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  Hawaii Ethic Commission - To preserve public confidence in government by administering and enforcing State of Hawaii governmental ethics laws to ensure the highest standards of ethical conduct among state officials and employees. Daniel J Mollway, Executive Director, Hawaii State Ethics Commission, Pacific Tower, Suite 970, 1001 Bishop Street, Honolulu, Hawaii 96813, USA, Phone: (808) 587-0460, Fax: (808) 587-0470, Email: dmollway@hawaiiethics.org

The ICAC (Independent Commission Against Corruption) of Hong Kong and 13 professional organizations/chambers of commerce have collaborated to produce the captioned Guide. It is tailor-made for managers who are not trained IT experts but who have to supervise their teams in the use of computers and the Internet. The Guide offers managers practical advice on how to identify integrity risks in the workplace and proactively reduce them by ethical management. Free copies are now available for collection by business organizations. Contents of the Guide include: Case illustrations from the ICAC's investigation files / An analytical framework for addressing corruption from the legal and ethical perspectives / An ethical management model and some practical measures / A directory of services provided by publishers, particularly the ICAC....Click here to read the Guide

All roads in the global supply chain run through China but appearances can be deceptive. Editorial Director Neil Shister went there to see for himself what's going on - By Neil Shister

China Legal Issues

December 29, 2004

China to Abolish Import License for All General Goods in 2005

China will further liberalise its market and revoke import license requirements for cars, key auto parts and compact disc manufacturing equipment in accordance with its commitments to the WTO from 1 January 2005. This means that except for three special commodities, all goods will be allowed to enter the China market without import license.

According to the PRC Foreign Trade Law and Regulations on the Administration of the Import and Export of Commodities, as well as the 2005 Catalogue of Commodities Requiring Import License recently published by the Ministry of Commerce and the General Administration of Customs, China will only require import licence for controlled chemical products, precursor chemicals and ozone-depleting substances, totalling 83 eight-digit HS codes.

This is the fourth time China has relaxed import license requirements since its accession to the WTO at the end of 2001. Effective 1 January 2001, China lifted import requirements on 14 products, including terylene fibres, tobacco and tobacco products, colour TV sets and kinescopes, and colour-sensitive materials, as well as certain types of automobiles, auto parts and tires. This reduced the types of commodities subject to import licensing from 26 to 12. Goods subject to import restrictions were further reduced to eight beginning 1 January 2003 and to two in 2004. All restrictions will be lifted in 2005.

Xian's greater concern with leisure and health

As living standards improve, rich and variegated leisure has become an increasing part of life in Xian. People are looking for a comfortable and healthy way of life that suits their personal temperament and after-work hours.

In the first 10 months of 2004, per-capita travelling expenses of Xian households amounted to Rmb58.7 (HK$55), up 92.8% from the same period a year ago. Travelling and tourism have become important aspects of leisure.

Going to the park and to the movies were the only ways to spend one's leisure in the past. Now people go to pubs, cafes or teahouses to relax, or become interested in sports of all kinds. In the first 10 months of 2004, per-capita spending on fitness exercise (equipment and classes) was 1.2 times than in the same period last year. Expenses on other cultural and entertainment activities were also up by 12.6% year-on-year.

Beauty treatments, hairdressing, foot baths, saunas and massages have become an important sector of leisure activities in Xian.

In the first 10 months of 2004, per-capita consumption of tonics and health foods was Rmb32.3 (HK$30.4), up 72.7% year-on-year; per-capita beauty treatment expenses amounted to Rmb13.02 (HK$12.2), up 51.7%; and per-capita hairdressing and bathing expenses amounted to Rmb33.58 (HK$31.6), up 15%.

Adding value to oneself in one's spare time has become the top trend and household expenses on adult education are steadily on the rise. In the first 10 months of 2004, per-capita expenses on adult education in Xian amounted to Rmb36.8 (HK$34), an increase of 140% over the same period of last year.

Information products are on the rise: there were 85.4 residential telephones, 30.9 computers and 100 mobile phones to every 100 households in Xian by the end of October 2004, with the number of mobile phones up by 36.8% and the number of computers up by 30.8% from the same period of last year. Per-capita consumption on telecom service was Rmb364.4 (HK$343) in the first 10 months, up 3.7%.

Yuzhou Mart: cradle of Chinese herbal medicines

Yuzhou's Chinese Medicine Mart (also known as the China Medicine City) is located on Yaocheng Road at the intersection of the provincial highways 01 and 31, positioned to feed a large constituency. It is 70 km from Zhengzhou, the capital of Henan, 37 km from Xuchang Station on Beijing-Guangzhou Railway, and less than 50 km from Zhengzhou Airport. It is easily reached from Zhengzhou, Kaifeng, Luoyang, Xuchang and Pingdingshan.

The remedies are numerous, only to be expected from one of the birthplaces of traditional Chinese medicine (TCM). Yuzhou has long enjoyed a fine reputation for its Chinese herbal preparations.

There are over 100 different kinds of wild medicinal herbs, including Yuzhou arisaematis rhizoma, Yuzhou typhonium rhizoma and scorpion. Chinese herbal medicines from Yuzhou are renowned for meticulous processing according to ancient methods.

Eminent doctors in Chinese history, such as Bian Que, Zhang Zhongjing and Sun Simiao all practised medicine, collected herbs and compiled prominent works here.

Yuzhou's medical background in trading dates back to the Tang Dynasty and the city became one of the four distribution centres for Chinese herbal medicines during the Ming and Qing dynasties.

In the course of time, 18 trading groups were formed in Yuzhou, including the drug store group, licorice and codonopsis groups. These were classified according to business types, and the Jiangxi group, Shanxi, Shaanxi, Qizhou, Shangcheng, Bozhou and Jinling groups were named relative to where they came from.

In ancient times, there were over 2,000 drug stores of various sizes in the city, selling more than 2,600 variations of medical herbs and employing over 5,000 workers. The city became a "medicine capital".

Historical traditions have made the medicine business a distinguishing feature of Yuzhou. To carry on its historic relationship with medicine, the local government invested Rmb200 million (HK$188 million) to build the Henan Yuzhou Chinese Medicine Mart (or China Medicine City) in 2001.

Today, the mart is one of China's 17 standardised Chinese medicine centres at national level. It is also uniquely one of a kind in Henan. The medicine city covers an area of about 27 hectares and includes a trading hall with a floor area of 23,000 sqm, capable of accommodating 2,500 stalls, and over 2,000 business premises with three or more storeys each.

Complete with storage and banking facilities, restaurants, car parks and entertainment venues, this is a large and modern market for Chinese herbal medicine with logistics, information, financial and other functions in situ.

Over 1,000 varieties of medicinal herbs are being traded at the market, which has more than 10,000 permanent employees and grosses Rmb1 billion (HK$943 million) annually.

The two-level trading hall at the centre of China Medicine City is wholly funded by Henan Songji Investment Co. Managed by the Yuzhou Pharmacy Management Committee, it provides the central space for the two-hectare mart.

Goods are mostly displayed in showcases. The sale price of a 3 sqm stall is about Rmb15,000 (HK$14,150), and display counters are given away free for lump-sum payments.

For leasing, the annual rent for each stall is about Rmb2,000. Buyers of stalls are issued with certificates by appropriate government departments and have rights of transfer, leasing, inheritance and mortgage.

The main trading hall of the China Medicine City is currently undergoing restructuring and re-positioning to meet the needs of new market development. After restructuring, it will be the only state-authorised trading venue for prepared herbal medicine in Henan and will be run according to formal medical standards.

The Yuzhou Chinese medicine mart is home to over 600 drug manufacturers from different parts of the country. Famous Chinese patent drug manufacturers, such as Beijing Tongrentang, Changsha Jiuzhitang, Guangzhou Baiyunshan, Harbin Pharmaceutical Group and Henan Wanxi Group have set up production facilities near the mart.

The mart deals in over 1,000 varieties of herbal medicine. Primarily a wholesale market, it also does retail business on the side. Business is mainly in the form of cash. Some shops deal in all sorts of medicines while others are exclusive to dealers.

A full range of medicinal herbs are available, including common herbs like honeysuckle flower, chrysanthemum and platycodon, as well as expensive tonic medicines such as pilose antler, ginseng, codycep and polygoni multiflori.

China Medicine City is able to supply herbal medicine of good quality at a cheap price thanks to a Chinese medicine cultivation base with a total area of over 200,000 hectares in the surrounding township. It has developed its market share in China and is already well received by people in the industry.

There are branches of the Industrial and Commercial Bank of China, Agricultural Bank of China and other banks as well as restaurants, carparks and entertainment facilities around the mart, providing quality services to domestic and foreign medicine dealers.

The mart has a modern logistics distribution centre to provide customers with storage, transportation, packaging, circulation, processing and distribution services.

The mart is managed by a pharmacy management committee, which shares the same office building with departments of industrial and commercial administration, taxation and quality inspection.

Occupants may start doing business after completing their entry procedures and obtaining their business licence from the office of industrial and commercial administration at the mart. The pharmacy management committee and the drug administration also jointly conduct random checks of the medicines on sale, to ensure that they are safe and reliable.

There are two national medical information service agencies at the mart providing traders with up-to-date information on the supply/demand and price trends of medicine in China and the world everyday.

The mart also hosts the China Yuzhou Chinese Medicine Fair every year for product exhibition, trade talks, academic exchange and project cooperation. The International Chinese Medicine Development and Cooperation Forum is held in conjunction with the medicine trade fair.

At the fair concluded at the end of October 2004, visitors attended came from Germany, South Korea, Malaysia and various parts of China.

December 28, 2004

China announced a first round of export duties on textiles, in a move analysts said is as much an attempt to spur large-scale production of high-quality products as to head off a trade spat with the West. According to the International Business Daily , which is published by the Ministry of Commerce, China will impose export duties of between 0.2 yuan and 0.3 yuan per unit on 146 items from Saturday. Those items fall into six categories of clothing, including dresses, trousers, knitted and non-knitted blouses, sleepwear and underwear. For accessories such as hooks for knitted and non-knitted clothing, a duty of 0.5 yuan will be charged per kilogram.

December 22, 2004

Hong Kong and Macau Residents Can Establish Individually-Owned Businesses in China Next Year

Hong Kong and Macau residents will be allowed to set up individually-owned businesses for retailing, catering and general services in the mainland after 1 January 2005. However, each business may not employ more than eight staff. The State Administration for Industry and Commerce recently published a document on opinions concerning the registration and administration of applications by Hong Kong and Macau residents to operate individually-owned businesses. According to this document, under relevant provisions of the supplementary agreements to the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Mainland and Macau Closer Economic Partnership Arrangement, starting from 1 January 2005 permanent residents of Hong Kong and Macau with Chinese citizenship will be allowed to establish individually-owned businesses in all provinces, autonomous regions and municipalities in accordance with mainland laws, regulations and administrative rules without having to go through approval procedures applicable to foreign investment.

The document defines clearly the scope of business for these operations. It covers retailing (except tobacco), catering, as well as services such as hairdressing, beauty and fitness, bathing, and repair of home electrical appliances and other goods for daily use, but excludes franchising. It is stressed that individually-owned businesses must be operated by individuals and should have a staff of no more than eight persons and a business area of no more than 300 sqm.

Wankelai Food City: the hypermarket for hypermarkets, and more

Wankelai Food City occupies both sides of Zhengzhou's South Third Ring Road near the Southern Gate to the west of Jingguang Road South: it can hardly be missed. While the food city is seen as a local brand name by local people, it is also the largest of its kind in central China and has provided wholesale non-staple food to that region since it opened for business in June 1998.

The wholesale market was established by Henan Wankelai Holdings, with an investment of Rmb98 million (HK$92 million). As an integral part of the Zhengzhou Agricultural By-Products Storage and Transportation Centre, the project was on the drawing board in 1996 and opened for business in 1998. It covers an area of 17.8 hectares and has a floor area of 80,000 sqm, accommodating 1,500 shops.

Wholesaling of non-staple foods - in other words, groceries - used to be a small-scale, low-end and scattered business in Zhengzhou. Wankelai Food City was built to change this state of affairs.

Great care was taken in determining the location, scale of operation, layout and range of commodities and services provided, when the project was planned. The food city offers preferential terms to tenants. Rental is fixed at Rmb20/sqm (HK$18/sqm), payable once every three months, six months or 12 months.

A 10% discount is offered on a one-off payment for six months and a 20% discount is offered for 12 months. All 3,000-plus shops available in the food city were signed up within seven days of its opening, and now, 80% of traders in Zhengzhou go there to do business.

Many brand-name products from large-scale and reputable enterprises have outlets at this food city, which is visited by over 20,000 people daily and grosses Rmb2 billion (HK$1 billion) a year in business turnover.

Serving not only neighbouring Shandong, Anhui, Shanxi, Shaanxi, Hebei and Hubei but also distant places like Inner Mongolia, Xinjiang, Qinghai and Gansu, it has become the largest wholesale base for non-staple food in central China. According to one of the tenants, the food city is so busy that a pay toilet can gross Rmb300,000 (HK$279,000) a year.

Small-scale non-staple food wholesale marts have mushroomed in Zhengzhou, as the market has flourished. There are more than 10 such small marts in the southern suburbs where Wankelai is located.

Large wholesale marts such as Central China Food City, Zhengzhou Food City, Hanghai Road Food City have also emerged.

Foreign companies have started ventures in Zhengzhou. Hypermarkets targeting the mid-to-lower-end market have sprung up all over Zhengzhou. Wankelai finds itself under tremendous pressure to undergo transformation.

Although the wholesale business has fared quite well in Zhengzhou, it cannot simply rely on trade to maintain its sound development. It must upgrade and transform itself and take a path that combines industry with trade.

Hou Shian, general manager of Wankelai, came up with the idea of building a processing base to turn the food city into a large logistics base with processing functions.

In October 2004, Wankelai Holdings and Hong Kong's Gangren Group signed a cooperative agreement to develop the Zhonghua Logistics Plaza. Under the agreement, Wankelai Food City will be transformed into a general merchandise logistics park.

This project is funded by an Asian consortium associated with the US Federal Foundation, through the Gangren Group. An initial investment of US$20 million (Rmb165 million or HK$156 million) is already in place. The logistics park will be the bright spot of the Southern Zhengzhou Economic Zone when it opens in 2006.

The park will be built at the Wankelai site and will have a total floor area of 500,000 sqm. Initial estimates put total investment at Rmb760 million (HK$716 million).

There will, in fact, be eight marts for trades of automobiles, furniture, information network equipment, clothing and general merchandise, as well as non-staple foods and other commodities. When completed, it will be the largest modern logistics centre in China embracing processing and manufacturing, general merchandise retailing, logistics and storage services, and information monitoring, all under one roof.

Wankelai Food City is complete with basic trading, accommodation, office and storage facilities. Its wide roads and several entrances allow heavy-duty trucks with trailers to move around freely, and its 40,000 sqm car park can accommodate over 1,000 trucks.

The City features 1,000 programme-controlled telephone lines, through which tenants can arrange financial, postal, medical, informational, transportation and licensing matters without leaving the food city at all.

There are different sections to facilitate management and consumers - for wines and spirits, non-staple food, dry condiments, tea leaves, detergents and food additives. Commodities of all grades are available.

The food city practices closed management and open trading, with both wholesale and retail transactions accepted.

Small furnished flats are hot properties in Shanghai

Prices of residential units on the mainland, and particularly in Shanghai, have skyrocketed in recent years. The average price this year is said to be at least 11% higher nationally than a year ago. The situation is particularly striking in Shanghai and Hangzhou.

High property prices have become an inhibiting factor for many, and shrewd investors are turning their eyes to smaller, furnished flats in city centers.

The Shanghai Real Estate Association and Shanghai Dongfang Real Estate Institute recently jointly organised a seminar to study the white hot sales of Zhongxing Fortune International Apartments, looking at the way these were bought up as a phenomenon for people returning to live in the city centre.

According to those who attended this seminar, the value of small furnished flats will continue to increase, as the city keeps expanding and land in the city centre becomes more scarce.

In Jingan district, flats with an area of between 40 and 50 sqm are priced between Rmb400,000 and Rmb500,000 (HK$377,358 and HK$471,000). Residential cum commercial apartments are the most sought after.

There is an increasing number of young home-buyers in Shanghai today. The lowering of the average age of home-buyers is becoming all too evident.

According to statistics, young people under 35 years of age account for more than one-third of home-buyers in Shanghai.

Young people who are busy at work and eager to try out new things go for small and tastefully-decorated homes and personal services. They have suddenly become an important consumer group for this type of property. "Wired homes" could well be the next "must get" feature on the list, creating great demand for broadband and wireless Internet services.

The inflow and exchange of personnel will become increasingly frequent as Shanghai matures and progresses as an international metropolis. This will also further boost the sale of small furnished flats.

Previously, there was a time when fully-furnished flats were selling better than unfurnished apartments in Shanghai. Indeed, the way things are going, and based on historical data, they should constitute a great market segment for the future too.

December 20, 2004

Key issues in China-US trade in 2004

Trade between China and the United States maintained a strong momentum of development in 2004. The later maintained one of China's top three trade partners with both cooperation as well as disputes. Key issues in Sino-US trade are as follows:

MARKET ECONOMY STATUS

China was cataloged as a non-full market economy when it joint the World Trade Organization in 2001 though it has established a market-oriented economic structure, which caused disadvantages for China in trade conflicts such as anti-dumping cases.

On the 15th session of the China-US Joint Commission on Commerce and Trade (JCCT) in April, China and the United States agreed to set up working group within the framework of the JCCT, a mechanism established in 1983, to deal with China's market economy status.

INTELLECTUAL PROPERTY RIGHTS

William H. Lash, US Assistant Secretary of Commerce for Market Access and Compliance, warned China to enhance protection on intellectual property rights before ending his tour to China in August, waving pirate DVD discs and golf club.

China, troubled by local governments' weak enforcement on IPRs protection, then reorganized 500,000 civil servants, directed by Vice-Premier Wu Yi, to safeguard IPRs of both foreign and domesticowners.

EXCHANGE RATES OF RMB

The US congress and industry representatives accused China "manipulates" the exchange rates of Renminbi (RMB), Chinese currency, in a bid to twist trade, saying it caused US great trade deficits and high unemployment in manufacture industries.

In a report to the Congress by the US Department of the Treasury, it confirmed that China did not manipulate the RMB exchange rates in a bid to twist trade with the United States.

The Office of the US Trade Representative also rejected appeals on suing China in the World Trade Organization.

TEXTILE PRODUCTS

Chinese Ministry of Commerce warned the US side to "cautiously" handle cases on textile imports when the US government accepted industrial appeals which will lead to import quota on Chinese fabric products, such as yarns, shirts and trousers in October.

Before that, the US government has re-imposed import quotas on bathgowns, bras, socks and certain textiles.

China holds that some US industrial organizations required restrictions on Chinese textile products based on an assumption, saying it will damage the free trade of textile products and will extend imports quota in another way.

TOURISM

China signed an agreement with the United States to promote bilateral travel and tourism cooperation in earlier December.

He Guangwei, visiting Chairman of China National Tourism Administration said that the United States is China's largest resource of long-journey tourists, as well as Chinese tourists' favor.

ANTI-DUMPING ON FURNITURE, SHRIMP

China expressed "strong dissatisfaction" in Dec. 13 with the US decision to impose punitive duties on wooden bedroom furniture imported from China on the accusation that the furniture was being dumped in the United States.

The decision leaves in place duties set by the US Department of Commerce of up to 198 percent on more than 110 Chinese furniture producers.

Chinese Ministry of Commerce criticized in Dec. 2 a recent arbitration ruling on Chinese shrimp imports made by the US Department of Commerce, calling it unfair for Chinese companies.

According to the arbitration, 35 Chinese exporters will pay an average of 55.23 percent anti-dumping tax, while other Chinese firms will have to pay 112.81 percent for their shrimp exports.

The two cases were regarded as the top two anti-dumping cases between the two countries this year.

CIVIL AVIATION

China and the United States signed an agreement on civil aviation cooperation on July in Beijing, which allows the pointed companies to flight to the other's any cities. Before that, Chinese airlines can only flight to 12 US cities and US companies,five Chinese cities.

CHIP

The US administration accused China's tax policy on semiconductors "discriminatory" to US chip manufacturers, and requested consultation with China at the WTO in March.

Four months later, China and the United States sign a Memorandum of Understanding (MOU) on the value-added tax of semiconductors.

TRADE DEFICIT

The United States has been complaining its great trade deficit with China this year.

However, Chinese Vice Premier Wu Yi told the 15th session of the China-US Joint Commission on Commerce and Trade that key to the problem is on the US side.

She urged the United States to enlarge exports, especially high-tech products with more value added, to China, rather than put restriction on imports from China.

According to Chinese official figures, China's trade with the United States recorded 152.7 billion US dollars in the first 11 months, up 34.3 percent year on year.

December 18, 2004

China, US sign agreement on tourism cooperation

    He Guangwei (R1), director of the Chinese State Tourism Administration, meets with Grant D. Aldonas (L1), under secretary of international trade administration of the United States Commerce Department, in Washington Dec. 6, 2004. China signed an agreement with the United States Monday in Washington to promote bilateral travel and tourism cooperation.

The agreement was signed by He Guangwei, visiting Chairman of China National Tourism Administration, and Grant D. Aldonas, Under Secretary of International Trade Administration of US Commerce Department.

Under the agreement, the two countries will support the development and the establishment of an environment that facilitates two-way travel, both individual and group travel, that is free of unnecessary restrictions and violations relating to each country's immigration concerns, regulations and laws.

Both countries will seek to ensure that governmental and/or non-profit travel and tourism related entities are able to establish offices or locate representatives to promote travel and tourism in the other country's territory.

Meanwhile, visits and the promotional activities of tourism organizations, tourism enterprises and groups to the countries in compliance with their immigration laws and policies will be facilitated.

The agreement will enter into force on the date of signature and remain valid for a period of five years.

December 15, 2004

China advised not to make big change in currency exchange in short

A senior World Bank trade official said in Beijing Monday it is not in China's interest to make a very big,sudden change in its currency exchange rate in the short term.

Uri Dadush, director of the bank's International Trade Department & Development Prospects Group, said any change should be made gradually.

The short-term issue for China is the question of the appreciation of the yuan in way that it does not adversely affect the country's banking system and domestic situation, said the official during a lecture in Beijing on global economic prospects.

But in the long term, "China needs to recognize that, as any large economy, the main concern of its monetary concern and fiscal policy issue should be on domestic balance," not on targeting the exchange rate.

He said most countries only have one good counter-cyclical instrument. In the case of the United States, it is monetary policy, and it needs to deal with both inflation and growth.

What lies behind the United States' benignly neglected dollar exchange rate, he said, is the fact that the United States does not worry about the dollar exchange rate very much.

"I think you will find that the European Union will also move in this direction, a direction where monetary policy cares much more about domestic inflation and growth than about the Euro exchange rate," he said.

This makes sense for a big economy whose exports are only 10-15 percent of the GDP (gross domestic product), said Dadush.

But China is in a special situation today, as its economy is growing very fast its exports account for a bigger share of its GDP, he said.

"But I have little doubt that the long term policy for China is to move to a flexible exchange rate to be determined largely by the market, even though it may take many years," he said.

China has adopted a gradual approach to the reform of the exchange rate of its currency despite pressures from outside China that the country should appreciate its currency.

December 10, 2004

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December 10, 2004

Textile export licenses to be cancelled

As learned form the Ministry of Commerce of China, in line with the relevant articles in the WTO's Agreement On Textiles and Clothing and China's WTO Accession Protocol, importing countries which impose limits on Chinese textiles will remove the quotas as of January 1, 2005. Correspondingly, China will annul the quota licenses on textile products involved.

The Ministry of Commerce and the General Administration of the Customs have jointly released the list of textiles which will be freed from systems of importing countries. The release announced that textile export license are not needed either in the customs declaration procedure in China or in the check-up process in the customs of the country of destination. But the license is still necessary before January 1 next year.

An official from the Foreign Trade Department of the Ministry of Commerce said the global textile trade had long been immune from the world free trade system. The efforts of the less developed members of WTO have finally paid off by the Agreement on Textiles and Clothing after prolonged difficult negotiations on multilateral trade talks in Uruguay rounds.

WTO members agree in this protocol on the gradual integration of the textile sector into the global free trade system after a 10-year transitional period. However, major importers such as Europe and US have made very slow progress on pushing the integration forward in the 10 years. They keep 70 percent of their quotas, most of which are sensitive products in tight supply, intact until the last minute.

December 8, 2004

Shanghai and Shenzhen Stock Exchanges Revise Listing Rules

Effective 10 December 2004, listed companies may apply to the stock exchange for suspension of disclosure if certain requirements are met and if the information to be disclosed involves uncertainties, commercial secrets or other conditions specified by the exchange such that its disclosure may harm the company’s interests or mislead investors. The Shanghai and Shenzhen stock exchanges have recently released the Listing Rules (2004 revised), making a number of improvements in enhancing the mechanism of information disclosure and in reforming and streamlining the delisting system.

Compared to the old version, the revised Listing Rules, which have expanded from 14 chapters and 223 articles to 18 chapters and 295 articles, have greatly enhanced the mechanism of information disclosure in the following ways:

Further specifying the conditions for suspension and exemption of disclosure of key information. Under the new rules, listed companies may apply to the stock exchange for exemption of disclosure or performing pertinent obligations if the information to be disclosed involves state or commercial secrets or other conditions specified by the exchange such that its disclosure or the performance of pertinent obligations may lead to possible violation of state laws regarding confidentiality or cause damage to the company’s interests.

Establishing the timing for first-time disclosure of major events while refining the requirement for continued disclosure. Chapter 7 of the new rules stipulates that listed companies should disclose in a timely manner major events that may significantly impact the transaction price of their stocks and derivatives when any one of the following occurs: (1) the board of directors or regulators has reached a resolution regarding that major event; (2) all parties concerned have signed a letter of intent or an agreement regarding that major event; and (3) any director, regulator or senior executive knows or is supposed to know about that major event. The new rules also provide that listed companies should continue to disclose the progress of major events as stipulated.

Unifying the disclosure standards for 11 types of transaction including major acquisition and sale of assets, external investment, provision of guarantee, and entrusting of assets and business management; while adding the indicator of absolute transaction amount on the basis of relative transaction amount.

Adjusting the disclosure standards and review procedures for associated trade.

The business of nostalgia in Shanghai

Barbie and Yue-Sai Wa Wa dolls have taken the mainland by storm - and opened new doors to entrepreneurship for doll lovers.

In Shanghai's Hongqiao district, there is a unique, small store selling all kinds of Western-style collectible dolls. Customers from Hong Kong, Macau, Taiwan, Japan and Europe keep returning to the store, which is always busy.

The proprietress of the shop is a woman in her fifties, but her love for dolls as a child still gives her a childlike innocence. "I am running this shop as a small kindergarten and I give my dolls different outfits. I opened this shop initially because of my love for dolls. I have been to all large shopping malls in Shanghai, but nowhere could I find this kind of store.

"So, I decided to set up my own business selling Western-style collectible dolls," says this woman. "I mainly deal in dolls in casual apparel that appears slightly antiquated. Collectible items are always a bit old anyway," she observes.

The dolls are very popular among people from different strata of society. "People who are eager to know more about foreign lands but have no chance to do so can also get a taste of different cultures here," she added.

Today, DIY shops have become one of the most popular forms of business. In these shops, people can see their creative talent come to fruit, creating everything from small, hand-made ornaments to garments, shoes and socks.

DIY toy kits, becoming popular overseas, have also found their way into Shanghai. In one of these shops on Nanjing Road, children can put stuffing in semi-finished toys, make their own recordings, give their toys names, choose clothing for them and even obtain "birth certificates" for them.

Every plush toy is unique. "The production process gives children some basic ideas about the making of plush toys and prevents them from tearing their toys apart out of curiosity. They will cherish these toys much more than ready-made ones," says one shop attendant. "This also gives parents and children a valuable opportunity of working as a team, as children are making the toys."

According to Xu Quanning, secretary general of the Shanghai Toy Association, this form of DIY toy workshop is new to Shanghai. Demonstrating some of the ways of making plush toys is a good way to attract customers.

Parents feel at ease seeing toys stuffed with cotton. Choosing clothes for their toys is also a way of training children's aesthetic appreciation and the ability to mix and match.

People in the industry see great prospects in this type of shop.

Miss Ge, who works for a foreign company, has joined a flower tea franchise as a sideline job to target the office requirement for specialty teas.

A tasteful style is very important for this type of tea outlet, which is a kind of bar.

The initial franchise fee is about Rmb50,000 (HK$47,000), and most of the shops are set up at the shopping arcade in upmarket office buildings. According to Miss Ge, white-collar workers are under pressure most of the time and what they want most during their lunch breaks is to take a rest in a place with a comfortable setting.

The tea bar satisfies that need. Flower tea has a beautiful colour and attractive aroma, while apparently being good for health and beauty. So, together with the attractive tea sets and the ambience, tea drinking becomes an enjoyment and a social event.

Daily, around noon, young executives gather in small groups to have a chat while sipping tea or simply relax. The pressure of work appears less daunting. This explains why the tea bar is becoming increasingly popular also among women executives, and business is doing well.

Many small businesses choose the busiest sections of Shanghai to set up shop. For example, Xiangyang Road near Huaihai Road is synonymous with trendiness and fashion for young people, especially young women. It is a fascinating labyrinth where one can spend hours just browsing.

Xiangyang Road Market mainly sells garments and fashionable small items. Besides the chic urban folk, foreigners in Shanghai also visit the market regularly in search of good deals.

There are more than 600 shops in Xiangyang Road Market with sizes ranging from three and four sqm to over 10 sqm.

New shops keep emerging, such as lingerie shops, nail art painting shops, scent and essence shops.

A small shop specialising in Nepalese ornaments is packed with young people who come looking for exotic items.

The proprietor has come all the way from Xian because of the shop's reputation. The place has also attracted business people from Guangzhou and Beijing.

Xiangyang Road Market grosses Rmb1.5 million (HK$1.4 million) a day and is visited by 50,000 people daily and 120,000 people on holidays. There are nearly 1,000 foreign tourists each day.

A team of 30 officers from the administration for industry and commerce posted at the market keep order and crack down on fake and shoddy items.

Ten design teams vie for World Expo planning contract

At an international forum, World Expo and Intelligent Transport Standardisation, held in mid-November, an official from the Shanghai World Expo Bureau disclosed changes to a plan for the Shanghai World Expo in 2010, and the result has been the choice of three finalists, which will each contribute to the master design for the Expo.

A plan was originally submitted at the time of bidding, but during another planning and design forum in April, the feasibility of the flower bridge, canal and other landmark architecture was questioned by many international experts.

For this reason, a new round of bidding for the master plan was launched in May, and 10 renowned design firms from around the world were invited to put forward their proposals.

At the end of July, leading Chinese and foreign experts on planning, transport and other areas were invited to form a panel of judges to review the new proposals in the light of eight criteria including feasibility, functions, future utilisation, and protection of historic relics.

After six rounds of votes, the panel confirmed Ove Arup and Richard Rogers Partnership, Perkins Eastman Architects, and Shanghai Tongji University as the three finalists.

The design proposed by Arup and Richard Rogers has an imposing main architecture and a breathtaking landmark.

Master Plan for 2010 Shanghai World Expo

The concept from Perkins Eastman "embraces the Pujiang River" as its theme, featuring seven river-facing architectural structures with good economic and operational prospects after the Expo.

Tongji University's proposal is amply backed up by theoretical research.

It is understood that the final blueprint will draw on the quintessence of all three proposals, with emphasis on future utilisation and transportation.

It has been disclosed that the revised optimised design will have 70 hectares of green belts along the river.

The permanent venues will be relatively centralised and will include a China pavilion, a convention centre, a centre for performing arts, as well as a number of theme halls.

The plan is expected to instill new life into the historic relics and old industrial premises which are part of the expo site. The infrastructure will be merged with the existing system of urban transport, with "zero scrapping" as far as possible.

Five rail transport routes will pass through or come near the Expo park, and different modes of river crossing will be available.

December 3, 2004

CITA Continues to Advance China Textile Safeguard Petition

The US Department of Commerce-chaired inter-agency Committee for the Implementation of Textile Agreements (CITA) has accepted another threat-based China textile safeguard petition, which targets combed cotton yarn (Category 301). Comments must be submitted no later than 23 December 2004. Interested persons may submit ten copies of such comments to the Chairman, Committee for the Implementation of Textile Agreements, Room 3001A, U.S. Department of Commerce, 14th and Constitution Avenue NW, Washington, DC 20230, United States.

To date, CITA has accepted seven of the nine threat-based China textile safeguard petitions that have been submitted. Comments on the safeguard request on cotton trousers (Category 347/348) must be submitted by 3 December 2004, while comments on the petitions targeting man-made fibre trousers (Category 647/648), cotton knit shirts (Category 338/339), man-made fibre knit shirts (Category 638/639), non-knit cotton and man-made fibre shirts (Category 340/640) and cotton and man-made fibre underwear (Category 352/652) are due no later than 9 December. In addition, the US textile industry has filed two petitions calling on CITA to "reapply" the China textile safeguard on knit fabric (Category 222) and robes and dressing gowns (Category 350/650), which should expire on 23 December 2004.

The textile and apparel safeguard provision in China's World Trade Organisation (WTO) accession agreement provides for the US and other WTO members that believe imports of Chinese textile and apparel products are disrupting the market and threatening to impede the orderly development of trade in these products to request consultations with China with a view to easing or avoiding the disruption. Under the procedures announced by CITA for invoking the safeguards, within 60 calendar days of the close of the comment period, CITA must decide whether to seek consultations with China. The 60-day period may be extended, but if the decision is delayed CITA must publish a notice in the Federal Register indicating the date by which it will make a determination.

Pursuant to the safeguard provision in China's WTO accession agreement, if the US requests consultations with China, it must, at the time of the request, provide China with a detailed factual statement showing "(1) the existence or threat of market disruption; and (2) the role of products of Chinese origin in that disruption". Beginning on the date that it receives such a request, China must restrict its shipments to the

US to a level no greater than 7.5% (6% for wool product categories) above the amount entered during the first 12 months of the most recent 14 months period preceding the request. If exports from China exceed that amount, the US may enforce the restriction. Consultations must be held within 30 days of China's receipt of the consultation request.

In addition, as was widely expected because China refuses to issue visas for goods subject to a safeguard, CITA has announced that it will not require visas for man-made fibre and wool socks (Categories 432 and 632 Part), which are the subject of a textile safeguard measure implemented on 29 October 2004. However, cotton socks (Category 332) imported from China will continue to be subject to a visa requirement through 31 December 2004 when the WTO Agreement on Textiles and Clothing (ATC) expires.

US Government Pushes RFID Technology for Various Security Applications

The US Food and Drug Administration (FDA) has announced that it will use radio frequency identification (RFID) technology to protect the US drug supply against counterfeit pharmaceuticals. Electronic tags on product packaging will allow manufacturers and distributors to keep track of products as they move through the supply chain. However, RFID has a wide variety of uses beyond tracking goods in the supply chain to reduce counterfeiting and streamlining business practices. For example, homeland security applications, many of which have been pioneered by the US Department of Defence (DOD), also utilise RFID technology. From this vantage point, the FDA's announcement sends an unequivocal signal that the US government intends to promote this technology.

On 17 November 2004 the FDA published a Compliance Policy Guide (CPG) in the Federal Register, which describes how to implement RFID studies and pilot programmes. The FDA believes that the CPG will clear the way for more pilot programmes that involve RFID tagging of all packages of certain products, especially those that are targeted by counterfeiters.

On 15 November, Lester Crawford, the acting FDA commissioner, stressed that the US government intends "to increase the safety of medications consumers receive by creating the capacity to track a drug from the manufacturer all the way to the pharmacy". He added, "We hope that other manufacturers, wholesalers, and retailers will follow this example by also becoming early adopters of RFID". The FDA applauded the pharmaceutical companies Pfizer, GlaxoSmithKline and Purdue Pharma for their plans to start utilising RFID tags on some products as early as next year, including on bottles of Viagra and OxyContin.

To encourage additional studies on the feasibility of using RFID for various business purposes, including inventory control and tracking and tracing of drugs, the FDA intends to exercise enforcement discretion until 31 December 2007 concerning certain regulatory requirements. These developments have been brought about by the publication on 18 February 2004 of an FDA a report, entitled Combating Counterfeit Drugs, which identified RFID technology as the cornerstone in the fight against counterfeit pharmaceutical products.

The FDA is also creating an internal "RFID workgroup" that will be charged with monitoring the adoption of RFID in the pharmaceutical supply chain, proactively identifying regulatory issues and developing straightforward processes for handling those issues.

The value of using this technology to ensure the safety of the pharmaceutical products in the US market is readily apparent, but it may not be an overstatement to say that before long virtually every company on earth will be required to use RFID technology in one way or another to remain competitive in the global market.

After all, potentially all companies that buy, sell or handle goods in the supply chain will have to become RFID-compliant. In this regard the world's largest retailer, Wal-Mart, is a trendsetter. Wal-Mart has made it mandatory for all of its suppliers to become RFID-compliant in 2005. According to some calculations, Wal-Mart imports goods worth US$15 billion from China. Speaking at the Fall 2004 CIO Summit in Boca Raton, Florida, on 15 November, Wal-Mart's chief information officer, Linda Dillman, said that Wal-Mart encourages its suppliers to "overdesign" their RFID projects.

A survey conducted in September and October 2004 by BearingPoint, the Information Technology Association of America (ITAA) and Federal Computer Week magazine documented that many US government technology executives view RFID technologies as a key element of achieving their organisational strategy, but have yet to deploy the technology.

Nick Evans of BearingPoint's Emerging Technology practice stressed, "At this stage in adoption, we were not surprised to see that most respondents indicated they would spend less than US$250,000 on RFID projects in fiscal year 2005 and less than US$1 million in each of fiscal years 2006 through 2008, which is consistent with what we are hearing through our work chairing ITAA's RFID Standards Task Group".

ITAA President Harris Miller added, "Near term obstacles aside, RFID will clearly become the heart of inventory and supply chain management technology for large enterprises of all kinds, including government agencies". He also noted, "Early adopters such as the DOD, to say nothing of major private sector retailers, have already sounded a resounding endorsement of the technology's benefits".

However, earlier in November, DOD announced that it has decided to push back the deadline for compliance with its RFID mandate. Originally set for 1 January 2005, compliance will now not be required until February, at the earliest, as no firm new date has been established. DOD's RFID implementation mandate plan seeks to give suppliers 90 days to comply from the release date of the specification. The delay that DOD has experienced has led experts to wonder whether Wal-Mart and other retailers can be far behind in announcing delays in their RFID programmes. Nevertheless, even if there are further delays, none of these problems will delay full implementation for long.

Homeland security applications also utilise RFID technology, particularly in the context of the cargo security programmes championed by the US Department of Homeland Security's Bureau of Customs and Border Protection (CBP), including the Container Security Initiative (CSI) and the Customs Trade Partnership Against Terrorism (C-TPAT).

RFID technology has been identified by many US security experts as an important element in the overall effort to secure the busiest US ports against potential future terrorist attacks, particularly because the new generation of active tags has significantly reduced the cost of securing containers in transit. There are a number of areas in which RFID technology can be used to improve cargo security efforts such as in facilitating container identification and in activity tracking.

For example, smart container seals are active RFID tags, which notify authorities and operators that a container has been opened without authorisation. Such smart seals may also be equipped with sensors that monitor conditions in the container and some tags, including those used by DOD on high-security containers, also contain global positioning system (GPS), sensor and satellite telephone capabilities to constantly report the location of the container and the conditions in it.

While there is no mandate for RFID tags in any of the current regulations governing cargo security in the US, US government cargo security initiatives and the FDA's recent moves to ensure the security of drugs in the US market via RFID technology mean that this technology is here to stay. This is all the more true when viewed in the context of concurrent private-sector initiatives to further streamline business processes, such as Wal-Mart's efforts to require all of its suppliers to tag products with RFID technology. That is to say, within a few years' time, RFID technology will be used by manufacturers, exporters, shipping companies, importers and governments to track products throughout the global supply chain.

USTR Rejects Congressional Section 301 Petition on Chinese Currency

On 12 November the Office of the US Trade Representative (USTR) rejected the most recent petition filed under Section 301 of the Trade Act of 1974 against Chinese currency practices. China's President Hu Jintao reportedly thanked President George W. Bush for this action when the two men met on the sidelines of the Asia-Pacific Economic Co-operation (APEC) summit in Santiago, Chile. However, the Bush administration's rejection of this effort did not come as a surprise, as it was primarily a Democratic initiative, with Senator Lindsey Graham (South Carolina) being the only Republican lawmaker among the 30 supporters.

In a statement, USTR spokeswoman Neena Moorjani explained, "As we have previously made clear, the administration believes China must move faster to adopt a flexible, market-based exchange rate and we have acted aggressively to persuade the Chinese government to undertake the complex transition toward that goal". She added, "A Section 301 action would not assist in these efforts, and indeed could be more damaging than helpful at this time".

At issue was once again China's policy of pegging its currency to the US dollar at 8.28 yuan to US$1, which an ever-growing chorus of US critics contends artificially undervalues China's currency and contributes to the ballooning US trade deficit. On 30 September a group of twenty-two House members and eight senators, the Congressional China Currency Action Coalition, launched a Section 301 initiative seeking the immediate elimination of the undervaluation of China's currency.

The lawmakers called on USTR to act quickly arguing that China's currency peg acts as an export subsidy that is prohibited by Article 3.1(a) of the World Trade Organisation (WTO) Agreement on Subsidies and Countervailing Measures (SCM). However, unlike previous Section 301 petitions targeting China's alleged "currency manipulation", this congressional initiative did not call for punitive across-the-board tariffs. Instead, it called on the Bush administration to launch a dispute settlement proceeding against China at the WTO.

Beyond the political nature of the Chinese currency issue in the just passed American election season, the expanding US trade deficits - on course to top US$600 billion this year, with China alone accounting for approximately 25% of that total - poses a risk to the US economy. The US current account deficit reached an all-time record of US$166.2 billion in the second quarter of 2004. Making matters worse, the Bush administration and the Republican-dominated US Congress continue to pursue policies that do nothing to rein in the growing budget deficit.

Federal Reserve Chairman Alan Greenspan issued a stern warning in this regard on 19 November in Frankfurt am Main, Germany, noting that continuing US current account and budget deficits could destabilise the US economy. In his remarks, Greenspan underlined, "Over the past ten years, a large current account deficit has emerged in the United States matched by current account surpluses in other countries". He added, "Current account imbalances, per se, need not be a problem, but cumulative deficits, which result in a marked decline of a country's net international investment position - as is occurring in the US - raise more complex issues. The US current account deficit has risen to more than 5% of GDP [gross domestic product]".

Greenspan pointed out that so far, foreigners, primarily China and Japan though he did not name them, are willing to lend the US money to finance the current account imbalance. However, particularly as the US dollar continues to fall, the worry continues to grow that foreigners might suddenly lose interest in holding dollar-denominated investments.

December 2, 2004

China shouldn't appreciate RMB

If China revaluates its currency it could damage the economy and create an economic "bubble" like Japan.

Morgan Stanley's chief Asia economist Andy Xie warned, if the Reminbi appreciates under international pressure, it will trap China, with low growth, low interest rates and low inflation but a strong currency, China Radio International reported Wednesday.

He pointed out that the macro economic situation in today's China resembles that of Japan when its currency was pressed to revalue during its fast growth period.

At present, at least 1.2 billion US dollars of hot money has entered the Chinese mainland and Hong Kong, as speculators gamble on a revaluation of the RMB.

The Japanese yen revaluated in 1985, causing domestic enterprises to move out of Japan and invest in South-East Asian nations. The low interest policy that followed created an economic "bubble", with over-investment in stock market and real estate, that Japan is yet to recover from.

December 1, 2004

China Allows Transfer of Personal Property Abroad

To meet individuals' legitimate needs of transferring personal property out of the mainland and to facilitate and standardise the conduct of such transfer, the People's Bank of China has recently issued the Provisional Measures for the Administration of the Sale and Payment of Foreign Exchange in the Transfer of Personal Property Abroad.

Taking effect on 1 December 2004, the measures clearly spell out China's foreign exchange administration policy on the personal property transfer by individuals emigrating abroad or inheriting property on the mainland. The move marks a significant step in protecting individuals' lawful property rights as well as pushing forward the convertibility of renminbi under the capital account.

The measures govern two types of personal property transfer by individuals. First, the outward remittance of foreign currency obtained from the sale of property in the mainland by natural persons emigrating to a foreign country or relocating from the mainland to Hong Kong or Macau. The property concerned should be lawfully owned by the individual in the mainland prior to acquisition of immigrant status. Second, the transfer of inheritance property. Foreign nationals and Hong Kong or Macau residents inheriting property legally in the mainland may convert the property into foreign currency and remit the proceeds out of the mainland. The measures also apply to personal property transfer involving residents of Taiwan. However, the measures do not govern other forms of personal property transfer.

The measures stipulate that the personal property to be transferred abroad by an applicant must be his or her lawful property which is not the subject of rights dispute with other parties. Foreign exchange administration authorities will not process applications involving the transfer of personal property under the restraint of judicial or supervisory authorities in accordance with law. Other property that cannot be transferred abroad includes property that is prohibited from transfer by law, property without proof of legal source, and property involved in ongoing criminal or civil litigation cases.

Applications for personal property transfer should be submitted to the local branch of the State Administration of Foreign Exchange (SAFE) at the place of domicile registration of the would-be emigrant or the original place of domicile registration of the benefactor. The applicant may apply in person or appoint an agent. Applications involving the equivalent of less than Rmb500,000 will be examined and approved by the local foreign exchange administration sub-bureau. Applications involving the equivalent of Rmb500,000 or more will be examined by the local foreign exchange administration sub-bureau first before seeking SAFE approval.

The measures also stipulate that applicants wishing to transfer property worth Rmb200,000 or more because of emigration should submit a single application and remit the funds out of China by installment within two years upon approval. Applicant wishing to transfer property inherited from the same benefactor should submit a single application, and the funds may be remitted as a lump sum or by installment. Applications involving the property of different benefactors should be lodged separately and the funds remitted separately too.

Rugao is China's flower world

Rugao Flower World in Jiangsu's Nantong, is China's foremost garden for growing and distributing flowers and plants of all kinds. The centre was developed in 2002 as a key project of government industrial restructuring, and with an investment of Rmb60 million (HK$56 million) from private investors.

The market combines production and distribution with information exchange, technical training, scientific and technological development, landscaping, tourism, and supporting commercial services.

Within two short years, Flower World has developed into a mega market of intensive trading for flowers and plants in eastern China, indeed throughout the whole of China.

Rugao Flower World is 64,000 sqm in area, with 1,024 stalls in five functional sections, including those for commercial services, potted flowers, seedlings, mature trees and short-term tenants.

There is a root carving hall, a kaffir lily garden, a southern flowers street, a Rugao-style bonsai garden, as well as a flower seedling and separate landscape bonsai garden. The centre is an attraction to those who want to view a mature poinsettia garden, a big tree garden and take part in leisure and entertainment.

All these elements combine to present an agriculture-tourism chain for tourism, trade, production, scientific research and training, landscape design, vacation and plant rental.

About 70% of the stalls are manned by local people, with the remaining 30% operated by people from Fujian, Zhejiang and Anhui.

The market is visited by 5,000 people daily.

Plants are mostly sold wholesale, and both spot transaction and orders are welcome.

Rugao is an important export base for bonsai, an art dating back to the Song dynasty that has won its share of international gold awards.

The city has a large area under the cultivation of flowers and plants and has bred over 1,300 varieties. It now has the capacity to produce 200 million tree saplings, 3 million pots of bonsai and 4 million pots of flowers each year.

Over 2,000 varieties of flowers and plants are available at Rugao Flower World. They are not only sold throughout China (such as in Hong Kong, Beijing, Shanghai, Guangdong, Jiangsu, Anhui, Shandong and Jiangxi), but are exported to more than 20 countries and regions, including Italy, Singapore, France and Japan. Annual sales exceed Rmb1 billion (HK$943 million).

There are green plants and flowers throughout the market. A huge variety of flowers and plants can be found, including not only gingko, Chinese rose and osmanthus but also rare and precious species, like one-leaf orchid, Chinese cymbidium and "tortoise shell" ilex.

This flower market is well served by roads, water and electricity supply, telephone, cable TV and Internet services.

Its electronic burglar alarm system provides all-weather monitoring round the clock.

An office embracing the five functional departments of industrial and commercial administration, taxation, public security, forestry and communications provides one-stop service at the flower world.

There are branches of the Bank of China, Construction Bank of China, Industrial and Commercial Bank of China, Agricultural Cooperative and People's Bank of China nearby to provide financial services to clients. There are also forwarding companies in the market to provide packaging and delivery services.

The market has its own horticulture training centre which provides full-time training for gardeners, bonsai makers, lawn builders and other specialists. It also boasts its own botanical information exchange centre.

The Flower World portal links up all operators in the market and functions as an electronic trading platform for domestic and overseas buyers. There are touch screen terminals to let clients know about the market situation.

The annual bonsai festival hosted by the Flower World is visited by many domestic and foreign buyers.

Rugao Flower World is situated at the heart of the Rugao Flower and Nursery Base next to National Highway 204, with the Nanjing-Nantong Expressway, coastal expressway, Xinyi-Changxin Railway and Nantong Airport providing it with convenient sea, land and air transport.

November 28, 2004

A forum for Hawaii's business community to discuss current events and issues Sunday, November 28, 2004 - Direct Link  PDF Format

THE ROUTE TO CHINA - North American Airlines’ bid for China route deserves isle support The airline promises routes that stop in Honolulu if it wins the flights next year By Johnson W. K. Choi

When Singapore Airlines stopped its direct flight service from Hong Kong to Hawaii in 1989, it created great inconveniences for both business and leisure travelers to come to Hawaii.

You can see a drop of Hong Kong visitors, including business executives, visiting Hawaii.

During the past 10 years, trade between United States and China has substantially increased.

Many businesses doing business with China preferred to set up their offices in California, which has the comfort of many choices of daily direct flights to and from all major cities in Asia.

During the past few years, we have had discussions with many accounting firms and found that more Chinese businesses left Hawaii, especially after 9/11, due to the difficulties traveling to and from Asia (except Japan).

The required stopovers at one or more connection points is a common complaint by business travelers.

I have received a solicitation for support from North American Airlines to fly directly to Shanghai and Guangzhou. I do not know too much about the airline.

But I've heard about direct flights from Hawaii to China for more than 10 years with almost annual discussion with foreign carriers planning to start direct flights from China/Hong Kong to Hawaii.

It has become old news.

We believe an American airline willing to fly to Shanghai and Guangzhou direct from Hawaii makes more economic sense as domestic carriers are allowed to pick up and drop off passenger between U.S. cities (foreign carriers are not allowed to do so).

It is great news that Hawaiian Airlines intends to fly direct to China from Hawaii in 2006 -- but it is two years away. It is not as desirable since it planning to do the direct flights four times per week.

If North American Airlines is able to fly daily directly to Shanghai in 2005 and Guangzhou in 2006 it should be good news for Hawaii. It will also give business travelers better choices and cut down their travel time to/from Hawaii.

I am asking you to take a look at it and see if you can support their efforts.

Johnson Choi is president and executive director of the China.Hawaii Chamber of Commerce.

China.Hawaii Chamber of Commerce http://www.hkchcc.org/president's_corner.htm

November 25, 2004

Convenience food in a hurry in Shanghai

Lianhua Express, All Days, Kedics, Liangyou, C-Store and Meiya 21st Century are all stores, now all over Shanghai.

Besides retail outlets, these stores also provide services to customers any time and anywhere.

For example, they sell convenience food, accept payments of public utility charges, deliver milk or flowers, as well as accept requests to reserve train or bus tickets, and sell public transport or telephone store-value cards.

One of the major characteristics of convenience stores is that they stock large varieties of convenience food to satisfy the needs of students and office workers instantly.

For people who crave something to eat in the middle of the night when all restaurants are closed, these outlets are the answer to their prayers.

Years ago, instant food was mostly in the form of simple Japanese snacks, like sushi.

Now, microwave-friendly Chinese foods such as shashlick, cakes, rice soup and congee are readily available. They are very popular because they are nutritious, convenient and hygienic.

In order to attract customers and fight for a winning edge in competition, convenience stores in Shanghai are striving to bring in new instant food products through diverse channels.

Lianhua Express recently teamed up with Nagatanien, Japan's largest instant food manufacturer and dealer, to develop and import Japanese-style convenience food in a bid to meet consumer demand in a modern city and give people an easy way to taste what authentic Japanese food is like.

Consumers stand to benefit, as convenience stores import more and richer varieties of convenience food in their effort to diversify their merchandise and provide more personalised service.

Workers Get Compensation for Wage Arrears Under New Regulation

Under the Regulations on Labor and Social Security Supervision promulgated by the State Council, employers have to pay workers compensation for wage arrears.

Article 26 of the new regulations stipulates that employment units that withhold or delay wage payment for no reason, pay workers below the local minimum wage, or fail to pay workers financial compensation for termination of labor contract in accordance with law, would be ordered by the labour and social security administrative departments to pay within a prescribed period remuneration to the workers, the difference between the workers’ wage and the local minimum wage, or financial compensation for termination of labor contract. Those that fail to make payments within the time limit would be ordered to make extra compensation to the workers at more than 50% but less than 100% of the amount due.

The regulations also stipulate that employment units that extend workers' working hours in violation of labor and social security laws and regulations would be warned by labor and social security administrative departments and ordered to make rectifications within a specified time. They may also be fined Rmb100 to Rmb500 per worker whose rights have been encroached upon.

November 24, 2004

Tourists bringing wealth to China

China's tourism industry enjoyed robust growth in the first 10 months this year, Beijing-based English newspaper China Daily reported Tuesday.

According to statistics from the National Tourism Administration, China received 89.79 million tourists in the mainland areas in the first 10 months this year, up 20.34 percent year-on-year, an 11.09 percent increase over the same period in 2002.

Among tourists, 13.84 million were from overseas countries, up 52.66 percent year-on-year; 55.03 million were from Hong Kong, up 14.68 percent; 17.83 million from Macao, up 15.63 percent; and 3.08 million from Taiwan, up 39.41 percent.

The top five countries on a list of those that witnessed the fastest growth in tourists entering China in the same 10-month period included India, Russia, the Republic of Korea, Australia and Singapore with growth rates of 45.32, 40.96, 31.93, 27.28 and 27.16 per cent, respectively.

The administration said foreign currency income from the tourism sector in the surveyed time period was estimated at 19.26 billion US dollars, which rose 37.45 percent and represented 14.08 percent in additional income over the same period in 2002.

And 49.79 percent of the tourism exchange revenue came from overseas tourists, 26.89 percent from Hong Kong, 9.81 percent from Macao and 14.01 percent from Taiwan.

China's inbound tourist arrivals set a record in 2002, when China ranked fifth in the world in terms of both overnight tourist arrivals and tourism income in foreign exchange.

In 2003, however, Chinese tourism suffered a heavy blow due to the outbreak of SARS (severe acute respiratory syndrome), which resulted in a sharp reduction in visitors.

In 2003, the tourist arrivals totaled 91.66 million, a decrease of 6 percent from the previous year.

After SARS, the Chinese government adopted a series of measures to reinvigorate the sector.

China sees new record of foreign investment

China's speed of attracting investment and the bulk of investment have attracted world attentions in recent years. Some scholars think the basis for attracting foreign capital has changed already, so the theories guiding foreign investment attraction need modification. Hu Jingyan, Director of Foreign Capital Department of Ministry of Commerce points out that China will adhere to the policy of active, reasonable and effective application of foreign capitals, the Guangming Daily reports.

The argument focuses on two issues: too much foreign capitals will threaten safety of China's economy; some competition will do harm to domestic enterprises, according to Jin Bosheng, a researcher with the Research Institute of Ministry of Commerce.

Jin says these worries are unnecessary. The FDI will not control or monopolize important industries that are connected with national economy and people's livelihood. In the Directory for Foreign Investment 2002, all industries are divided into four categories, according to which foreign capitals are encouraged to enter, allowed to enter, restricted to enter and forbidden to enter respectively. Not all industries are open to foreign capitals. The practice in more than 20 years has proved that the superiors survive the competition and the inferiors are eliminated at market.

China is the No. 1 destination of foreign investment in 2003, says World Investment Report issued by the United Nations Conference on Trade and Development in September. At present, China is still the most attractive destinations for foreign capitals in the world. By the end of August 2004, China has applied foreign investment of US$ 545.029 bln. Experts forecast the gross foreign investment will exceed US$ 60 bln in the whole year, hence the year that receives most foreign capitals.

Simple figures or proportions are not criterion for evaluating the bulk of foreign capitals. The true standard is if the foreign capital play the role it is supposed to play and if it is beneficial to healthy growth of national economy. Foreign investment has made contribution to China's economic development since China's opening. The advanced technology, management experience outweighs the capital itself. More importantly, it makes positive contribution in alleviating the employment pressures.

November 20, 2004

Brazil, Argentina, Chile approved as Chinese group travelers destinations

Brazil, Argentina and Chile have been approved by the Chinese government as Chinese group travelers destinations, according to the latest news from China National Tourism Administration (CNTA). Cuba was approved as a Chinese travelers destination last year.

With no direct flights between China and South America, package prices to the three nations will be quite high. The current price to Cuba within seven days cost more than 20,000 yuan (2000 US dollars) in local travel agencies.

Brazil's rainforest and Samba dance, Chile's volcanoes and Easter island and Argentina's Moreno Glacier are expected to attract Chinese travelers.

Chinese travel agencies will organize groups only after CNTA reaches a consensus with those three nations in visa procedure and local guide issues. Travelers can fly there via Europe or North America.

According to the World Tourism Organization (WTO), China is among the top ten overseas tourist consumption markets. Last year, more than 20 million Chinese travelers went abroad, passing Japan to rank first in Asia for the first time. The WTO has predicted China will become the world's fourth biggest tourism source nation by 2020.

November 17, 2004

Sino-American Trade Relations in A Second Term for President Bush: An Outlook

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Threat-Based China Textile Safeguard Petitions Move Forward

The Committee for the Implementation of Textile Agreements (CITA), an inter-agency group chaired by the US Department of Commerce (DOC), has accepted six threat-based China textile safeguard petitions from US textile industry. In accordance with the stipulated procedures, CITA has started a 30-day period public comment period. Comments on the requested safeguard action targeting cotton trousers (Category 347/348) must be submitted by 3 December 2004. Public comments on the petitions targeting man-made fibre trousers (Category 647/648), cotton knit shirts (Category 338/339), man-made fibre shirts (Category 638/639), non-knit cotton and man-made fibre shirts (Category 340/640) and man-made fibre underwear (Category 352/652) must be submitted no later than 9 December. Interested persons may submit ten copies of such comments to the Chairman, Committee for the Implementation of Textile Agreements, Room 3001A, U.S. Department of Commerce, 14th and Constitution Avenue NW, Washington, DC 20230, United States.

The latest development means that six of the nine petitions submitted thus far have been accepted by CITA. Currently, CITA is reviewing the petitions on combed cotton yarn (Category 301), synthetic filament fabrics (Category 620) and wool trousers (Category 447).

The basis for these threat-based safeguard petitions is that the US textile industry contends that China will capture 70-75% of the US market when textile and apparel import quotas are removed on 1 January 2005 pursuant to the World Trade Organisation (WTO) Agreement on Textiles and Clothing. According to the US textile industry, approximately 33.5% of all US textile and apparel manufacturing jobs, or 350,500, have been lost since January 2001. As of October 2004, 695,800 US textile and apparel manufacturing jobs still remain.

As part of its safeguard petition drive, the US textile industry also has accused Chinese firms of illegally exporting to the US millions of pairs of cotton and man-made fibre trousers by misclassifying the subject merchandise as linen, silk or other vegetable fibre trousers. The accusation is included in two of the recent petitions.

In a statement, Cass Johnson, the president of the National Council of Textile Organisations, greeted CITA's decisions enthusiastically, saying, "The six petitions now accepted are where the rubber meets the road in determining whether the textile industries in the US, the Western Hemisphere and the rest of the developing world will be given a fair chance to compete once quotas are removed. As the quota phase-out ticks down, these petitions are the only things that can now stop a Chinese takeover of the US market. Hundreds of thousands of jobs are at stake as well as the principle of fair play in textile trade".

The acceptance of the petitions means that CITA deemed that they contained sufficient information for further consideration. Nevertheless, these threat-based petitions are under close scrutiny. For its part, China has threatened to challenge the legality of threat-based safeguards at the WTO, but US government officials do not believe that such a Chinese complaint would be successful.

More important than China's complaints, many US importers and retailers have protested against them. For example, the American Apparel and Footwear Association (AAFA) said in a statement that the DOC's legal basis for accepting threat-based petitions is unclear, particularly because to date CITA has failed to issue a promised procedure for accepting such petitions. Kevin Burke, the AAFA's president and CEO, stressed, "We believe the safeguard mechanism can be effective when decisions are reached through a clear and transparent process and only when there is a clear linkage between imports from China and market disruption in the US. To act otherwise, only raises false expectations that the safeguards will benefit the US textile industry".

Nevertheless, the process is moving forward, with the following, approximate timeline. After the end of the comment period, CITA will have 60 days - until early February in the case of the petitions thus far accepted - to determine whether imports of these products are threatening to disrupt the US market. Although it is difficult to predict whether CITA will follow the US textile industry's call for help, many observers feel that the domestic industry will be successful in the majority of these cases.

Should CITA, as most observers expect, make affirmative market disruption determinations, the US will request consultations with China with a view toward resolving the issue. The new quotas will take effect on the day when the US government requests bilateral consultations with China. Bilateral consultations must be held within 30 days of the US government's request and a mutually satisfactory agreement with China must be reached within 90 days of the Chinese government's receipt of the US request. In the event that a mutually satisfactory agreement cannot be reached by that time, the quota will remain in place for one year after the date on which consultations were originally requested.

Finally, in its announcement of 29 October of a new 12-month quota on imports of cotton, wool and man-made fibre socks from China, CITA stated that it would require such imports to be accompanied by an export visa and Electronic Visa Information System (ELVIS) transmission issued by the Chinese government.

However, this requirement may not be implemented. CITA had also intended to require visa and ELVIS transmissions in conjunction with the quotas it imposed on Chinese knit fabric, dressing gowns and brassieres on 24 December 2003, but this requirement was cancelled before taking effect due to objections from the Chinese government. In the latter case, China has used an alternative procedure under which qualified enterprises must apply for a "Registration Certificate" from the Bureau of Visa Affairs of the Ministry of Commerce or the Provincial Office for Trade and Commerce, to export these items to the US.

DOC Makes Affirmative Final AD Determination on Wooden Bedroom Furniture From China

On 9 November 2004, the US Department of Commerce (DOC) made its final determination in anti-dumping duty (AD) investigation A-570-890 that imports of wooden bedroom furniture from China are being dumped on the US market. The subject merchandise is classified under subheadings 9403.50.9080, 9403.50.9040 and 7009.92.5000 of the Harmonised Tariff Schedule of the US (HTSUS). The DOC's final determination calculated dumping margins ranging from 0.79% (de minimis) to the China-wide rate of 198.08%, which has remained unchanged from the preliminary determination.

The US imported wooden bedroom furniture from China worth US$1.2 billion in 2003. Imports from China accounted for 48% share of total US bedroom furniture imports in 2003, up from US$817.3 million in 2002, which translated into a 40% market share. In light of its limited resources, the DOC selected the top seven Chinese furniture exporters to the US as mandatory respondents. These seven companies represent roughly 34% of the total value of US imports of the subject merchandise from China. The DOC has determined that dumping margins, ranging from 0.79% to 198.08% exist for these mandatory respondents.

The DOC also found that 115 additional Chinese companies have demonstrated that their export activities are not controlled by the Chinese government, which entitle them to a separate rate of 8.64%. This separate rate is based on the weighted-average of five of the seven mandatory respondents' rates. These Section A respondents account for 65% of Chinese wooden bedroom furniture imports.

However, the imposition of an AD order also requires an affirmative injury determination from the US International Trade Commission (USITC). The USITC's final determination in this AD investigation is expected no later than 23 December 2004. If the USITC makes an affirmative injury determination, the DOC will issue an AD order.

November 16, 2004

China Publishes List of Prohibited Imports for Processing Trade

The Catalogue of Prohibited Commodities in Processing Trade jointly published by the Ministry of Commerce (MOFCOM), General Administration of Customs and State Environmental Protection Administration came into effect on 1 November 2004. Certain low-end, toxic, harmful and low value-added items such as scrap mechanical and electrical products, wastes and used mechanical and electrical products are included in the list of prohibited imports.

According to an official from MOFCOM’s Mechanical and Electrical Products Import/Export Division, the government has been publishing annual catalogues of commodities prohibited from the processing trade in recent years to restrict processing trade using low-end, toxic, harmful and low value-added products. At the same time, it encourages processing trade to use products with high technology content and value-added.

Under processing trade, a major form of import/export trade in China, domestic manufacturers import bonded raw materials and parts from abroad for production and assembling in China and re-export the finished products.

In the early stage of development of processing trade, some foreign enterprises transferred the production of toxic and harmful products to China. Objectively speaking, these activities contributed positively to China’s trade, especially export earnings, in the early days. However, in the long run, they will not only pollute the local environment but will harm the health of workers working in toxic and harmful conditions.

As China has come to realise this problem, it is now publishing lists of prohibited commodities every year to restrict processing trade using low-end, toxic, harmful and low value-added products. The scrap wires, scrap mechanical and electrical products such as scrap car steel, wastes and used mechanical and electrical products such as air-conditioners and TV sets announced this time are all low-end products.

Chongqing's red hot thermal underwear competition

Thermal underwear has already made an appearance in Chongqing's huge market, even though winter has yet to really make its mark. As usual, price continues to be the weapon for boosting sales.

Unlike previous years, when discounts were offered on old stock alone, new arrivals - many of which are brand-name items - are also currently being discounted. Manufacturers are eager to join this highly competitive sector because thermal underwear can make good returns.

New thermal brands are popping up alongside household names such as Gracewell, Nanjiren, Beijirong, Docare and Catman. Makers of ordinary underwear, such as Lovegod, Three Guns and Meilaoda, have joined the race, and even manufacturers of woollen products like Hengyuanxiang and Erdos are also now producing thermal underwear.

Companies are rushing into this lucrative business, where trade standards have yet to be established and competition is unregulated.

Understandably, the most cost-effective way to fight for market share is through pricing.

Top brands are also being dragged into the price competition, and are compelled to offer outright discounts or resort to disguised forms of discounting, such as "buy one, get one free".

At the underwear section of Wangfujing Department Store, there are discount tags all over the place.

Modal is offering a 35% discount for products of the new season. Its rival, Clockwise, counters the challenge by offering free underwear worth Rmb200 (HK$188.6) for the purchase of an undergarment priced at Rmb300 (HK$283).

Another retailer, Docare, did quite well last year, but still offers a 50% discount for some of its items this year.

Competition is, in fact, becoming white hot, even before the peak season.

Besides the price war, new concepts are also used to promote sales. Manufacturers have come up with all kinds of fascinating "concept" fabrics this year, such as lycra, natak, nano and corn fibre. Competition looks set to intensify with the advent of winter.

New industry standards were introduced on 1st November 2004 to regulate the market. The new standards require fibre and formaldehyde content labeling as heat insulation and environmental protection indicators, so consumers have a clear idea of what they are buying.

These strict requirements could well bring pressure to bear on the smaller and weaker enterprises, which have all along resorted to lower pricing to secure a place in the market. They are making a last ditch effort to stay in the game before the market is comprehensively regulated, which may well explain why competition in the thermal underwear market is particularly fierce at the moment.

November 15, 2004

Chongqing Opens Senior Positions to Hong Kong and Macau Residents

The government of Chongqing recently published a set of opinions on the policy of strengthening personnel exchange and cooperation with Hong Kong. According to this document, Hong Kong and Macau personnel may be recruited as senior civil servants in Chongqing or as senior executives of enterprises and public organisations in the city at salary levels commensurate with those in Hong Kong.

Full Opening of Enterprises and Organisations - Hong Kong and Macau residents may join the government and functional departments of Chongqing as advisers. They may become senior civil servants through open recruitment or take up employment with functional departments.

Hong Kong and Macau professionals and technical personnel may also be employed by schools, research institutions, medical institutions and other establishments, and may be employed as special (visiting) professors, researchers or economic, technical and management consultants. The salary level, which is commensurate with the pay scale for similar posts in Hong Kong and Macau, will be negotiated between the employing units and the Hong Kong and Macau personnel. Hong Kong and Macau managers, professionals, technical personnel and high-tech experts may also work for enterprises in Chongqing.

Hong Kong and Macau personnel with professional qualifications obtained in Hong Kong and Macau or vocational qualifications obtained through training in Hong Kong and Macau will be treated in the same way as their Chongqing counterparts and permitted to practise or take up employment in the city.

Permitted to Set Up Intermediaries - Unless otherwise prohibited by the laws of China, Hong Kong and Macau personnel will be allowed to set up intermediary service agencies in Chongqing and to take up equity in enterprises or establish new enterprises with patents, special technologies and research achievement for commercialisation purposes. The government will provide them with speedy and good quality service in business registration, land use, taxation and other matters.

Human resources development companies in Chongqing, Hong Kong and Macau are encouraged to join hands in setting up job recruitment agencies and unfold cooperation in job market information, forecast and planning, quality assessment, performance evaluation, salary structure design, management consultancy and headhunting services.

Tax Concessions - Hong Kong and Macau companies registered in Chongqing that meet the relevant requirements are eligible for tax concessions offered to foreign-invested enterprises and to the development of the western region. Legitimate individual income derived from Chongqing is eligible for individual income tax concessions offered to foreign employees. The after-tax income may be converted into foreign currency and remitted out of the country.

National Treatment - Hong Kong and Macau personnel working in Chongqing may apply for a foreign resident permit, which gives them national treatment in their children's schooling and in applying for driving licence and buying real estate.

Hong Kong and Macau personnel (including their spouses and minor children) who need to travel regularly to Chongqing will be issued resident permits for two to five years and a corresponding multiple entry "Z" visa. Those who do not need to travel regularly will be issued a multiple entry "F" visa valid for two to five years with unlimited renewal options.

November 9, 2004

  Posted on: Monday, November 8, 2004

EDITORIAL - Diplomacy a must for Taiwan mission

If they haven't done so already, we urge state officials to consult very carefully with the State Department about their plans for a major trade mission to Taiwan next month.

November 4, 2004

What Firms Can Do When Faced with US Anti-Dumping Actions

An anti-dumping duty (AD) order is arguably the most effective way to close the US market to foreign exporters. When it comes to dumping proceedings involving non-market-economy (NME) countries like China, the US Department of Commerce (DOC) presumes that all companies are under governmental control. As a result, all Chinese exporters are assigned a single countrywide AD rate, which is often on the high side and affects normal exports to the US.1 Yet there are certain things that individual Chinese firms can do to protect themselves, and one such means is to "apply" for a separate rate.

Should a certain product become subject to an AD order, US importers are likely to look towards those Chinese suppliers that have been excluded from the case, or have secured lower dumping margins than the countrywide rate. Chinese firms that are not selected to be investigated by the DOC - those that will not be mandatory respondents - may be able to minimise the impact of an AD order by "applying" for a separate rate, which means that the dumping margin will be a weighted-average of the rates of the fully investigated mandatory respondents, excluding the lowest rates, such as 0% and de minimis, and the highest rates, ie, "total adverse facts available", which is typically the countrywide rate.

Receiving separate rate treatment requires a proactive approach. For a Chinese firm to receive a separate rate, it must request Section A of the DOC's questionnaire, which is essentially a generic document, but is adapted slightly for every specific case. A copy of the Section A questionnaire should also be obtainable from China's Ministry of Commerce, as the DOC serves the ministry with a copy of it.

In theory, a company could represent itself and deal directly with the DOC, but in practice this is not an advisable strategy for any number of reasons. For example, the questionnaire is difficult to understand, particularly without prior experience. There are also various technical format and procedural requirements associated with a Section A response that must be met, otherwise it is likely to be rejected.

Just as important, the Section A response must be filed in a timely manner. The deadline for separate rate respondents is the same as the deadline for mandatory re