manageable than stilettos. A major improvement of wedge heels this summer is their tapered soles, and colourful, light-weight products with cork or rope-textured heels are a match for hot pants, knee length skirts of ethnic designs and full-pleated skirts.
Clear-crystal shoes are very much in: their transparent sole, body and heel make the wearer look taller and more slender. The slightly raised sole adds a touch of elegance. They go best with tight, three-quarter-length slacks and vacation outfits.
Cage design shoes are sliding into the picture: the shallow, netted upper design gives a carefree touch to the otherwise extravagant style of ladies' wear this season. They go well with floral dresses, flared skirts, slip dresses and shirt dresses.
Open-toe high heel shoes are classic in style and are a cross between high-heel shoes and open-toe sandals. With open side and colourful patent leather uppers of various designs, they match well with full pleated skirts, flared dresses and three-quarter-length slacks.
Glamorous shoes in crocodile skin, satin, crystals, embroideries, silk and dye-printed fabrics are becoming popular, and pair well with short skirts and hot pants.
Jiangsu Shoe City brings together brands from home and abroad, including Camel, Julu, Hang Ten, Juri, Jinlaike, Crocodile, Bage, Xiaotuge, Huabin, Hongchen, Shanghai Danling, and Ouniaowang, along with Bolong, Caolong, Tilesi, Lanlier, Bingting, Daminghuang, Yaqili, Red Ant, and Qiaofeng.
Service facilities have been improved since the market was first established. Also, the shoe city has its own consumer council, individual workers association, product quality control office, security guards, cleaning brigade and other service and support units.
The Industrial and Commercial Bank, Communications Bank, Agricultural Bank, Construction Bank and Bank of China have branches close by. There are also industrial, commercial and taxation departments and freight forwarding centres in the vicinity.
The shoe city provides pre-, during- and after-sales services, while regularly evaluating the credibility and product quality of suppliers. Manufacturers reputed for products of good quality are invited to set up direct sales outlets there.
A special office has been set up to handle customers' complaints and a quality complains registration system has been put in place.
Jiangsu Shoe City is situated in a prime section of Nanjing near Shuiximen. Its location is characterized by heavy pedestrian flow and convenient transport.
Rents are cheap. A monthly rent per 100 sqm ranges between Rmb90 and Rmb180 (HK$84.9 and HK169.8), depending on location.
Qualified help at hand in Shenzhen
Most families in Shenzhen employ part-time or stand-in nannies to look after
their little ones. Some companies set up to develop childcare have so-called
"child care workers" for babies aged up to three, but all of these people are
Under the National Professional Standards for Childcare Workers, published by the Ministry of Labor and Social Security, childcare workers are one of the eight new types of job announced by the ministry. According to the new regulations, child care workers must be able to "choose the right disinfectants for babies" and "correctly record a baby's growth curve and use growth monitoring charts", in addition to taking basic daily care of the child.
These better-trained nannies are also expected to work out personalized teaching plans according to the level of development of children, choose and design games, train the infants in sports, recognition, language, social skills and other abilities, as well as perform all kinds of educational tasks. These workouts could involve movement and skill training, intellectual development, social behavior and character training for children.
Among the various types of domestic service in Shenzhen, caring for old people accounts for 5%, housework for another 25% while looking after children represents a massive 70% of services.
The average age of the urban population in Shenzhen is 28.6 and the birth rate of registered residents is 10.63%. With about 70,000 new babies born each year, there is bound to be a concerted cry for professional childcare help from busy parents!
July 11, 2004
Policy and Law
Crackdown on VAT Violations
The State Administration of Taxation (SAT) issued two circulars on 30 April regarding its crackdown on tax-related violations, such as the issuance of fraudulent freight invoice and the production and sale of fake invoice, and the launch of special tax inspection work for 2004.
The key points of the circulars are as
The deliberate issuance or acceptance of fake special VAT invoice, and issuance of other invoices for the purpose of cheating export rebate or tax deduction are violations of tax collection laws. Tax authorities at all levels have to take stringent measures to combat such tax-related violations and bring offenders to justice. They should carry out a thorough checking of general taxpayers in their respective jurisdictions, especially the smaller businesses with irregular tax records.
Tax authorities at all levels should strictly enforce the law and seriously punish those enterprises engaged in the issuance of fraudulent special VAT invoice or other tax deductible invoices in addition to imposing the tax originally due and the overdue surcharge. For offences punishable by law, tax authorities should promptly refer the case to public security departments.
For enterprises which deliberately accept fraudulent special VAT invoice or other tax deductible invoices for the purpose of tax evasion and cheating export rebate, tax authorities must thoroughly review their tax payment records for at least the preceding three years. Once an investigation confirms that the fraudulent invoice has been accepted deliberately, the party concerned will be punished in accordance with law.
Tax authorities at all levels should bear in mind the dual purpose of combat and publicise at the same time. Comprehensive plans should be formulated to combat illegal activities while positive results of the exercise should be publicised.
July 8, 2004
Guangdong Commences Credit Legislation
Guangdong has embarked on credit legislation and will establish a system of credit rating for individuals and enterprises. In future, people will be able to check the credit-worthiness of enterprises at any time.
Led by the government and with the participation of the People's Bank of China and the departments concerned taking part as members, a personal credit-worthiness and personal credit rating system will be established in Guangzhou, Shenzhen and Shantou. The government will authorize an intermediary to set up the system, which will operate according to the market mechanism and provide charged services. Initially the system will be available to members only. When the whole project is up and running, its service would be extended to institutions authorized by laws and regulations and to citizens and legal persons authorised by the parties concerned. A personal credit-worthiness and credit rating supervisory committee formed by the members will supervise the operation of companies.
At the end of the first half of 2004, an information network connecting 21 cities in Guangdong was built to provide online search service for the credit records of enterprises throughout the province. The network will be eventually extended to all cities in the province and will cover information from different departments on enterprises. When the project is completed, a corporate and personal credit worthiness system connecting all government departments, intermediaries, banks and securities markets will be established whereby individuals and enterprises will be able to check the credit records of all enterprises in the province at any time. Relevant information analysis, forecasting and early warning systems will also be established for the credit rating of enterprises and individuals.
Meanwhile, Guangdong is taking steps to legislate credit checking and disclosure. The provincial department of information industry is taking the lead to organize credit legislation for all enterprises in the province and has started the drafting of the Regulations for the Opening of Credit Information on Enterprises in Guangdong and the Regulations for the Opening of Administrative Affairs in Guangdong.
doctors, medical insurance in Shenzhen
As ties between Shenzhen and Hong Kong grow with the implementation of the individual travel scheme for mainlanders, more and more Shenzhen people arrive in Hong Kong to visit relatives, and as tourists. Conversely, the number of Hong Kong people living and working in the Pearl River Delta is also rising sharply.
How can adequate medical services for all these travelling people from one jurisdiction to another be provided, if not guaranteed?
Shenzhen's health department and labour and social security department indicated in meetings with the Hong Kong Association of Registered Medical Practitioners recently, that Shenzhen citizens with medical coverage can make claims from the mainland labour and social security department.
Mainland patients can present bills for detailed medical checkups and other medical expenses, medical reports and associated documents issued by Hong Kong hospitals in cases of emergencies such as sudden illness, a traffic accident or in childbirth while they are visiting Hong Kong.
The Hong Kong Association and Shenzhen authorities also agreed that Hong Kong people working and living across the Special Administrative Region boundary should be able to enjoy timely medical support and services provided by the Hong Kong government. The Association will designate one or two large hospitals in Shenzhen, where Hong Kong residents can enjoy medical protection and benefits as if they were in Hong Kong.
Both parties also discussed another way of addressing this issue. It was suggested that Hong Kong's Hospital Authority may invest in a large joint-venture general hospital in Shenzhen through arrangements between the two governments.
While providing medical services to Hong Kong residents in Shenzhen and the Pearl River Delta, the hospital will also gear itself to the local medical market and serve the residents of Shenzhen.
Under the specific commitments set out under the Closer Economic Partnership Arrangement, CEPA, the majority of medical personnel employed by joint-venture hospitals and clinics can be permanent Hong Kong residents. Hong Kong doctors may engage in long-term medical practice in Shenzhen.
Zhou Jun'an, director of Shenzhen's health department, explained how Hong Kong doctors can practice in the Special Economic Zone.
According to Ministry of Health policies, and given the actual situation in Shenzhen, there are basically two criteria under which Hong Kong doctors can practice in Shenzhen.
The first is for doctors to present themselves as specialists. Hong Kong doctors may practise in Shenzhen provided that they are employed by a legally licensed medical institution there, file their Hong Kong qualifications for medical practice and personal resume with the local health department, and obtain a provisional certificate for medical practice.
Such certificates have to be renewed once every three years.
To avoid this procedure, doctors may apply for a permanent certificate. To do this, they must first sit for the annual national examination for medical practitioners and may take the examination in Shenzhen.
off the leash in Shanghai
Pet lovers are in Shanghai in greater numbers. The opportunity to offer a range of pet products on the market grows commensurate with that.
In some major retail outlets, over 200 varieties of products, including toys, ropes, travel carriers, health products, beds and kennels, bones and chews, are available and sell very well.
Specialty stores, tailors' shops, beauty saloons and hospitals for pets have mushroomed. In particular, pet clinics affiliated to universities and research institutions have attracted a large number of clients.
Pet hospitals provide more than medical services. These also include adoption and sale of pets, sale of pet goods and food, pet boarding and grooming.
Pet goods attract a high profit margin. For example, a dog jacket may cost as much as Rmb180 (HK$169.8).
Pet hospitals are doing great business in spite of their hefty charges. Nail and hair trimming and regular checkups cost nearly Rmb100 a month (HK$94.3). When a pet gets sick, drips may be needed and a visit to the vet costs Rmb300 (HK$283), on average.
For a medium-sized pet hospital, after making deductions for rent, costs of medicine, salaries for vets and depreciation for x-ray, ultra-sound, lab facilities and other equipment, it is reckoned that a net monthly income of between Rmb15,000 and Rmb60,000 (HK$13,760 and HK$$56,600) can be expected, with incomes higher for hospitals in better locations.
Compared with the mature and systematic pet-related industries in other countries, China's pet industry has had a late start. It is not yet a regular trade but a new, emerging business that is gradually taking shape.
The sector covers manufacturing (such as the production of pet food, medicines, supplies, toys and garments), as well as services such as pet hospitals, pet training, boarding and health care consultancy.
Business comes in to play in every aspect of a pet's life, from food, clothing, accommodation and transport to sickness, birth and death.
There are about 200 pet goods producers in China, most of which are private operations. Since the market was still immature just a few years ago, products have been mostly for export. Business has mainly been in export processing, according to buyer's samples - and products are mostly destined for affluent countries in the West. The majority of exports involve labour-intensive industry.
Overseas companies see growing prospects for making money in this market and all kinds of pet shows are staged in Shanghai.
In 2003, several pet shows were held in the city. Professionals from the US, Australia, the UK, Japan, South Korea, Taiwan, Hong Kong and other countries and regions came to familiarise themselves with China's pet goods market, and look for cooperative opportunities.
Pet lovers in Shanghai and neighbouring areas also visit shows with their pets. Some have made purchases of pets at the shows - meaning that the popularity of the events gave the exhibitors confidence in investing in Shanghai's pet goods market.
July 5, 2004
The US textile industry petitioned the Bush administration to curb the import of socks from China. The industry asked that a quota be imposed that would cap the growth in Chinese sock imports at 7.5 per cent over the next year.
(Information Source & Credit: Hong Kong Trade Development Council)