Foreign trade

　　The uncertain factors of the world economic environment are looming large. It has made China's foreign trade perspective hazier. This year has witnessed the most difficult year after Asian financial crisis. Influences on China's imports and exports brought about by World economy recession even exceeded the Asian financial crisis.

　　China's foreign trade system is not yet suited to the great changes in world trade environment after WTO entry. Export tax refund system is not completed in which export encouragement measures are restricted, imports management not efficient and import adjustment measures are not perfect. All these factors will exert pressures on China's foreign trade in a short period to come.

　　The 9·11 incident delayed world economy recovery process. It showed an increasing waver in world foreign exchange and capital market, thus making China to face with more risks in foreign trade. International Monetary Fund lowered its predications on economic growth rate of the US, Japan and EU. As the three markets make up 70 percent of China's exports, the economic trend will exercise a direct affect on China's exports.

　　In addition, China's overall export competition is not strong, export commodities are not of hi-tech value, enterprise management at low level and government administration is required to improve its efficiency. Currency devaluation in some Southeast Asian countries will also impose more competitiveness to China's products.

　　China will strive do a good job in foreign trade so that resources and markets at home and abroad are both used effectively. Everything possible will be done to increase the country's volume of exports. No time should be lost in reforming and improving the system of export tax rebates. There will be tax exemptions, discounts or rebates for all exports carried out by producers on their own or through commission agents.

　　Export credit will be expanded and export credit insurance mechanisms will be improved. Policy-related financial institutions will increase their support for exports. Customs clearance procedures will be simplified to improve efficiency.

　　Great efforts will be made to diversify the types of organizations engaging in foreign trade, restructure foreign trade more thoroughly and further ease restrictions on who can engage in foreign trade. Vigorous efforts will be made to diversify the forms of exports.

　　Investment

　　China has become a safe island in the eyes of numerous international investors, although the year 2001 witnessed the first drop of global investment in the last decade. An investigation by the American magazine Fortune shows that 92 percent of multinational corporations have a plan to set up their business headquarters in China.

　　After China's WTO entry three changes are predicted of foreign capital flowingsintosChina in investment. Global investment will continue to grow in coming five years, large amounts of transnational capital flowing in will provide favorable condition for China in attracting foreign funds.

　　In contrast, China's market system is not mature enough, relevant laws and regulations are not complete either, 70 percent of foreign investment flowing in are absorbed by way of joint ventures or cooperation, and few are adopted by global merger, which has hindered the roll-in of foreign investment. In view of this, during a short period of time, foreign investment in China will continue to increase but will not have a too large amount as it should be.

　　Commodity exports may become another choice for foreign investors. Part of foreign-funded companies in China may adjust their business tactics from direct investment to commodity exports.

　　China will gradually open up its Telecom, finance, insurance and its new technology sectors after WTO entry, which would suck up more foreign funds.

　　China will continue to improve the investment environment. Overseas firms are set to gain more investment opportunities in China after the central government approved a fresh regulation to attract foreign capital, which will take effect on April 1.

　　The regulation outlines how China will expand co-operation with foreign investors. In particular, it appeals for capital in agricultural technology, transportation, energy and the new materials industry. The service industry - including banking, telecommunications, securities, insurance and tourism - will gradually become another focal point of co-operation.

　　In the last two decades, China has mainly opened its manufacturing industry to overseas investors, and the nation will continue to encourage foreigners to invest in basic industries, infrastructure construction and environmental protection.

　　The new foreign investment guidance is tailored to the commitments China has made to become a member of the World Trade Organization (WTO). Compared with the old foreign investment guide, the government has opened more sectors for foreigners to invest in. China's WTO entry has boosted economic co-operation with foreign countries, and investors and the government should meet the opportunity. China's WTO membership has reduced risks and cost for foreign investors and more capital and advanced techniques and expertise are expected to flow in.

　　However, the country hopes foreign investors start businesses in the western regions,swheresthey will enjoy more favorable taxation policies for the next 10 years, according to the guidance.

　　From 2001 to 2010, income tax will stay at 15 per cent if enterprises invest in industries encouraged by the government.

　　In addition, the government encourages foreigners to take part in key State-owned enterprises (SOEs) reform. According to the regulation, overseas investors are expected to become shareholders in key SOEs. The government is planning to sell a certain amount of SOE shares to foreigners over the next five years to speed up the restructuring of SOEs. Overseas investors will even be allowed to hold the controlling stake in large SOEs, except for those of key importance to national or economic security.The government will choose asgroupsof large SOEs to be listed on overseas stock exchanges and encourage strategic partnerships between multinationals and Chinese businesses.

　　Six Favorable Measures for Foreign Investors in Gas Pipeline Project

　　Bidding has begun on a gas pipeline project that will carry natural gas from western to eastern China, according to Beijing Review.

　　By December last year, project managers had sent more than 60 invitations to foreign investors to bid. Bidding is expected to end in June.

　　General Manager Chen Jiqing said in September that the State Development Planning Commission had authorized the project and named China Petroleum and Natural Gas Co. Ltd. as the Chinese sponsor of the project.

　　By publishing bids, foreign investors can cooperate with the Chinese sponsor and both sides will decide cooperation methods and details. Then the new partners will set up a new company in charge of building, operating and managing the pipeline.

　　The government issued six favorable policies related to the project:

　　Foreign investors can hold the controlling stake. According to previous policies, Chinese partners had to hold the controlling stakes or majority shares in gas pipeline projects, but this project is allowed to break such restrictions.

　　The Government will open up the urban construction of a natural gas network to foreign investors. Previously, foreign investors could not be involved in constructing natural gas network in cities. But in light of the importance of this project, the Chinese Government decided to add the natural gas supply system for the affected cities to the list of cooperative fields.

　　Foreign investors can choose the method of cooperation, such as joint venture, association or other approaches.

　　Equipment can be imported duty-free. Customs will exempt equipment imported for the project from Customs and value-added duties.

　　Foreign investors can expand their business to related fields. The Interim Stipulations issued by the State Development Planning Commission, State Economic and Trade Commission and Ministry of Foreign Trade and Economic Cooperation encourage foreign investment. The Interim Stipulations say that foreign investors who specialize in transportation, energy and other facilities may also enter their enterprises to other related fields. Those policies are suitable for this project.

　　Preferential land policies. The government will adopt more flexible and timely policies on the acquisition of land needed for the project.

　　Full Trading Rights to be Granted to Foreign Firms

　　The Ministry of Foreign Trade and Economic Co-operation (MOFTEC) has allowed some foreign-invested companies to export products that are not their own and bought from other manufactures.

　　According to China's WTO agreement, about 50,000 foreign-invested companies are to be granted full foreign trade rights in the first year after its accession.

　　These foreign-invested companies will then be able to import and export all products that are not subject to State trading or designated trading.

　　The vast majority of these companies will be minority-held by foreign investors.

　　On joining the WTO on December 11 of 2001, China has agreed to grant full trading rights to joint-venture enterprises with minority share foreign-investment in 2002 and to majority share foreign-invested joint-ventures in 2003.

　　Within three years after the WTO accession, all enterprises in China would be granted the full right to trade, according to China's WTO commitment.

　　China hopes to absorb US-50b of foreign fund in 2002

　　Foreign Trade Minister Shi Guangsheng said Tuesday that China is expected to attract US billion to US billion of foreign investment this year.

　　Last year, China absorbed 69.19 billion US dollars of contractual foreign investment and actually used 46.8 billion US dollars, up 10.43 percent and 14.9 percent, respectively, from the previous year.

　　The amount of foreign investment actually used last year hit an all time high, the minister said at a press conference held by the on-going Fifth Session of the Ninth National People's Congress.