Monday, April 25, 2005
suzhou model
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第三条道路”与中国经验
21世纪经济报道 2005-04-18 16:26:39
特约评论员 赵晓
“苏州模式”和“温州模式”这两种模式最终将走向融合，因为单一的政府企业家创新和单一的市场企业家创新都会遭遇边际效率递减的制约，市场经济发展的内在要求是政府看得见的手和市场看不见的手两只手都要发挥好作用，两手都要硬。
在上世纪80年代中国经济转型的十字路口，以提出“短缺经济”闻名于世的匈牙利经济学家亚诺什·科尔内伫立于长江三峡的“巴山轮”豪华游轮上，向中国高层推荐他构想中的市场作用与政府调控相结合的所谓“IIB模式”，直接影响了上个世纪80年代中国政府“政府调控市场、市场引导企业”的发展道路的构想。
弹指一挥间，中国的改革开放已取得极大成功。在过去的20余年，当中国GDP以近10％的速度增长时，俄罗斯却在1978－1998的20年间经历了大幅度的衰退，并在上世纪90年代继续以－5.6％的速度下降……
虽然中国的经济发展还存在着环境污染、分配不公、发展不平衡等诸多问题，但中国经济转轨取得了巨大成功这一点是不容否认的。也许正是对“中国经济奇迹”有深刻印象，近几年来，科尔内也加入了国际大牌经济学家关注中国经济道路的行列，他屡屡向世人呼吁，要求他们特别关注中国的发展和改革，研究中国是否会走出一条既不同于传统市场经济，也不同于东欧转型经济的“第三条道路(the third way)”。
对于科尔内提出的“第三条道路”，其实已经有一些中国经济学家进行了研究。除了林毅夫教授撰写《中国经济的奇迹》一书，从中国由“赶超战略”转向“比较优势战略”的角度进行了系统解释外，钱颖一教授从制度变迁的角度、樊纲教授从全球化和改革顺序的角度、张维迎教授从地方分权的角度也进行一些解释，但系统性的解释仍不多。
在这篇短文中，笔者想谈一下中国地方经济发展的两种模式。也许，从中可以找出一些“中国经验”的蛛丝马迹。
“苏州模式”与“温州模式”之辩
改革开放以来，中国涌现出许多地方发展模式，但在笔者看来，最主要的应该是“苏州模式”和“温州模式”。所谓“苏州模式”，实际上是类似于早年日本和韩国“政府主导型”的一种经济发展模式，但又有自己的特色。归结起来，主要是政府除了做成熟市场经济下政府应该做的事，比如除提供制度和政策环境外，还通过制订非常明确的发展规划和发展战略来引导投资者进入，并积极参与到引导外部资源尤其是企业家资源的进入(所谓“招商引资”
或“招商选资”)。与“苏州模式”不同的是“温州模式”，它是典型的“市场主导型”经济发展模式，即主要依靠市场企业家的创新作用来发展本地经济，政府相对无为而治。
这两种模式在中国的发展都取得了巨大的成功。比如，短短几年时间，苏州经济增长之快举世罕见。到2004年，苏州GDP达到3450亿元，悄然超过一直稳居第四的深圳；工业总产值9560亿元，占到江苏省工业总量的30％，仅次于上海；尤其是苏州的引进外资额高居各大中城市之首。
温州模式也是成功的。在过去20年中，温州从一个穷地方一跃成为中国市场经济改革的典范以及富裕地区的象征。温州模式对外资的依赖度小，形成了许多产业集群，而且产业链条长，当地百姓从中得到了很大的实惠，涌现出大大小小的老板并走向全国各地(温州之外的温州人达200万人)。
对于两种模式的比较，有学者提出：“温州模式往往打通了产业的上下游，有自主品牌，苏州模式只是处于国际产业链中低端的加工链条，中国其它区域经济应该学习的是温州模式，而不是苏州模式！”其实，市场经济的发展需要发挥市场和政府两种资源、两只手的作用，两者不可偏废，温州模式依赖于市场企业家创新，苏州模式依赖于政府企业家创新，从本质上看两者是相辅相成的关系而非矛盾关系，因此大可不必厚此而薄彼。
但是，对于其他地方以及希望从中国学习成功发展经验的国家，真正需要分析的是两种发展模式所依赖的条件及自身的实际情况。
引进发展型的“苏州模式”
从中国大多数地区实际情况出发，则必须承认，尽管民营企业的发展对于当地经济举足轻重，但中国大部分的地区都缺乏温州那样的传统的商业文化传统，缺乏雄厚的“社会资本”，因此要模仿温州模式，靠民营企业来发展本地经济事实上有一定的困难。在中国，以笔者的调查所见，除了广东的潮汕地区、福建的晋江、福清地区等企业家资源丰富、商业传统悠久的地方外，很难找到堪与温州相比的地区发展案例，表明这一模式的推广和复制难度较大。
相比之下，苏州模式是典型的引进发展型，以强势政府和有效政府为基础，以招商引资为手段，以土地换资金，以空间求发展，可以说更加易于操作，易于模仿，易于复制。
我的老家江西过去一直贫穷落后，但在过去四年，却发生了翻天覆地的变化。2001－2004年，江西的GDP和财政收入分别增长了202％和175％，几乎重建了一个江西，其增速高居中部地区之首，尤其是在引进外资方面，江西超过了东部的福建和天津，与北京市相当，位居全国第九并居中部地区第一，俨然成为中部崛起的领头大省。江西历行发展的模式正是典型的“苏州模式”：政府创新先行，制订正确的发展战略、发展规划、打造一流的招商引资环境、在本地企业家资源不足、发展资金不足的情况下，靠“引进发展”突围并实现经济腾飞。
江西省委书记孟建柱和常务副省长吴新雄此前分别担任上海市委副书记和无锡市委副书记，是得到公认的典型的管理型、创新型的政府企业家。
一般来说，经济学家都谙熟市场制度的重要，却不太清楚市场制度不成熟时如何运作，谙熟企业家的重要却不太清楚在企业家资源不足时该如何运作。所以，转型经济学家们值得研究的中国许多地方发展成功的一大经验就是：不机械地等待市场制度的成熟，而是在市场转型中注重发挥好政府企业家的作用；不机械地等待本地企业家的涌起，而是通过招商引资发挥外地企业家的创新作用进而撞击培育本地企业家，从而在市场和政府均不太规范的情况下，最优地发挥好“两只手”的作用，避免市场转型过程中经济的衰退，赢得市场转型期地区经济的发展。
追问地区创新的机制
如果把过去20余年中国分省经济增长率，与全世界其他有数据的130个国家的增长率进行比较，不仅中国全国的人均GDP增长率排位第一，中国的各省、直辖市和自治区也都名列前茅。正是有了中国各个地区的创新和增长，才有中国经济的奇迹的出现。
追问地区创新的机制，当然在于地方分权和地方竞争，对此，张维迎教授的文章曾有精彩的说明。此外，值得注意的是，中国的地方竞争事实上还提供了政府企业家信息充分显示的机制，更有利于政府企业家脱颖而出，并可望在更大的舞台上一显身手，从而更大程度地推动中国经济的发展。
2004年10月，曾先后担任苏州市委书记的陈德铭和王岷出任陕西和吉林两省副书记，后者并被提名为省长候选人。如果从苏州干部派出区域结构来分析，陕西和吉林分别处于中国的西北和东北地区，是中国未来经济增长希望所在。此次干部调任，表面看是苏州地区政府官员输出，实质上是苏州经验在全国区域经济的一次扩散。
笔者认为，在经济发展中，企业家的作用是最重要的，但企业家并不就是市场企业家，也包括政府企业家，即敢创新、善创新的政府官员。所谓“兵熊熊一个，将熊熊一窝”，在市场制度尚不完善的时期，注意发挥强势政府和有效政府的作用，发挥“政府企业家”的作用，让那些来自经济发达地区的干部去抓一抓经济欠发达地区的工作，输出先进的宏观经济管理经验和观念，带动欠发达地区的经济发展，不失为改变落后地区面貌的一记高招，其效果在实践中远胜过中央政府的财政“输血”以及制订几条优惠政策。
春节期间，笔者赴贵阳市白云区进行调查。这个地区交通和基础设施并不十分便利，但该区领导十分能干，通过招商引资，引进了若干大项目后，2004年该区人均GDP已达到3500美金，远远超过国内平均水平，在西部地区相当少见，再次印证了“苏州模式”的威力。苏州模式在偏远山区况且能扎根和发挥作用，为什么就不能在条件比较好的其他地区推行呢？
“第三条道路”的未来
笔者肯定温州模式，同时推崇苏州模式，但并不意味着这些模式是一种终极模式。事实上，“苏州模式”和“温州模式”这两种模式最终将走向融合，因为单一的政府企业家创新和单一的市场企业家创新都会遭遇边际效率递减的制约，市场经济发展的内在要求是政府看得见的手和市场看不见的手两只手都要发挥好作用，两手都要硬。
在苏州，我们看到已经出现了后备土地资源不足因而影响招商引资的困窘，出现了产业链条短、当地百姓得实惠小的困窘，这使得许多地方在大力学习苏州“引进发展型”的模式外，更加注重“创业发展型”的温州模式借鉴。而在温州，民间创业热情虽高，但对发展环境不很满意，风行20余年的温州市正在主动转型。如，政府实施了“一港三城”新战略，又打出“百项千亿”基础设施建设工程，全面吸收资本要素回流。2005年2月，春节后的温州在第一个千人大会上宣布“一号工程”启动：县市和有关机关负责人签订2005年的招商引资目标责任书，要求实际利用外资要增长50％。以上这些做法岂不是“苏州”的厉害？
“苏州模式”向“温州模式”转变的关键是推动民营企业家的出现，打造民营企业，发挥市场“看不见的手”的作用；“温州模式”向“苏州模式”转变的关键则是塑造强势政府、加强规划、战略引导以及主动招商引资，发挥好政府“看得见的手”的作用。
放眼全球，在发展过程中将两个模式一开始就较好地结合起来的是我国台湾地区的“新竹工业园区”的发展。只是限于篇幅，在此不作介绍，且容以后再述。
“苏州模式”和“温州模式”推动中国地方经济发展的经验说明，科尔内市场作用与政府调控相结合的思路没错。但在市场转型过程中，要有某种类似于中国“中庸”文化式的智慧，不走极端，不偏废一头，不墨守成规，不急于求成，有市场资源优势则发挥市场的优势，有政府资源优势则发挥政府的优势，能够利用自身优势则利用自身优势，能够利用外部优势则利用外部优势，真正在约束条件下寻求最有效率、发展最快的制度创新，而不是为制度创新而制度创新。
赵晓 国资委研究中心宏观部部长 本报资料
第三条道路”与中国经验
21世纪经济报道 2005-04-18 16:26:39
特约评论员 赵晓
“苏州模式”和“温州模式”这两种模式最终将走向融合，因为单一的政府企业家创新和单一的市场企业家创新都会遭遇边际效率递减的制约，市场经济发展的内在要求是政府看得见的手和市场看不见的手两只手都要发挥好作用，两手都要硬。
在上世纪80年代中国经济转型的十字路口，以提出“短缺经济”闻名于世的匈牙利经济学家亚诺什·科尔内伫立于长江三峡的“巴山轮”豪华游轮上，向中国高层推荐他构想中的市场作用与政府调控相结合的所谓“IIB模式”，直接影响了上个世纪80年代中国政府“政府调控市场、市场引导企业”的发展道路的构想。
弹指一挥间，中国的改革开放已取得极大成功。在过去的20余年，当中国GDP以近10％的速度增长时，俄罗斯却在1978－1998的20年间经历了大幅度的衰退，并在上世纪90年代继续以－5.6％的速度下降……
虽然中国的经济发展还存在着环境污染、分配不公、发展不平衡等诸多问题，但中国经济转轨取得了巨大成功这一点是不容否认的。也许正是对“中国经济奇迹”有深刻印象，近几年来，科尔内也加入了国际大牌经济学家关注中国经济道路的行列，他屡屡向世人呼吁，要求他们特别关注中国的发展和改革，研究中国是否会走出一条既不同于传统市场经济，也不同于东欧转型经济的“第三条道路(the third way)”。
对于科尔内提出的“第三条道路”，其实已经有一些中国经济学家进行了研究。除了林毅夫教授撰写《中国经济的奇迹》一书，从中国由“赶超战略”转向“比较优势战略”的角度进行了系统解释外，钱颖一教授从制度变迁的角度、樊纲教授从全球化和改革顺序的角度、张维迎教授从地方分权的角度也进行一些解释，但系统性的解释仍不多。
在这篇短文中，笔者想谈一下中国地方经济发展的两种模式。也许，从中可以找出一些“中国经验”的蛛丝马迹。
“苏州模式”与“温州模式”之辩
改革开放以来，中国涌现出许多地方发展模式，但在笔者看来，最主要的应该是“苏州模式”和“温州模式”。所谓“苏州模式”，实际上是类似于早年日本和韩国“政府主导型”的一种经济发展模式，但又有自己的特色。归结起来，主要是政府除了做成熟市场经济下政府应该做的事，比如除提供制度和政策环境外，还通过制订非常明确的发展规划和发展战略来引导投资者进入，并积极参与到引导外部资源尤其是企业家资源的进入(所谓“招商引资”
或“招商选资”)。与“苏州模式”不同的是“温州模式”，它是典型的“市场主导型”经济发展模式，即主要依靠市场企业家的创新作用来发展本地经济，政府相对无为而治。
这两种模式在中国的发展都取得了巨大的成功。比如，短短几年时间，苏州经济增长之快举世罕见。到2004年，苏州GDP达到3450亿元，悄然超过一直稳居第四的深圳；工业总产值9560亿元，占到江苏省工业总量的30％，仅次于上海；尤其是苏州的引进外资额高居各大中城市之首。
温州模式也是成功的。在过去20年中，温州从一个穷地方一跃成为中国市场经济改革的典范以及富裕地区的象征。温州模式对外资的依赖度小，形成了许多产业集群，而且产业链条长，当地百姓从中得到了很大的实惠，涌现出大大小小的老板并走向全国各地(温州之外的温州人达200万人)。
对于两种模式的比较，有学者提出：“温州模式往往打通了产业的上下游，有自主品牌，苏州模式只是处于国际产业链中低端的加工链条，中国其它区域经济应该学习的是温州模式，而不是苏州模式！”其实，市场经济的发展需要发挥市场和政府两种资源、两只手的作用，两者不可偏废，温州模式依赖于市场企业家创新，苏州模式依赖于政府企业家创新，从本质上看两者是相辅相成的关系而非矛盾关系，因此大可不必厚此而薄彼。
但是，对于其他地方以及希望从中国学习成功发展经验的国家，真正需要分析的是两种发展模式所依赖的条件及自身的实际情况。
引进发展型的“苏州模式”
从中国大多数地区实际情况出发，则必须承认，尽管民营企业的发展对于当地经济举足轻重，但中国大部分的地区都缺乏温州那样的传统的商业文化传统，缺乏雄厚的“社会资本”，因此要模仿温州模式，靠民营企业来发展本地经济事实上有一定的困难。在中国，以笔者的调查所见，除了广东的潮汕地区、福建的晋江、福清地区等企业家资源丰富、商业传统悠久的地方外，很难找到堪与温州相比的地区发展案例，表明这一模式的推广和复制难度较大。
相比之下，苏州模式是典型的引进发展型，以强势政府和有效政府为基础，以招商引资为手段，以土地换资金，以空间求发展，可以说更加易于操作，易于模仿，易于复制。
我的老家江西过去一直贫穷落后，但在过去四年，却发生了翻天覆地的变化。2001－2004年，江西的GDP和财政收入分别增长了202％和175％，几乎重建了一个江西，其增速高居中部地区之首，尤其是在引进外资方面，江西超过了东部的福建和天津，与北京市相当，位居全国第九并居中部地区第一，俨然成为中部崛起的领头大省。江西历行发展的模式正是典型的“苏州模式”：政府创新先行，制订正确的发展战略、发展规划、打造一流的招商引资环境、在本地企业家资源不足、发展资金不足的情况下，靠“引进发展”突围并实现经济腾飞。
江西省委书记孟建柱和常务副省长吴新雄此前分别担任上海市委副书记和无锡市委副书记，是得到公认的典型的管理型、创新型的政府企业家。
一般来说，经济学家都谙熟市场制度的重要，却不太清楚市场制度不成熟时如何运作，谙熟企业家的重要却不太清楚在企业家资源不足时该如何运作。所以，转型经济学家们值得研究的中国许多地方发展成功的一大经验就是：不机械地等待市场制度的成熟，而是在市场转型中注重发挥好政府企业家的作用；不机械地等待本地企业家的涌起，而是通过招商引资发挥外地企业家的创新作用进而撞击培育本地企业家，从而在市场和政府均不太规范的情况下，最优地发挥好“两只手”的作用，避免市场转型过程中经济的衰退，赢得市场转型期地区经济的发展。
追问地区创新的机制
如果把过去20余年中国分省经济增长率，与全世界其他有数据的130个国家的增长率进行比较，不仅中国全国的人均GDP增长率排位第一，中国的各省、直辖市和自治区也都名列前茅。正是有了中国各个地区的创新和增长，才有中国经济的奇迹的出现。
追问地区创新的机制，当然在于地方分权和地方竞争，对此，张维迎教授的文章曾有精彩的说明。此外，值得注意的是，中国的地方竞争事实上还提供了政府企业家信息充分显示的机制，更有利于政府企业家脱颖而出，并可望在更大的舞台上一显身手，从而更大程度地推动中国经济的发展。
2004年10月，曾先后担任苏州市委书记的陈德铭和王岷出任陕西和吉林两省副书记，后者并被提名为省长候选人。如果从苏州干部派出区域结构来分析，陕西和吉林分别处于中国的西北和东北地区，是中国未来经济增长希望所在。此次干部调任，表面看是苏州地区政府官员输出，实质上是苏州经验在全国区域经济的一次扩散。
笔者认为，在经济发展中，企业家的作用是最重要的，但企业家并不就是市场企业家，也包括政府企业家，即敢创新、善创新的政府官员。所谓“兵熊熊一个，将熊熊一窝”，在市场制度尚不完善的时期，注意发挥强势政府和有效政府的作用，发挥“政府企业家”的作用，让那些来自经济发达地区的干部去抓一抓经济欠发达地区的工作，输出先进的宏观经济管理经验和观念，带动欠发达地区的经济发展，不失为改变落后地区面貌的一记高招，其效果在实践中远胜过中央政府的财政“输血”以及制订几条优惠政策。
春节期间，笔者赴贵阳市白云区进行调查。这个地区交通和基础设施并不十分便利，但该区领导十分能干，通过招商引资，引进了若干大项目后，2004年该区人均GDP已达到3500美金，远远超过国内平均水平，在西部地区相当少见，再次印证了“苏州模式”的威力。苏州模式在偏远山区况且能扎根和发挥作用，为什么就不能在条件比较好的其他地区推行呢？
“第三条道路”的未来
笔者肯定温州模式，同时推崇苏州模式，但并不意味着这些模式是一种终极模式。事实上，“苏州模式”和“温州模式”这两种模式最终将走向融合，因为单一的政府企业家创新和单一的市场企业家创新都会遭遇边际效率递减的制约，市场经济发展的内在要求是政府看得见的手和市场看不见的手两只手都要发挥好作用，两手都要硬。
在苏州，我们看到已经出现了后备土地资源不足因而影响招商引资的困窘，出现了产业链条短、当地百姓得实惠小的困窘，这使得许多地方在大力学习苏州“引进发展型”的模式外，更加注重“创业发展型”的温州模式借鉴。而在温州，民间创业热情虽高，但对发展环境不很满意，风行20余年的温州市正在主动转型。如，政府实施了“一港三城”新战略，又打出“百项千亿”基础设施建设工程，全面吸收资本要素回流。2005年2月，春节后的温州在第一个千人大会上宣布“一号工程”启动：县市和有关机关负责人签订2005年的招商引资目标责任书，要求实际利用外资要增长50％。以上这些做法岂不是“苏州”的厉害？
“苏州模式”向“温州模式”转变的关键是推动民营企业家的出现，打造民营企业，发挥市场“看不见的手”的作用；“温州模式”向“苏州模式”转变的关键则是塑造强势政府、加强规划、战略引导以及主动招商引资，发挥好政府“看得见的手”的作用。
放眼全球，在发展过程中将两个模式一开始就较好地结合起来的是我国台湾地区的“新竹工业园区”的发展。只是限于篇幅，在此不作介绍，且容以后再述。
“苏州模式”和“温州模式”推动中国地方经济发展的经验说明，科尔内市场作用与政府调控相结合的思路没错。但在市场转型过程中，要有某种类似于中国“中庸”文化式的智慧，不走极端，不偏废一头，不墨守成规，不急于求成，有市场资源优势则发挥市场的优势，有政府资源优势则发挥政府的优势，能够利用自身优势则利用自身优势，能够利用外部优势则利用外部优势，真正在约束条件下寻求最有效率、发展最快的制度创新，而不是为制度创新而制度创新。
赵晓 国资委研究中心宏观部部长 本报资料
Wednesday, April 20, 2005
US trade rules unfair
China Internet Information Center
Report: US Trade Rules Unfair
The Ministry of Commerce issued a foreign market access report recently which summed up the trade and investment environment within Chinese companies in China's 22 major trade partners in 2004. The report showed the ministry's concern on trade barriers in some foreign markets.
Trade with the United States took up the largest section of the 182-page report with 22 pages dedicated to it.
Following are some excerpts from that section.
By frequently using anti-dumping and safeguarding measures, the US government has practically restricted exports from China. From 1980 to the end of 2004, it had initiated 110 anti-dumping investigations and 19 safeguard investigations against Chinese exports. According to statistics from the US International Trade Commission (ITC), 59 anti-dumping orders were still in force by the end of last year. The United States initiated six new anti-dumping investigations against imports from China and 12 special safeguard investigations against Chinese textiles in 2004.
There are many discriminatory provisions against Chinese products in relevant US anti-dumping legislation. Many unfair practices that exist in the investigations have also constituted barriers to China's exports to the United States.
Market economy status
In spite of China's accession to the WTO and China's achievements in the development of its market economy over the years, the United States has consistently treated China as a non-market economy and refused to grant market-economy status (MES) to China.
The US Department of Commerce (DOC) held a public hearing on China's MES for the first time in June 2004. Representatives from industry groups of steel, wood furniture, cookware, paper and other manufacturing sectors spoke at the hearing.
Although most recognized the progress and achievements China has made in developing its market economy since the opening up, it was deemed by most people that there was still a gap China needed to fill before becoming a market economy. Many US officials have said publicly on many occasions that unless China makes significant reforms in its labor market and exchange rate mechanism, the US Government will not recognize China's MES.
To push for an earlier resolution of this issue, the Sino-US Joint Commission on Commerce and Trade (JCCT) agreed to set up a working group for China's MES in April last year. The first meeting of the working group was held in July 2004.
Market oriented industry
According to US laws, if the respondent company in a non- MES country can prove that its industry meets standards for Market Oriented Industry (MOI), the US anti-dumping authorities should adopt the cost data of this respondent company or its industry when calculating production costs and dumping margin, rather than adopting costs in a third country.
However, though Chinese respondents had provided proof of their consistency with the MOI standards in numerous anti-dumping investigations, the US authorities refused to grant MOI status.
So far, no single Chinese respondent has won MOI status. China hopes the US will correct this discriminatory practice as soon as possible.
Surrogate country
To non-MES countries, the US DOC usually uses surrogate country data to determine the normal value and calculate dumping margins. The surrogate country should have a level of economic development comparable to that of the non-MES country and be an important producer of the subject product.
In practice, the United States usually uses India, Pakistan, Indonesia, Sri Lanka or the Philippines as candidates for surrogate country in cases against China. India is usually a favorite choice because of the easy availability of information. In the seven anti-dumping rulings in 2004, the DOC used India as the surrogate country in every case.
However, certain industries in India are by no means comparable to industries in China. Therefore, using India as the surrogate country will inevitably lead to unfair rulings against Chinese enterprises. For instance, in the anti-dumping investigation against Chinese colour TV sets, India was selected as the surrogate country. The colour TV set industry in India, however, is still in a monopoly stage, with small production scale and high costs, while China is a big producer of colour TV sets in the world and the companies have full autonomy in production and participate in free competition.
Using India's standards to measure China's colour TV set industry will naturally lead to the wrong conclusion that Chinese colour TV sets were sold at an abnormally low price.
China suggested that if it is still treated as a non-market economy in the future, the US DOC should select a more appropriate surrogate country in order to come to a reasonable normal value for the subject product.
Separate rate
Unlike the past practice by the DOC of applying one tariff rate towards all producers from one non-market economy country, the current separate rate policy has made it possible for Chinese respondent companies to obtain a lower individual rate.
In practice, however, the DOC has in many cases refused Chinese company's application for individual rates, claiming the application materials and related information were not adequate.
On July 6 last year, the DOC issued the initial ruling on the anti-dumping case against warm-water shrimp of Chinese origin.
Citing the inadequacy of materials and information submitted by Chinese exporters as the reason, the ruling refused to apply separate rates on 32 Chinese companies, and levied a 98.34 per cent anti-dumping tariff on most Chinese exporters.
In fact, in current US laws, there is no clearly defined standard to judge whether the submitted information is adequate or not and the DOC has great discretionary power in this regard.
The DOC is currently considering adjusting the policy of granting separate rates to Chinese companies. Interested parties have been asked to submit written comments. The Chinese Government, as well as relevant chambers of commerce, has submitted several written comments to the DOC, urging the US Government not to impose barriers to Chinese companies on this issue.
Textile products
By the end of 2004, the US Committee for the Implementation of Textile Agreements (CITA) had accepted 12 requests to restrict Chinese textiles.
One petition on knit fabric, brassieres and dressing gowns and robes of Chinese origin was received in 2003 based on market disruption, and a one-year restriction starting from December 24 2003 was imposed.
Another one against China's socks was accepted in July 2004, also based on market disruption, and a one-year restriction starting from October 29 2004 was imposed.
Some 10 more requests have been accepted by the CITA since October 2004 based on the "threat of market disruption", involving trousers, shirts, blouses and underwear.
According to WTO rules, to adopt special restrictions on Chinese textile products, a WTO member must be able to show that it meets three conditions: the existence of market disruption, threatening to impede the orderly development of trade, and the causal link of the two.
The materials submitted by US petitioners only showed a threat of increased imports from China, but failed to illustrate the causal link.
Meanwhile, procedures for the United States to start restriction measures also lack definition on basic concepts such as market disruption.
The Chinese Government and relevant chambers of commerce have on many occasions expressed strong objection to the related procedures.
Import control
The US Government announced it would remove all quotas on textiles on January 1, 2005, according to the World Trade Organization agreement. In terms of implementation, however, restrictive measures still remain.
The CITA declared on December 13 last year that all shipments exported in 2004 that exceed that year's agreed quota limit would not be allowed to enter upon the removal of the quota.
Entry will be permitted to goods in an amount equal to 5 per cent of the applicable 2004 base quota limit, until all shipments in excess of the quota limits have entered.
Shipments in excess of 5 per cent will have to wait until the following month or later for customs clearance.
The delay will inevitably increase traders' warehousing costs and affect the timely supply of products.
In addition, in the absence of sufficient factual evidence as required by the bilateral agreements, the US authorities have taken unilateral action to deduct China's textile quotas in 2004, saying illegal transshipments exist in China's textile trade.
China's investigation revealed that many such transshipments were conducted by exporters from a third country, rather than by Chinese exporters, and a considerable number US importers were involved.
In collusion with US Customs Service staff, they transshipped Chinese products originally destined to a third country to the United States.
Several negotiations were held for solving this issue between China and the US and the US has corrected only part of its practices so far.
Export restrictions
US controls on export of technology to China have long been in place, and have remained a big issue affecting the trade balance between the two countries.
The intention is to prevent China from benefiting from nuclear weapons, missiles, chemical and biochemical weapons, and other important military items.
Over the last few years, China has applied for the most export licences but the procedure for China is the lengthiest one. In addition, certain products or technologies are basically prohibited from being exported to China or face stringent conditions.
Apart from the product-based licensing requirement, the US government lists companies which should be specially watched in the export control.
Some 19 Chinese companies were on the list by the end of 2004, accounting for one third of the total. Only Pakistan had more with 20.
The US Government has also asked for wider coverage to visit Chinese end-users of high and new technologies exported from the United States.
On April 1 last year, the US Government imposed a two-year sanction against 13 companies including 5 Chinese ones, claiming that these companies had transferred US equipment and technology falling within export control classifications to Iran.
These companies were denied new export licenses, and were prohibited from any business transaction with the US Government. Similar sanctions were put in place against a total of 45 Chinese companies between 1999 and 2004.
China believes there are many discriminatory measures in US export controls towards China, which cut US exports to China and led to unbalanced trade.
The US Government should review its export control policies as soon as possible.
Bio-terrorism Act
The US Government promulgated the Public Health Security and Bio-terrorism Preparedness and Response Act (Bio-terrorism Act) in June 2002 and the US Food and Drug Administration (FDA) publicized the Registration of Food Facilities and Prior Notice of Imported Food Shipments.
While China recognizes the efforts of these laws to fight against terrorism, it is concerned about the adverse impact caused, such as slower customs clearance, increased business cost, increased uncertainty in the market.
According to the FDA Import Refusal Report, a total of 1815 shipments from China were denied entry into the US market by the end of 2004. China is concerned over this issue.
Visa issue
The increasingly strict visa policies of the United States have affected bilateral trade.
Santangelo Group, a Washington-based consulting firm comprised of former Fortune 500 executives and senior US government officials,issued a report last year entitled "Do Visa Delays Hurt US Business." The report was based on a survey of 734 companies.
This report identified applicants from China, India and Russia as having the greatest difficulties with timely visa processing from US authorities. The report also found that medium-sized companies suffered the greatest business losses, averaging US$5 million per company.
Issue of IPR
The US ITC can investigate foreign companies, which violate US intellectual property rights (IPRs) in exports to the United States, according to Section 337 of the Tariff Act of 1930.
In recent years, China has become one of the major targets of Section 337 investigations.
In 2004, 11 were filed involving products from China, up 57 per cent over 2003.
China holds that Section 337 is inconsistent with relevant WTO rules and discriminates against imports in investigations.
Certain Section 337 investigations only name an investigated country without naming respondent companies, which in fact undermined the interests of other companies. In 1989, the GATT (The General Agreement on Tariffs and Trade), The WTO's predecessor, ruled that Section 337 were not consistent with related rules.
Although Section 337 was later amended, it is still not in line with related rules. China expressed great concern over this issue.
Banking service
The US Government places stringent restrictions on the marketing network and business scope of foreign banks.
If a foreign bank wants to set up a new branch, it has to go through the application procedures one more time even though it has already established itself in the country.
By September 30 2004, only three Chinese banks, namely, Bank of China, Bank of Communication and CITIC Bank have set up branches in the United States.
Many Chinese bankers have expressed concerns over the difficulty of applying for approval to establish branches or representative offices.
In addition, the United States has rigorous restrictions on mergers, acquisitions and holding majority stakes of US banks by foreign banks, which has seriously affected the business of foreign banks.
In addition, branches of foreign banks are not allowed to take retail deposits that are less than US$100,000 each.
(China Daily April 12, 2005)
Report: US Trade Rules Unfair
The Ministry of Commerce issued a foreign market access report recently which summed up the trade and investment environment within Chinese companies in China's 22 major trade partners in 2004. The report showed the ministry's concern on trade barriers in some foreign markets.
Trade with the United States took up the largest section of the 182-page report with 22 pages dedicated to it.
Following are some excerpts from that section.
By frequently using anti-dumping and safeguarding measures, the US government has practically restricted exports from China. From 1980 to the end of 2004, it had initiated 110 anti-dumping investigations and 19 safeguard investigations against Chinese exports. According to statistics from the US International Trade Commission (ITC), 59 anti-dumping orders were still in force by the end of last year. The United States initiated six new anti-dumping investigations against imports from China and 12 special safeguard investigations against Chinese textiles in 2004.
There are many discriminatory provisions against Chinese products in relevant US anti-dumping legislation. Many unfair practices that exist in the investigations have also constituted barriers to China's exports to the United States.
Market economy status
In spite of China's accession to the WTO and China's achievements in the development of its market economy over the years, the United States has consistently treated China as a non-market economy and refused to grant market-economy status (MES) to China.
The US Department of Commerce (DOC) held a public hearing on China's MES for the first time in June 2004. Representatives from industry groups of steel, wood furniture, cookware, paper and other manufacturing sectors spoke at the hearing.
Although most recognized the progress and achievements China has made in developing its market economy since the opening up, it was deemed by most people that there was still a gap China needed to fill before becoming a market economy. Many US officials have said publicly on many occasions that unless China makes significant reforms in its labor market and exchange rate mechanism, the US Government will not recognize China's MES.
To push for an earlier resolution of this issue, the Sino-US Joint Commission on Commerce and Trade (JCCT) agreed to set up a working group for China's MES in April last year. The first meeting of the working group was held in July 2004.
Market oriented industry
According to US laws, if the respondent company in a non- MES country can prove that its industry meets standards for Market Oriented Industry (MOI), the US anti-dumping authorities should adopt the cost data of this respondent company or its industry when calculating production costs and dumping margin, rather than adopting costs in a third country.
However, though Chinese respondents had provided proof of their consistency with the MOI standards in numerous anti-dumping investigations, the US authorities refused to grant MOI status.
So far, no single Chinese respondent has won MOI status. China hopes the US will correct this discriminatory practice as soon as possible.
Surrogate country
To non-MES countries, the US DOC usually uses surrogate country data to determine the normal value and calculate dumping margins. The surrogate country should have a level of economic development comparable to that of the non-MES country and be an important producer of the subject product.
In practice, the United States usually uses India, Pakistan, Indonesia, Sri Lanka or the Philippines as candidates for surrogate country in cases against China. India is usually a favorite choice because of the easy availability of information. In the seven anti-dumping rulings in 2004, the DOC used India as the surrogate country in every case.
However, certain industries in India are by no means comparable to industries in China. Therefore, using India as the surrogate country will inevitably lead to unfair rulings against Chinese enterprises. For instance, in the anti-dumping investigation against Chinese colour TV sets, India was selected as the surrogate country. The colour TV set industry in India, however, is still in a monopoly stage, with small production scale and high costs, while China is a big producer of colour TV sets in the world and the companies have full autonomy in production and participate in free competition.
Using India's standards to measure China's colour TV set industry will naturally lead to the wrong conclusion that Chinese colour TV sets were sold at an abnormally low price.
China suggested that if it is still treated as a non-market economy in the future, the US DOC should select a more appropriate surrogate country in order to come to a reasonable normal value for the subject product.
Separate rate
Unlike the past practice by the DOC of applying one tariff rate towards all producers from one non-market economy country, the current separate rate policy has made it possible for Chinese respondent companies to obtain a lower individual rate.
In practice, however, the DOC has in many cases refused Chinese company's application for individual rates, claiming the application materials and related information were not adequate.
On July 6 last year, the DOC issued the initial ruling on the anti-dumping case against warm-water shrimp of Chinese origin.
Citing the inadequacy of materials and information submitted by Chinese exporters as the reason, the ruling refused to apply separate rates on 32 Chinese companies, and levied a 98.34 per cent anti-dumping tariff on most Chinese exporters.
In fact, in current US laws, there is no clearly defined standard to judge whether the submitted information is adequate or not and the DOC has great discretionary power in this regard.
The DOC is currently considering adjusting the policy of granting separate rates to Chinese companies. Interested parties have been asked to submit written comments. The Chinese Government, as well as relevant chambers of commerce, has submitted several written comments to the DOC, urging the US Government not to impose barriers to Chinese companies on this issue.
Textile products
By the end of 2004, the US Committee for the Implementation of Textile Agreements (CITA) had accepted 12 requests to restrict Chinese textiles.
One petition on knit fabric, brassieres and dressing gowns and robes of Chinese origin was received in 2003 based on market disruption, and a one-year restriction starting from December 24 2003 was imposed.
Another one against China's socks was accepted in July 2004, also based on market disruption, and a one-year restriction starting from October 29 2004 was imposed.
Some 10 more requests have been accepted by the CITA since October 2004 based on the "threat of market disruption", involving trousers, shirts, blouses and underwear.
According to WTO rules, to adopt special restrictions on Chinese textile products, a WTO member must be able to show that it meets three conditions: the existence of market disruption, threatening to impede the orderly development of trade, and the causal link of the two.
The materials submitted by US petitioners only showed a threat of increased imports from China, but failed to illustrate the causal link.
Meanwhile, procedures for the United States to start restriction measures also lack definition on basic concepts such as market disruption.
The Chinese Government and relevant chambers of commerce have on many occasions expressed strong objection to the related procedures.
Import control
The US Government announced it would remove all quotas on textiles on January 1, 2005, according to the World Trade Organization agreement. In terms of implementation, however, restrictive measures still remain.
The CITA declared on December 13 last year that all shipments exported in 2004 that exceed that year's agreed quota limit would not be allowed to enter upon the removal of the quota.
Entry will be permitted to goods in an amount equal to 5 per cent of the applicable 2004 base quota limit, until all shipments in excess of the quota limits have entered.
Shipments in excess of 5 per cent will have to wait until the following month or later for customs clearance.
The delay will inevitably increase traders' warehousing costs and affect the timely supply of products.
In addition, in the absence of sufficient factual evidence as required by the bilateral agreements, the US authorities have taken unilateral action to deduct China's textile quotas in 2004, saying illegal transshipments exist in China's textile trade.
China's investigation revealed that many such transshipments were conducted by exporters from a third country, rather than by Chinese exporters, and a considerable number US importers were involved.
In collusion with US Customs Service staff, they transshipped Chinese products originally destined to a third country to the United States.
Several negotiations were held for solving this issue between China and the US and the US has corrected only part of its practices so far.
Export restrictions
US controls on export of technology to China have long been in place, and have remained a big issue affecting the trade balance between the two countries.
The intention is to prevent China from benefiting from nuclear weapons, missiles, chemical and biochemical weapons, and other important military items.
Over the last few years, China has applied for the most export licences but the procedure for China is the lengthiest one. In addition, certain products or technologies are basically prohibited from being exported to China or face stringent conditions.
Apart from the product-based licensing requirement, the US government lists companies which should be specially watched in the export control.
Some 19 Chinese companies were on the list by the end of 2004, accounting for one third of the total. Only Pakistan had more with 20.
The US Government has also asked for wider coverage to visit Chinese end-users of high and new technologies exported from the United States.
On April 1 last year, the US Government imposed a two-year sanction against 13 companies including 5 Chinese ones, claiming that these companies had transferred US equipment and technology falling within export control classifications to Iran.
These companies were denied new export licenses, and were prohibited from any business transaction with the US Government. Similar sanctions were put in place against a total of 45 Chinese companies between 1999 and 2004.
China believes there are many discriminatory measures in US export controls towards China, which cut US exports to China and led to unbalanced trade.
The US Government should review its export control policies as soon as possible.
Bio-terrorism Act
The US Government promulgated the Public Health Security and Bio-terrorism Preparedness and Response Act (Bio-terrorism Act) in June 2002 and the US Food and Drug Administration (FDA) publicized the Registration of Food Facilities and Prior Notice of Imported Food Shipments.
While China recognizes the efforts of these laws to fight against terrorism, it is concerned about the adverse impact caused, such as slower customs clearance, increased business cost, increased uncertainty in the market.
According to the FDA Import Refusal Report, a total of 1815 shipments from China were denied entry into the US market by the end of 2004. China is concerned over this issue.
Visa issue
The increasingly strict visa policies of the United States have affected bilateral trade.
Santangelo Group, a Washington-based consulting firm comprised of former Fortune 500 executives and senior US government officials,issued a report last year entitled "Do Visa Delays Hurt US Business." The report was based on a survey of 734 companies.
This report identified applicants from China, India and Russia as having the greatest difficulties with timely visa processing from US authorities. The report also found that medium-sized companies suffered the greatest business losses, averaging US$5 million per company.
Issue of IPR
The US ITC can investigate foreign companies, which violate US intellectual property rights (IPRs) in exports to the United States, according to Section 337 of the Tariff Act of 1930.
In recent years, China has become one of the major targets of Section 337 investigations.
In 2004, 11 were filed involving products from China, up 57 per cent over 2003.
China holds that Section 337 is inconsistent with relevant WTO rules and discriminates against imports in investigations.
Certain Section 337 investigations only name an investigated country without naming respondent companies, which in fact undermined the interests of other companies. In 1989, the GATT (The General Agreement on Tariffs and Trade), The WTO's predecessor, ruled that Section 337 were not consistent with related rules.
Although Section 337 was later amended, it is still not in line with related rules. China expressed great concern over this issue.
Banking service
The US Government places stringent restrictions on the marketing network and business scope of foreign banks.
If a foreign bank wants to set up a new branch, it has to go through the application procedures one more time even though it has already established itself in the country.
By September 30 2004, only three Chinese banks, namely, Bank of China, Bank of Communication and CITIC Bank have set up branches in the United States.
Many Chinese bankers have expressed concerns over the difficulty of applying for approval to establish branches or representative offices.
In addition, the United States has rigorous restrictions on mergers, acquisitions and holding majority stakes of US banks by foreign banks, which has seriously affected the business of foreign banks.
In addition, branches of foreign banks are not allowed to take retail deposits that are less than US$100,000 each.
(China Daily April 12, 2005)
on track exchange reform
China Internet Information Center
Central Bank: On Track for Exchange Reform
China's central bank chief told Xinhua News Agency on Saturday that the country is very much on track for exchange rate reform in response to the demand of the world's richest nations for a more flexible regime.
But Zhou Xiaochuan, governor of the People's Bank of China, cautioned that reform will be carried out in a measured way to guarantee stability of the renminbi, China's currency.
In an exclusive interview, he said that China will stick to its long-term goal of convertibility under capital account.
To that end, the formulation mechanism of the exchange rate will be reformed and control over cross-border capital movement gradually relaxed. But he emphasized that the renmibi must be kept stable at a reasonable level, and potential risks fended off.
Currently the renminbi is pegged to the US dollar at a rate of about 8.27 per dollar.
Zhou said substantive progress has been made for a little over a year in preparing for exchange rate reform.
Efforts have been made to prepare commercial banks for a more flexible rate, foreign exchange controls relaxed, and the domestic foreign exchange market improved to familiarize financial institutions and businesses with an open foreign exchange market environment, said Zhou.
As for whether there is a timetable for reform, Zhou said its pace will be set in accordance with broader economic reforms.
The adjustment of the exchange rate mechanism depends on a stable macroeconomic environment, a healthy market scheme and a sound financial system, Zhou said.
He said that China has yet to draw up a suitable reform plan to keep the renminbi stable and has to take into account the impact of such a reform on the regional and global economy.
Zhou denied that the renminbi is significantly undervalued, arguing that the international trade balance has only a modest surplus.
In 2004, China had an estimated trade surplus of 20 billion dollars, representing less than 2 percent of its foreign trade total or its GDP, he said.
On foreign exchange reserves, Zhou said there are several factors behind their relatively rapid increase: a moderate current account surplus; the good performance of the economy attracting both foreign direct investment and reinvestment of foreign-funded companies; and a reversal in capital outflow trends.
"These were nothing but normal," he said.
In response to concerns that the possible appreciation of the renmibi might result in a mass inflow of 'hot' money, he said the problem should not be exaggerated because strict controls on capital accounts are being exercised.
Zhou arrived in London to attend the Group of Seven (G7) finance ministers' meeting.
He held talks with US Federal Reserve Chairman Alan Greenspan and US Treasury Under-secretary John Taylor as well as other G7 finance officials.
With Greenspan and Taylor, Zhou reaffirmed China's policy on reforming its exchange rate mechanism and briefed them on progress made in this endeavor.
The two American officials said they understood the Chinese stand and its cautiousness in reform, said Zhou.
(Xinhua News Agency February 7, 2005)
Central Bank: On Track for Exchange Reform
China's central bank chief told Xinhua News Agency on Saturday that the country is very much on track for exchange rate reform in response to the demand of the world's richest nations for a more flexible regime.
But Zhou Xiaochuan, governor of the People's Bank of China, cautioned that reform will be carried out in a measured way to guarantee stability of the renminbi, China's currency.
In an exclusive interview, he said that China will stick to its long-term goal of convertibility under capital account.
To that end, the formulation mechanism of the exchange rate will be reformed and control over cross-border capital movement gradually relaxed. But he emphasized that the renmibi must be kept stable at a reasonable level, and potential risks fended off.
Currently the renminbi is pegged to the US dollar at a rate of about 8.27 per dollar.
Zhou said substantive progress has been made for a little over a year in preparing for exchange rate reform.
Efforts have been made to prepare commercial banks for a more flexible rate, foreign exchange controls relaxed, and the domestic foreign exchange market improved to familiarize financial institutions and businesses with an open foreign exchange market environment, said Zhou.
As for whether there is a timetable for reform, Zhou said its pace will be set in accordance with broader economic reforms.
The adjustment of the exchange rate mechanism depends on a stable macroeconomic environment, a healthy market scheme and a sound financial system, Zhou said.
He said that China has yet to draw up a suitable reform plan to keep the renminbi stable and has to take into account the impact of such a reform on the regional and global economy.
Zhou denied that the renminbi is significantly undervalued, arguing that the international trade balance has only a modest surplus.
In 2004, China had an estimated trade surplus of 20 billion dollars, representing less than 2 percent of its foreign trade total or its GDP, he said.
On foreign exchange reserves, Zhou said there are several factors behind their relatively rapid increase: a moderate current account surplus; the good performance of the economy attracting both foreign direct investment and reinvestment of foreign-funded companies; and a reversal in capital outflow trends.
"These were nothing but normal," he said.
In response to concerns that the possible appreciation of the renmibi might result in a mass inflow of 'hot' money, he said the problem should not be exaggerated because strict controls on capital accounts are being exercised.
Zhou arrived in London to attend the Group of Seven (G7) finance ministers' meeting.
He held talks with US Federal Reserve Chairman Alan Greenspan and US Treasury Under-secretary John Taylor as well as other G7 finance officials.
With Greenspan and Taylor, Zhou reaffirmed China's policy on reforming its exchange rate mechanism and briefed them on progress made in this endeavor.
The two American officials said they understood the Chinese stand and its cautiousness in reform, said Zhou.
(Xinhua News Agency February 7, 2005)
underground currency dealing
China Internet Information Center
Underground Currency Dealings Examined
In the 2004 Blue Book of Finance -China: Banking and Financial Markets Development, compiled by the Institute of Financial Research under the Chinese Academy of Social Sciences and published late last year, researchers at the institute give their view of this situation.
Underground financial activities between Shenzhen - in south China's Guangdong Province - and Hong Kong have been very active in recent years, and the scale of these - mainly conversions between the renminbi and the Hong Kong dollar - have been tremendous.
The flow of renminbi and Hong Kong dollars between Shenzhen and Hong Kong has basically exceeded capital account restrictions.
According to the Shenzhen Public Security Bureau, the underground financial activities between the city and Hong Kong are facilitated by fairly developed networks, featuring highly professional standards.
Underground financial organizations typically set up companies in Shenzhen and then open bank accounts there. They then team up with money changers in Hong Kong, and open many foreign currency bank accounts.
Underground financial activities in Shenzhen
In our field work, we found that the major characteristic of such underground financial activities is cash transaction. The purpose of using cash is not only to evade financial supervision -which is the common feature of all forms of the underground economy - but, more importantly, to transport Hong Kong dollars or renminbi banknotes between the two places.
Before the mid-1990s, the capital flow was a one-way traffic: mainly Hong Kong dollars flowing into Shenzhen. After the mid-1990s, the flow started to go both ways, with not only Hong Kong dollars entering the mainland, but renminbi going to Hong Kong.
The purpose of this is to facilitate spending by a growing number of Hong Kong residents on the mainland.
According to statistics, Shenzhen recorded net cash withdrawals of renminbi from 1990 to 1997. Its net cash withdrawals started to fall in 1996, reversed to a net release in 1998, and has been reporting the biggest net cash release among all Chinese cities since 2001.
That starkly contrasts with the nationwide situation with the implementation of the State's macro-economic management measures, inflation came under control in 1995, starting a period of relatively stable cash release for the banking system.
We can make several observations by looking at the statistics.
First, Shenzhen's net cash release became positive in 1998.
Second, Guangdong accounted for more than half of the nation's total cash release starting 1999.
Third, since 2003, cash release in Shenzhen was approximately equal to that in Guangdong, excluding Shenzhen.
The huge proportions of net cash release in Shenzhen cannot be explained by regular factors. There are two reasons for this. First, although Shenzhen's gross domestic product is smaller than that of Beijing, Shanghai and Guangzhou, none of the three cities had such a massive net cash release after 1998. Second, Shenzhen's huge net cash release was mainly through the one channel, the Bank of Communications.
Although the Shenzhen branch of the Bank of Communications held a mere 5 percent share in the local deposits market in 2000, its cash release accounted for more than 70 percent of the city's total.
Its share hit 90.1 percent in the first half of 2002 in terms of cash release. And even after a supervisory notice from the central bank in July, the share for the entire 2002 stood at 70.5 percent.
Investigations found that the cash withdrawals at the Bank of Communications were mostly enabled by the non-issuing city cash withdrawal function of its Pacific card. The reason could be very simple: only the Bank of Communications allows free non-issuing city withdrawals. Other banks charge a certain amount of commission when card holders withdraw cash in cities other than the city where the cards are issued.
And that turned out to be the case. According to the People's Bank of China's Shenzhen branch, cash withdrawals through the Bank of Communication's Pacific cards in cities other than the issuing city totaled a staggering 17.9 billion yuan (US$2.2 billion) in 2002.
Insiders told us that the underground banks in Shenzhen transferred nearly all their renminbi derived from the transactions to Hong Kong. By comparing purchasing power and recent cash release statistics, we think what they said was basically true.
Based on that presumption, the renminbi funds transferred to Hong Kong via underground channels in recent years could amount to tens of billions of yuan annually. That is not far from the unofficial estimates.
It is worth noting that this is not only happening between Shenzhen and Hong Kong.
Net cash releases are also reported in other cities of Guangdong. Similarly, we can conclude that the majority of the renminbi funds there also flowed into Hong Kong.
Therefore, the annual inflow of renminbi to Hong Kong far exceeds the above mentioned estimates.
Functions of the money
Many may equal the net renminbi release in Shenzhen and other parts of Guangdong with renminbi funds flowing from the mainland to Hong Kong. That has led to estimates that is 40-100 billion yuan (US$4.8-12 billion) of renminbi circulating in the Hong Kong market.
That reasoning is far too simplistic. Theoretically, there are at least three possible functions for the massive renminbi cash released in Guangdong. First, mainland residents carry renminbi to Hong Kong, convert it into Hong Kong dollars and either spend or invest them.
Second, to meet Hong Kong residents' consumption and investment needs in Guangdong - Hong Kong residents carry Hong Kong dollars to the mainland, convert them into renminbi and spend or invest the money.
Third, the massive cash release may also reflect renminbi conversions between mainland residents and residents of Southeast Asia or other regions, which can be normal trade of commodities and services or international smuggling or other types of cross-border crime.
Sources of demand
Why is there huge demand for renminbi in Hong Kong? We believe there are five major reasons.
First, the upward pressure on the renminbi started to build in 2000. The softening of the US dollar, starting at the end of 2002, reinforced the trend.
That trend prompted speculative funds to convert into renminbi through underground channels for arbitrage purposes.
Second, the stability of the renminbi exchange rate and the wide use of the currency in neighbouring regions.
After the Asian financial crisis in 1997, the currencies of most Southeast Asian countries depreciated to different extents, while the renminbi has remained stable in a highly volatile international environment.
Nowadays, the renminbi not only maintains its stability, but boasts growing purchasing power, gaining broad recognition among institutions and individuals in both Hong Kong and other neighboring regions.
Third, renminbi interest rates remained stable after a string of cuts in the late 1990s, while developed nations including the US repeatedly lowered rates to stimulate economic growth, bringing renminbi interest rates far above levels in the United States, European Union and Japan.
That makes increasing renminbi holdings an option for many investors. With little room provided for legitimate channels given China's capital account controls, underground channels become the natural choice.
Fourth, the interest rate cuts on the renminbi after 1998 significantly reduced the cost of renminbi-denominated investment, increasing the acceptance of renminbi among Hong Kong investors as they invest on the mainland.
Fifth, with the economic integration as well as increased convenience of traveling between Hong Kong and the mainland, the ties between the two sides increased in recent years. Given the huge differences in the commodities and services available on both sides, more Hongkongers are travelling northward for sightseeing, shopping, purchasing properties and others items.
Then, why is there huge demand for foreign exchange on the mainland? As we found in the investigations, there are two major reasons: One, to invest in mainland's B-share market or the H-share market in Hong Kong; two, to transfer ill-gotten money out of the mainland via money laundering. Due to the complexity of the issue of money laundering, here we only discuss the relationships between forex transactions and the capital markets.
On February 19, 2001, the China Securities Regulatory Commission announced that the B-share markets in Shenzhen and Shanghai were opened to domestic investors, triggering a bull run unseen since the B-share markets were established. During that period, many people converted their renminbi into Hong Kong dollars to purchase the B shares, leading to a rapid expansion in transactions between renminbi and Hong Kong dollars. As the renminbi was not convertible under the capital account, the demand for Hong Kong dollars could only be satiated through illegal channels.
This is demonstrated in net cash release in Shenzhen. In the first half of 2001, the net cash release of renminbi rose by 260 percent year-on-year. As the B-share market stabilized in May, underground conversions started to reside, subsequently bringing cash release back to normal.
Conclusions and recommendations
Statistics indicate that there was a huge cash amount released in Shenzhen and the whole Guangdong Province, which neighbours Hong Kong. The huge cash release suggests that there are huge amounts of renminbi circulating between Hong Kong and Shenzhen.
Regulators have noticed the trend, and some domestic scholars have also done a lot of research on this phenomenon. In this report, we tried to move forward in a few areas:
First, we elaborated on the process of currency circulation and conversions between Hong Kong and Shenzhen. We believe that, due to the existence of that conversion mechanism, capital account controls on renminbi convertibility are, to a large extent, invalid.
Second, we pointed out that the huge conversions with renminbi have led to a gradual de facto marginalization of the Hong Kong dollar.
Third, we provided an in-depth analysis of the three major purposes of conversions. We pointed out that before the signing of Closer Economic Partnership Agreement between the mainland and Hong Kong, the main purpose of converting Hong Kong dollars into renminbi was to buy the lower-price commodities and services and enter the mainland's financial markets. The reason for mainland residents to hold Hong Kong dollars was mainly for consumption, or investment, in Hong Kong.
The above analysis shows that there exists a mechanism for the conversion of renminbi and Hong Kong dollars between Hong Kong and the mainland. This judgment carries a further implication - through the underground channels, the renminbi has become somewhat convertible under the capital account. In other words, renminbi and Hong Kong dollar are close to forming a common currency zone.
Given the current exchange rate systems of renminbi and the Hong Kong dollar, such close interactions have not yet had any significant impact on the mainland's economic, financial and monetary policies. But we may face very complicated situations should the exchange rate systems change. We need to get prepared for this.
(China Daily February 7, 2005)
Underground Currency Dealings Examined
In the 2004 Blue Book of Finance -China: Banking and Financial Markets Development, compiled by the Institute of Financial Research under the Chinese Academy of Social Sciences and published late last year, researchers at the institute give their view of this situation.
Underground financial activities between Shenzhen - in south China's Guangdong Province - and Hong Kong have been very active in recent years, and the scale of these - mainly conversions between the renminbi and the Hong Kong dollar - have been tremendous.
The flow of renminbi and Hong Kong dollars between Shenzhen and Hong Kong has basically exceeded capital account restrictions.
According to the Shenzhen Public Security Bureau, the underground financial activities between the city and Hong Kong are facilitated by fairly developed networks, featuring highly professional standards.
Underground financial organizations typically set up companies in Shenzhen and then open bank accounts there. They then team up with money changers in Hong Kong, and open many foreign currency bank accounts.
Underground financial activities in Shenzhen
In our field work, we found that the major characteristic of such underground financial activities is cash transaction. The purpose of using cash is not only to evade financial supervision -which is the common feature of all forms of the underground economy - but, more importantly, to transport Hong Kong dollars or renminbi banknotes between the two places.
Before the mid-1990s, the capital flow was a one-way traffic: mainly Hong Kong dollars flowing into Shenzhen. After the mid-1990s, the flow started to go both ways, with not only Hong Kong dollars entering the mainland, but renminbi going to Hong Kong.
The purpose of this is to facilitate spending by a growing number of Hong Kong residents on the mainland.
According to statistics, Shenzhen recorded net cash withdrawals of renminbi from 1990 to 1997. Its net cash withdrawals started to fall in 1996, reversed to a net release in 1998, and has been reporting the biggest net cash release among all Chinese cities since 2001.
That starkly contrasts with the nationwide situation with the implementation of the State's macro-economic management measures, inflation came under control in 1995, starting a period of relatively stable cash release for the banking system.
We can make several observations by looking at the statistics.
First, Shenzhen's net cash release became positive in 1998.
Second, Guangdong accounted for more than half of the nation's total cash release starting 1999.
Third, since 2003, cash release in Shenzhen was approximately equal to that in Guangdong, excluding Shenzhen.
The huge proportions of net cash release in Shenzhen cannot be explained by regular factors. There are two reasons for this. First, although Shenzhen's gross domestic product is smaller than that of Beijing, Shanghai and Guangzhou, none of the three cities had such a massive net cash release after 1998. Second, Shenzhen's huge net cash release was mainly through the one channel, the Bank of Communications.
Although the Shenzhen branch of the Bank of Communications held a mere 5 percent share in the local deposits market in 2000, its cash release accounted for more than 70 percent of the city's total.
Its share hit 90.1 percent in the first half of 2002 in terms of cash release. And even after a supervisory notice from the central bank in July, the share for the entire 2002 stood at 70.5 percent.
Investigations found that the cash withdrawals at the Bank of Communications were mostly enabled by the non-issuing city cash withdrawal function of its Pacific card. The reason could be very simple: only the Bank of Communications allows free non-issuing city withdrawals. Other banks charge a certain amount of commission when card holders withdraw cash in cities other than the city where the cards are issued.
And that turned out to be the case. According to the People's Bank of China's Shenzhen branch, cash withdrawals through the Bank of Communication's Pacific cards in cities other than the issuing city totaled a staggering 17.9 billion yuan (US$2.2 billion) in 2002.
Insiders told us that the underground banks in Shenzhen transferred nearly all their renminbi derived from the transactions to Hong Kong. By comparing purchasing power and recent cash release statistics, we think what they said was basically true.
Based on that presumption, the renminbi funds transferred to Hong Kong via underground channels in recent years could amount to tens of billions of yuan annually. That is not far from the unofficial estimates.
It is worth noting that this is not only happening between Shenzhen and Hong Kong.
Net cash releases are also reported in other cities of Guangdong. Similarly, we can conclude that the majority of the renminbi funds there also flowed into Hong Kong.
Therefore, the annual inflow of renminbi to Hong Kong far exceeds the above mentioned estimates.
Functions of the money
Many may equal the net renminbi release in Shenzhen and other parts of Guangdong with renminbi funds flowing from the mainland to Hong Kong. That has led to estimates that is 40-100 billion yuan (US$4.8-12 billion) of renminbi circulating in the Hong Kong market.
That reasoning is far too simplistic. Theoretically, there are at least three possible functions for the massive renminbi cash released in Guangdong. First, mainland residents carry renminbi to Hong Kong, convert it into Hong Kong dollars and either spend or invest them.
Second, to meet Hong Kong residents' consumption and investment needs in Guangdong - Hong Kong residents carry Hong Kong dollars to the mainland, convert them into renminbi and spend or invest the money.
Third, the massive cash release may also reflect renminbi conversions between mainland residents and residents of Southeast Asia or other regions, which can be normal trade of commodities and services or international smuggling or other types of cross-border crime.
Sources of demand
Why is there huge demand for renminbi in Hong Kong? We believe there are five major reasons.
First, the upward pressure on the renminbi started to build in 2000. The softening of the US dollar, starting at the end of 2002, reinforced the trend.
That trend prompted speculative funds to convert into renminbi through underground channels for arbitrage purposes.
Second, the stability of the renminbi exchange rate and the wide use of the currency in neighbouring regions.
After the Asian financial crisis in 1997, the currencies of most Southeast Asian countries depreciated to different extents, while the renminbi has remained stable in a highly volatile international environment.
Nowadays, the renminbi not only maintains its stability, but boasts growing purchasing power, gaining broad recognition among institutions and individuals in both Hong Kong and other neighboring regions.
Third, renminbi interest rates remained stable after a string of cuts in the late 1990s, while developed nations including the US repeatedly lowered rates to stimulate economic growth, bringing renminbi interest rates far above levels in the United States, European Union and Japan.
That makes increasing renminbi holdings an option for many investors. With little room provided for legitimate channels given China's capital account controls, underground channels become the natural choice.
Fourth, the interest rate cuts on the renminbi after 1998 significantly reduced the cost of renminbi-denominated investment, increasing the acceptance of renminbi among Hong Kong investors as they invest on the mainland.
Fifth, with the economic integration as well as increased convenience of traveling between Hong Kong and the mainland, the ties between the two sides increased in recent years. Given the huge differences in the commodities and services available on both sides, more Hongkongers are travelling northward for sightseeing, shopping, purchasing properties and others items.
Then, why is there huge demand for foreign exchange on the mainland? As we found in the investigations, there are two major reasons: One, to invest in mainland's B-share market or the H-share market in Hong Kong; two, to transfer ill-gotten money out of the mainland via money laundering. Due to the complexity of the issue of money laundering, here we only discuss the relationships between forex transactions and the capital markets.
On February 19, 2001, the China Securities Regulatory Commission announced that the B-share markets in Shenzhen and Shanghai were opened to domestic investors, triggering a bull run unseen since the B-share markets were established. During that period, many people converted their renminbi into Hong Kong dollars to purchase the B shares, leading to a rapid expansion in transactions between renminbi and Hong Kong dollars. As the renminbi was not convertible under the capital account, the demand for Hong Kong dollars could only be satiated through illegal channels.
This is demonstrated in net cash release in Shenzhen. In the first half of 2001, the net cash release of renminbi rose by 260 percent year-on-year. As the B-share market stabilized in May, underground conversions started to reside, subsequently bringing cash release back to normal.
Conclusions and recommendations
Statistics indicate that there was a huge cash amount released in Shenzhen and the whole Guangdong Province, which neighbours Hong Kong. The huge cash release suggests that there are huge amounts of renminbi circulating between Hong Kong and Shenzhen.
Regulators have noticed the trend, and some domestic scholars have also done a lot of research on this phenomenon. In this report, we tried to move forward in a few areas:
First, we elaborated on the process of currency circulation and conversions between Hong Kong and Shenzhen. We believe that, due to the existence of that conversion mechanism, capital account controls on renminbi convertibility are, to a large extent, invalid.
Second, we pointed out that the huge conversions with renminbi have led to a gradual de facto marginalization of the Hong Kong dollar.
Third, we provided an in-depth analysis of the three major purposes of conversions. We pointed out that before the signing of Closer Economic Partnership Agreement between the mainland and Hong Kong, the main purpose of converting Hong Kong dollars into renminbi was to buy the lower-price commodities and services and enter the mainland's financial markets. The reason for mainland residents to hold Hong Kong dollars was mainly for consumption, or investment, in Hong Kong.
The above analysis shows that there exists a mechanism for the conversion of renminbi and Hong Kong dollars between Hong Kong and the mainland. This judgment carries a further implication - through the underground channels, the renminbi has become somewhat convertible under the capital account. In other words, renminbi and Hong Kong dollar are close to forming a common currency zone.
Given the current exchange rate systems of renminbi and the Hong Kong dollar, such close interactions have not yet had any significant impact on the mainland's economic, financial and monetary policies. But we may face very complicated situations should the exchange rate systems change. We need to get prepared for this.
(China Daily February 7, 2005)
yuan basically stable
China Internet Information Center
Gov't Vows to Keep Yuan 'Basically Stable'
Chinese Premier Wen Jiabao reiterated Saturday the renminbi exchange rate would be kept "basically stable" at a rational equilibrium in 2005.
"We will push forward the reform of the exchange rate determination mechanism step by step," Wen said in his government work report delivered at the opening meeting of the Third Session of the 10th National People's Congress (NPC), China's top legislature.
China's central bank announced earlier the country turned in "double surpluses" -- in both current and capital accounts -- in 2004. In breakdown, surpluses from current accounts -- which track trade, income from investments and overseas workers, as well as one-way transfers such as foreign aid -- reached roughly 70 billion US dollars last year. Capital and financial account surpluses reached about 112 billion dollars.
Top Chinese leaders and central bank authorities, however, have repeatedly noted that the country should first ameliorate its financial system before implementing a flexible exchange rate mechanism.
Some developed countries have said that China has held the yuan artificially low, giving China's exporters an "unfair advantage" and contributing to its trade surpluses.
(Xinhua News Agency March 6, 2005)
Gov't Vows to Keep Yuan 'Basically Stable'
Chinese Premier Wen Jiabao reiterated Saturday the renminbi exchange rate would be kept "basically stable" at a rational equilibrium in 2005.
"We will push forward the reform of the exchange rate determination mechanism step by step," Wen said in his government work report delivered at the opening meeting of the Third Session of the 10th National People's Congress (NPC), China's top legislature.
China's central bank announced earlier the country turned in "double surpluses" -- in both current and capital accounts -- in 2004. In breakdown, surpluses from current accounts -- which track trade, income from investments and overseas workers, as well as one-way transfers such as foreign aid -- reached roughly 70 billion US dollars last year. Capital and financial account surpluses reached about 112 billion dollars.
Top Chinese leaders and central bank authorities, however, have repeatedly noted that the country should first ameliorate its financial system before implementing a flexible exchange rate mechanism.
Some developed countries have said that China has held the yuan artificially low, giving China's exporters an "unfair advantage" and contributing to its trade surpluses.
(Xinhua News Agency March 6, 2005)
market to have a bigger say
China Internet Information Center
Market to Have Bigger Say in Yuan Rate
China will maintain the current foreign-exchange system but will allow the market to play an increasingly larger role in determining the renminbi's rate, according to the nation's foreign-exchange chief.
To that end, the foreign-exchange market will become more sophisticated as a platform determining the renminbi's exchange rate, Guo Shuqing, director of the State Administration of Foreign Exchange (SAFE), told China Daily in a written interview.
"The interbank foreign exchange market is the platform which determines the renminbi's rate...to improve the function of the market is an important part of the foreign exchange system's reform," he said.
Guo said more instruments will be introduced for trading this year; and SAFE would also consider permitting instruments that enterprises can use to hedge risks in the foreign exchange market.
Other financial officials said a market-maker system might be experimented to ensure vibrant trading. Market makers, which are designated by financial authorities, are institutions that buy and sell currencies on a regular and continuous basis at a publicly-quoted price.
The renminbi currently trades in a narrow band against the greenback.
Guo and other senior economic officials have said the yuan's exchange rate will be allowed increasing flexibility as the country reforms its exchange-rate system.
"The reform will be a complex, gradual process. It must be pushed forward in a steady manner," Guo said.
Meanwhile, capital injection and bringing in strategic investors are among options for China's financial authorities in their attempt to recapitalize the Industrial and Commercial Bank of China (ICBC), he said at the sidelines of the National Committee of the CPPCC meeting yesterday.
Guo, who is a CPPCC member, said using part of the country's hefty foreign exchange reserves to fund an ICBC capital infusion would be an "appropriate method."
In late 2003, the country injected a total US$45 billion into the Bank of China (BOC) and China Construction Bank (CCB) to help boost their balance sheets following a massive debt write-off.
Analysts said it is very likely the country would also use foreign exchange reserves to recapitalize ICBC.
However, other methods such as issuing bonds, as was done in 1998, are also possible options.
ICBC, BOC, CCB are among the four major State banks, the other being Agricultural Bank of China (ABC). BOC and CCB are preparing for a listing while ICBC also plans to go public.
A holding company named Central Huijin Corp was established to allow capital infusion into BOC and CCB.
The company reports directly to the State Council instead of the Ministry of Finance or the People's Bank of China, said Guo, who is also a vice-governor of the central bank.
Guo said the effects of the capital injection were basically positive, and financial authorities were studying the results to draw lessons for the reform of ICBC and ABC.
Guo also said the financial authorities are considering allowing more renminbi-based transactions in Hong Kong; and are evaluating the feasibility of allowing the issue of yuan-denominated bonds and corporate loans in the territory.
(China Daily March 7, 2005)
Market to Have Bigger Say in Yuan Rate
China will maintain the current foreign-exchange system but will allow the market to play an increasingly larger role in determining the renminbi's rate, according to the nation's foreign-exchange chief.
To that end, the foreign-exchange market will become more sophisticated as a platform determining the renminbi's exchange rate, Guo Shuqing, director of the State Administration of Foreign Exchange (SAFE), told China Daily in a written interview.
"The interbank foreign exchange market is the platform which determines the renminbi's rate...to improve the function of the market is an important part of the foreign exchange system's reform," he said.
Guo said more instruments will be introduced for trading this year; and SAFE would also consider permitting instruments that enterprises can use to hedge risks in the foreign exchange market.
Other financial officials said a market-maker system might be experimented to ensure vibrant trading. Market makers, which are designated by financial authorities, are institutions that buy and sell currencies on a regular and continuous basis at a publicly-quoted price.
The renminbi currently trades in a narrow band against the greenback.
Guo and other senior economic officials have said the yuan's exchange rate will be allowed increasing flexibility as the country reforms its exchange-rate system.
"The reform will be a complex, gradual process. It must be pushed forward in a steady manner," Guo said.
Meanwhile, capital injection and bringing in strategic investors are among options for China's financial authorities in their attempt to recapitalize the Industrial and Commercial Bank of China (ICBC), he said at the sidelines of the National Committee of the CPPCC meeting yesterday.
Guo, who is a CPPCC member, said using part of the country's hefty foreign exchange reserves to fund an ICBC capital infusion would be an "appropriate method."
In late 2003, the country injected a total US$45 billion into the Bank of China (BOC) and China Construction Bank (CCB) to help boost their balance sheets following a massive debt write-off.
Analysts said it is very likely the country would also use foreign exchange reserves to recapitalize ICBC.
However, other methods such as issuing bonds, as was done in 1998, are also possible options.
ICBC, BOC, CCB are among the four major State banks, the other being Agricultural Bank of China (ABC). BOC and CCB are preparing for a listing while ICBC also plans to go public.
A holding company named Central Huijin Corp was established to allow capital infusion into BOC and CCB.
The company reports directly to the State Council instead of the Ministry of Finance or the People's Bank of China, said Guo, who is also a vice-governor of the central bank.
Guo said the effects of the capital injection were basically positive, and financial authorities were studying the results to draw lessons for the reform of ICBC and ABC.
Guo also said the financial authorities are considering allowing more renminbi-based transactions in Hong Kong; and are evaluating the feasibility of allowing the issue of yuan-denominated bonds and corporate loans in the territory.
(China Daily March 7, 2005)
more yuan overseas
China Internet Information Center
More Yuan to Travel Abroad: Central Bank
China's central bank announced yesterday it will allow travelers to take up to 20,000 yuan (US$2,400) of local currency out of the country.
The last time the nation raised the limit on renminbi's cross-border flow was 1993, when the ceiling was set at 6,000 yuan (US$720).
The new rule comes into effect next month.
During the past 10 years, China's economy grew rapidly, consumption levels among local residents improved continuously, and economic ties with foreign countries broadened significantly.
That, coupled with the stability in the renminbi's exchange rate, has amplified the demand for the Chinese currency in neighboring countries and regions, a spokesman from the People's Bank of China (PBOC) said.
"It is necessary to adjust the limit on taking renminbi across borders," he said.
"We view this move as a positive, albeit small, step forward in the process of removing foreign exchange controls and opening-up the economy," said Liang Hong, China economist at Goldman Sachs (Asia).
"Besides Chinese consumers, the main beneficiaries of this policy change will include Hong Kong and Macao consumer related industries, including banks, as Chinese tourists visiting these economies will be able to legally bring more cash to spend," she added.
China's sustained and rapid economic growth in recent years has raised the publicity of its currency in neighboring nations and regions, making it a major settlement currency for border trade with nations like Russia, the Republic of Mongolia and Viet Nam.
And only the new ceiling can meet the overseas spending needs of the majority of increasingly wealthy Chinese travelers, the PBOC spokesman said, adding that average spending by local residents more than tripled since 1993.
Economists largely ruled out possibilities that the move is aimed at reducing the persistent upward pressure on renminbi, or any attempt to promote the regionalization or internationalization of the local currency.
"Policy changes to allow easier currency outflows will have limited, if any, impact towards easing the Chinese yuan appreciation pressures at the present," Liang said.
"The purpose is to meet the needs of local residents and economic exchanges within the region," said Qin Chijiang, a professor with the Central University of Finance and Economics. "I don't think there is any special political motive."
Qin underlined the need to build bilateral mechanisms with neighboring countries and regions to channel the renminbi back to China.
The PBOC spokesman said there is only a tiny possibility that the loosening will have any negative impact on the Chinese economy, citing the small share of overseas-circulating renminbi in the total money supply and the arrangements with Hong Kong, Macao and some neighboring countries on flowing the renminbi back home.
(China Daily December 3, 2004)
More Yuan to Travel Abroad: Central Bank
China's central bank announced yesterday it will allow travelers to take up to 20,000 yuan (US$2,400) of local currency out of the country.
The last time the nation raised the limit on renminbi's cross-border flow was 1993, when the ceiling was set at 6,000 yuan (US$720).
The new rule comes into effect next month.
During the past 10 years, China's economy grew rapidly, consumption levels among local residents improved continuously, and economic ties with foreign countries broadened significantly.
That, coupled with the stability in the renminbi's exchange rate, has amplified the demand for the Chinese currency in neighboring countries and regions, a spokesman from the People's Bank of China (PBOC) said.
"It is necessary to adjust the limit on taking renminbi across borders," he said.
"We view this move as a positive, albeit small, step forward in the process of removing foreign exchange controls and opening-up the economy," said Liang Hong, China economist at Goldman Sachs (Asia).
"Besides Chinese consumers, the main beneficiaries of this policy change will include Hong Kong and Macao consumer related industries, including banks, as Chinese tourists visiting these economies will be able to legally bring more cash to spend," she added.
China's sustained and rapid economic growth in recent years has raised the publicity of its currency in neighboring nations and regions, making it a major settlement currency for border trade with nations like Russia, the Republic of Mongolia and Viet Nam.
And only the new ceiling can meet the overseas spending needs of the majority of increasingly wealthy Chinese travelers, the PBOC spokesman said, adding that average spending by local residents more than tripled since 1993.
Economists largely ruled out possibilities that the move is aimed at reducing the persistent upward pressure on renminbi, or any attempt to promote the regionalization or internationalization of the local currency.
"Policy changes to allow easier currency outflows will have limited, if any, impact towards easing the Chinese yuan appreciation pressures at the present," Liang said.
"The purpose is to meet the needs of local residents and economic exchanges within the region," said Qin Chijiang, a professor with the Central University of Finance and Economics. "I don't think there is any special political motive."
Qin underlined the need to build bilateral mechanisms with neighboring countries and regions to channel the renminbi back to China.
The PBOC spokesman said there is only a tiny possibility that the loosening will have any negative impact on the Chinese economy, citing the small share of overseas-circulating renminbi in the total money supply and the arrangements with Hong Kong, Macao and some neighboring countries on flowing the renminbi back home.
(China Daily December 3, 2004)
on FDI
China Internet Information Center
Overseas Investment on the Up
Editor's note: The Chinese Academy of Foreign Trade and Economic Cooperation, a think tank for the Ministry of Commerce, recently published the 2005 Report of Transnational Corporations in China. Following are excerpts:
I. New trends of multinationals' operations in China
China's investment environment has greatly improved since the country joined the World Trade Organization (WTO) in 2001, with the nation bucking the global trend of falling foreign direct investment (FDI). China now is attractive to foreign investors not only in terms of preferential policies, but also thanks to its stable and increasingly transparent investment environment. China is now a competitive manufacturing base as well as a lucrative and promising market. This has made China an important destination for multinational investments.
Annual global FDI dropped from US$1,388 billion to US$560 billion from 2000 to 2003. But over the same period, FDI in China grew steadily from US$40 billion in 2000 to US$53 billion in 2003. Last year, the figure topped US$60 billion.
Since 2001, major multinationals have been adjusting China's position in their global strategies.
New trends were seen during these processes.
Increased investment
Many multinationals have considerably increased their investments in China over the past three years.
Japanese companies are the best example of this trend. Nine major Japanese companies doing business in China have established 200 new enterprises in the nation since 2001.
They now not only regard China as an export base, but also a key market and site for research and development (R&D).
Many other big companies from the United States, Europe and the Republic of Korea have also joined this trend to set up new firms in China.
Putting China in more positions in multinationals' industrial value chain
Multinationals operating in China concentrated on manufacturing in the 1990s.
But intensified competition among multinationals and also from Chinese companies have prompted foreign firms to extend their value chain in China. For the upstream, they have started to set up R&D centers and key component manufacturing bases; for the downstream, they began to greatly increase their inputs into sectors like sales and logistics.
Between June 2003 and June 2004, foreign companies established 200 R&D centers. By the end of last year, foreign companies had set up more than 750 R&D centers in the country.
Chips are the core components of the electronics industry. Although multinationals' investment in chip projects in China used to be small, this is no longer the case, with investment gradually growing to US$730 million in 2003 from US$91 million in 2000.
Consolidation activities
Multinationals have been adjusting the management structure of their China-based operations. But their methods are somewhat different. Some, such as Japan's Matsushita, put previously independent business units under the umbrella of the company's head office in China. Some, like Finnish company Nokia, merged their manufacturing bases. While others, such as French telecommunications firms Alcatel, grew by acquiring stakes in other IT companies.
But the common thread that binds all of these activities is the creation of group companies where independent ventures had previously operated. At the end of the day, these firms will operate according to a single goal, a single strategy, a single brand and operations coordinated by the group. Such practices are expected to significantly improve the multinational firms' overall competitiveness in China.
II. Multinationals' contributions
China has absorbed huge amounts of resources from foreign investment. Since China started its reform and opening in the late 1970s, the country has attracted more than US$550 billion in FDI. Annual FDI currently accounts for 10 percent of the country's fixed asset investment;
Foreign-funded enterprises' exports and imports both account for more than half of the nation's total; The taxes they pay make up 20 percent of the total; And they employ about 22 million workers.
On the industrial front, foreign companies' participation has spurred the development of many industries, such as home appliances, packaging and logistics.
On the micro-economic level, Chinese companies have grown thanks to cooperation and competition with foreign firms. Chinese companies have learned many new concepts from multinationals, such as corporate governance and unfair competition.
Multinationals in China also helped change Chinese people's mindset and the structure of Chinese society.
With the development of the modern manufacturing and modern service industries, modern industrial workers and professional managers have become new social forces. Now people have broader perspectives, and they pay more attention to national and global developments. People's values are more pragmatic and diversified.
Foreign companies, especially multinational ones, are an important force in bringing about these changes.
III. China's debates on FDI
There have been discussions and debates among researchers and in the media on problems related to China's introduction of foreign capital.
The major issues of concern are as follows:
Gap between GDP and GNI
Foreign investment has contributed to China's prosperity by driving up growth of gross domestic product (GDP). But the country's gross national income (GNI) has failed to grow at such a rapid rate. This means the country is more prosperous, but not necessarily richer. Some claim that foreign investment is a factor behind this phenomenon.
China's GNI lagged behind its GDP every year between 1993 and 2003. This indicates that a part of the value generated in China - we believe about 100 billion yuan (US$12 billion) every year - did not end up being the income of Chinese nationals. It actually flew out of the country and became the wealth of foreign citizens.
As an increasing number of foreign enterprises have begun to reap profits in China, their earnings from the country will only grow.
We believe the country's GNI being less than its GDP is an unavoidable situation when China is a recipient of huge amounts of foreign investment. But we do not regard this as a cause for concern. The gap between GNI and GDP will narrow as Chinese companies increase their overseas investments and operations.
Multinationals' negative impact on domestic enterprises' technological innovation
Foreign investment has long been regarded as a means of upgrading the nation's technological level. But many Chinese academics and managers now complain that this goal has not been met.
Although many multinationals introduced state-of-the-art technology to their China operations, many Chinese employees cannot get to grip with the core technology.
Chinese enterprises and employees working with foreign companies have not gained much in terms of their research and development capabilities.
Foreign automakers, for example, are even accused of discouraging research and development activities in their joint ventures in China.
FDI's negative impact on China's technological development can also be attributed to the lack of an institutional framework and policies that support fair and orderly competition in the market. With the rise of domestic companies, this issue has become more pressing.
Multinationals' alleged suppression of competition
Some multinationals were accused of monopolizing the market. Although some of the reports were inaccurate, this issue requires attention.
We should not neglect the fact that some multinationals won their position in the Chinese market after making contributions here.
But as China's business environment becomes increasingly relaxed and multinationals input into the nation's market increases, the ability of these companies to suppress competition will become stronger.
The construction of a mechanism safeguarding a healthy competitive order has emerged as a significant issue. Monopolies should be avoided by introducing new competitors to protect small competitors to ensure market players compete fairly.
An anti-trust law is necessary. Of course the law will target all monopolistic activities, both by domestic and foreign companies.
Local governments' unreasonable competition for foreign investment
Some local governments offered excessively preferential treatment to foreign investors; some built unnecessary development zones to attract foreign companies and have ended up wasting huge amounts of farmland; and some blindly introduced energy-consuming or pollution-generating projects.
The aim of introducing foreign investments is to promote sustainable development. But the local government officials regard attracting foreign investment purely as a way to show off their performance.
These practices should be rectified.
IV. New approach in dealing with multinationals
We should not limit the scale of foreign capital influx.
We should maintain the stability and continuity of the policy of encouraging foreign investment.
China is not overtly dependent on foreign investment, as indicated by the ratio of foreign investments to GDP and the ratio of foreign investments to total fixed assets investment.
For the first indicator, China is on par with the average level of the developing world. If China's GDP is calculated by Purchasing Power Parity (PPP), the ratio for China is just half of the global average.
FDI's percentage in fixed asset investment is also below the global average. With the growth of domestic investment, this figure is expected to fall further.
In fact, we believe China still has a good opportunity to absorb external resources.
With the progress of globalization, many multinationals are regarding China as a link in their global value chain. China is now a market for them. For many of them, China is also a manufacturing base, and to some it is an R&D and service center.
The rapid growth in FDI in China over the past few years contrasts dramatically with the fall in global FDI.
As China's economy continued to grow and the country further implements its WTO commitments, the nation has a good chance to attract even more foreign investment.
The current round of macroeconomic adjustment is a chance to optimize the structure of foreign investment
The central government's tightened controls on land use have prompted foreign companies to invest more in inland areas of the country and up their investment in the service and high-tech industries, both of which require less land.
But we should also try to maintain the stability of our foreign investment policy during the cycle of economic adjustment. We should also try to rely more on market-based measures in the adjustments in order to strengthen foreign investors' confidence.
Increasing competition from neighboring countries for FDI justifies the maintenance of some preferential policies for foreign investors
China should keep some favorable policies for foreign investors because more countries are competing for foreign investment.
Viet Nam levies an corporate income tax of just 10 per cent on foreign-funded companies. And Ho Chi Minh City promised to exempt foreign companies from paying corporate income tax for eight years after they begin to make a profit.
The Republic of Korea has established three special economic zones and offers preferential financial policies to companies operating there.
We should bear in mind that China is a country short of natural resources. We have to use the resources we have rich supplies of, such as low-cost manufacturing capabilities and markets - to exchange with other economies for the resources that we lack, such as technology and raw materials.
Foreign investment is a key vehicle for this exchange.
Maintaining the stability of foreign investment policy does not mean preferential treatments cannot be adjusted at all. Some policies should indeed be adjusted to improve the quality of foreign investment.
We suggest that the universal preferential tax rate for foreign companies should be changed into different rates for different industries, regions and projects. In other words, preferential treatments should be maintained for the areas and sectors where more foreign investments are encouraged.
(China Daily February 1, 2005)
Overseas Investment on the Up
Editor's note: The Chinese Academy of Foreign Trade and Economic Cooperation, a think tank for the Ministry of Commerce, recently published the 2005 Report of Transnational Corporations in China. Following are excerpts:
I. New trends of multinationals' operations in China
China's investment environment has greatly improved since the country joined the World Trade Organization (WTO) in 2001, with the nation bucking the global trend of falling foreign direct investment (FDI). China now is attractive to foreign investors not only in terms of preferential policies, but also thanks to its stable and increasingly transparent investment environment. China is now a competitive manufacturing base as well as a lucrative and promising market. This has made China an important destination for multinational investments.
Annual global FDI dropped from US$1,388 billion to US$560 billion from 2000 to 2003. But over the same period, FDI in China grew steadily from US$40 billion in 2000 to US$53 billion in 2003. Last year, the figure topped US$60 billion.
Since 2001, major multinationals have been adjusting China's position in their global strategies.
New trends were seen during these processes.
Increased investment
Many multinationals have considerably increased their investments in China over the past three years.
Japanese companies are the best example of this trend. Nine major Japanese companies doing business in China have established 200 new enterprises in the nation since 2001.
They now not only regard China as an export base, but also a key market and site for research and development (R&D).
Many other big companies from the United States, Europe and the Republic of Korea have also joined this trend to set up new firms in China.
Putting China in more positions in multinationals' industrial value chain
Multinationals operating in China concentrated on manufacturing in the 1990s.
But intensified competition among multinationals and also from Chinese companies have prompted foreign firms to extend their value chain in China. For the upstream, they have started to set up R&D centers and key component manufacturing bases; for the downstream, they began to greatly increase their inputs into sectors like sales and logistics.
Between June 2003 and June 2004, foreign companies established 200 R&D centers. By the end of last year, foreign companies had set up more than 750 R&D centers in the country.
Chips are the core components of the electronics industry. Although multinationals' investment in chip projects in China used to be small, this is no longer the case, with investment gradually growing to US$730 million in 2003 from US$91 million in 2000.
Consolidation activities
Multinationals have been adjusting the management structure of their China-based operations. But their methods are somewhat different. Some, such as Japan's Matsushita, put previously independent business units under the umbrella of the company's head office in China. Some, like Finnish company Nokia, merged their manufacturing bases. While others, such as French telecommunications firms Alcatel, grew by acquiring stakes in other IT companies.
But the common thread that binds all of these activities is the creation of group companies where independent ventures had previously operated. At the end of the day, these firms will operate according to a single goal, a single strategy, a single brand and operations coordinated by the group. Such practices are expected to significantly improve the multinational firms' overall competitiveness in China.
II. Multinationals' contributions
China has absorbed huge amounts of resources from foreign investment. Since China started its reform and opening in the late 1970s, the country has attracted more than US$550 billion in FDI. Annual FDI currently accounts for 10 percent of the country's fixed asset investment;
Foreign-funded enterprises' exports and imports both account for more than half of the nation's total; The taxes they pay make up 20 percent of the total; And they employ about 22 million workers.
On the industrial front, foreign companies' participation has spurred the development of many industries, such as home appliances, packaging and logistics.
On the micro-economic level, Chinese companies have grown thanks to cooperation and competition with foreign firms. Chinese companies have learned many new concepts from multinationals, such as corporate governance and unfair competition.
Multinationals in China also helped change Chinese people's mindset and the structure of Chinese society.
With the development of the modern manufacturing and modern service industries, modern industrial workers and professional managers have become new social forces. Now people have broader perspectives, and they pay more attention to national and global developments. People's values are more pragmatic and diversified.
Foreign companies, especially multinational ones, are an important force in bringing about these changes.
III. China's debates on FDI
There have been discussions and debates among researchers and in the media on problems related to China's introduction of foreign capital.
The major issues of concern are as follows:
Gap between GDP and GNI
Foreign investment has contributed to China's prosperity by driving up growth of gross domestic product (GDP). But the country's gross national income (GNI) has failed to grow at such a rapid rate. This means the country is more prosperous, but not necessarily richer. Some claim that foreign investment is a factor behind this phenomenon.
China's GNI lagged behind its GDP every year between 1993 and 2003. This indicates that a part of the value generated in China - we believe about 100 billion yuan (US$12 billion) every year - did not end up being the income of Chinese nationals. It actually flew out of the country and became the wealth of foreign citizens.
As an increasing number of foreign enterprises have begun to reap profits in China, their earnings from the country will only grow.
We believe the country's GNI being less than its GDP is an unavoidable situation when China is a recipient of huge amounts of foreign investment. But we do not regard this as a cause for concern. The gap between GNI and GDP will narrow as Chinese companies increase their overseas investments and operations.
Multinationals' negative impact on domestic enterprises' technological innovation
Foreign investment has long been regarded as a means of upgrading the nation's technological level. But many Chinese academics and managers now complain that this goal has not been met.
Although many multinationals introduced state-of-the-art technology to their China operations, many Chinese employees cannot get to grip with the core technology.
Chinese enterprises and employees working with foreign companies have not gained much in terms of their research and development capabilities.
Foreign automakers, for example, are even accused of discouraging research and development activities in their joint ventures in China.
FDI's negative impact on China's technological development can also be attributed to the lack of an institutional framework and policies that support fair and orderly competition in the market. With the rise of domestic companies, this issue has become more pressing.
Multinationals' alleged suppression of competition
Some multinationals were accused of monopolizing the market. Although some of the reports were inaccurate, this issue requires attention.
We should not neglect the fact that some multinationals won their position in the Chinese market after making contributions here.
But as China's business environment becomes increasingly relaxed and multinationals input into the nation's market increases, the ability of these companies to suppress competition will become stronger.
The construction of a mechanism safeguarding a healthy competitive order has emerged as a significant issue. Monopolies should be avoided by introducing new competitors to protect small competitors to ensure market players compete fairly.
An anti-trust law is necessary. Of course the law will target all monopolistic activities, both by domestic and foreign companies.
Local governments' unreasonable competition for foreign investment
Some local governments offered excessively preferential treatment to foreign investors; some built unnecessary development zones to attract foreign companies and have ended up wasting huge amounts of farmland; and some blindly introduced energy-consuming or pollution-generating projects.
The aim of introducing foreign investments is to promote sustainable development. But the local government officials regard attracting foreign investment purely as a way to show off their performance.
These practices should be rectified.
IV. New approach in dealing with multinationals
We should not limit the scale of foreign capital influx.
We should maintain the stability and continuity of the policy of encouraging foreign investment.
China is not overtly dependent on foreign investment, as indicated by the ratio of foreign investments to GDP and the ratio of foreign investments to total fixed assets investment.
For the first indicator, China is on par with the average level of the developing world. If China's GDP is calculated by Purchasing Power Parity (PPP), the ratio for China is just half of the global average.
FDI's percentage in fixed asset investment is also below the global average. With the growth of domestic investment, this figure is expected to fall further.
In fact, we believe China still has a good opportunity to absorb external resources.
With the progress of globalization, many multinationals are regarding China as a link in their global value chain. China is now a market for them. For many of them, China is also a manufacturing base, and to some it is an R&D and service center.
The rapid growth in FDI in China over the past few years contrasts dramatically with the fall in global FDI.
As China's economy continued to grow and the country further implements its WTO commitments, the nation has a good chance to attract even more foreign investment.
The current round of macroeconomic adjustment is a chance to optimize the structure of foreign investment
The central government's tightened controls on land use have prompted foreign companies to invest more in inland areas of the country and up their investment in the service and high-tech industries, both of which require less land.
But we should also try to maintain the stability of our foreign investment policy during the cycle of economic adjustment. We should also try to rely more on market-based measures in the adjustments in order to strengthen foreign investors' confidence.
Increasing competition from neighboring countries for FDI justifies the maintenance of some preferential policies for foreign investors
China should keep some favorable policies for foreign investors because more countries are competing for foreign investment.
Viet Nam levies an corporate income tax of just 10 per cent on foreign-funded companies. And Ho Chi Minh City promised to exempt foreign companies from paying corporate income tax for eight years after they begin to make a profit.
The Republic of Korea has established three special economic zones and offers preferential financial policies to companies operating there.
We should bear in mind that China is a country short of natural resources. We have to use the resources we have rich supplies of, such as low-cost manufacturing capabilities and markets - to exchange with other economies for the resources that we lack, such as technology and raw materials.
Foreign investment is a key vehicle for this exchange.
Maintaining the stability of foreign investment policy does not mean preferential treatments cannot be adjusted at all. Some policies should indeed be adjusted to improve the quality of foreign investment.
We suggest that the universal preferential tax rate for foreign companies should be changed into different rates for different industries, regions and projects. In other words, preferential treatments should be maintained for the areas and sectors where more foreign investments are encouraged.
(China Daily February 1, 2005)
china outbound investment
China Internet Information Center
Outbound Investment Increasing
The China Outbound Investment Statistics Report, jointly issued by the Ministry of Commerce and the National Bureau of Statistics, gives an overview of the movement in the Chinese mainland. Following are excerpts from the report:
The outbound FDI of Chinese mainland companies reached US$2.85 billion last year, up 5.5 percent year-on-year. The number brought the mainland's total overseas investment to US$33.2 billion by the end of 2003.
According to the 2003 World Investment Report issued by the United Nations Conference on Trade and Development (UNCTAD), the annual international flow of FDI stood at US$647 billion with the Chinese mainland accounting for 0.45 percent. The accumulated world FDI was US$6.866 trillion with the Chinese mainland representing 0.48 percent.
With its growing economic power increasingly driving it to target overseas markets for investment opportunities, the Chinese mainland is expected to become the world's fifth largest outward foreign direct investor this year, according to the UNCTAD 2004 forecast, displacing Japan.
According to the UNCTAD 2004 report, the United States remains far and away the world's biggest foreign direct investor, followed by Germany, Britain and France.
About investors
Some 3,439 mainland enterprises had established 7,470 companies in 139 countries or regions by the end of last year.
Ownership of the investors has been diversified while State-owned enterprises are still the majority, representing 43 percent of registered investors.
Limited liability companies, shareholding companies and private companies account for 22 percent, 11 percent and 10 percent respectively.
Some 41 percent of the investors chose Hong Kong, the United States, Japan and Germany. Hong Kong boasts the highest rate of 21 percent.
Companies in manufacturing and wholesale and retail business are the largest investors.
Most of these investors pour their money into industries abroad like manufacturing, wholesale and retail, commercial services and construction, which have low investment thresholds.
Specifically, 27 percent of the investors run manufacturing businesses, 10 percent wholesale and retail, 14 percent commercial services and 11 percent construction.
FDI in 2003
Half of annual investments went to Asia, in particular, Hong Kong.
The total investment to Asia reached US$1.5 billion. Hong Kong grabbed US$1.15 billion, followed by South Korea, Thailand, Macao, Indonesia and Cambodia.
Some US$1.04 billion flowed into Latin America, accounting for 36.5 percent of the year's total.
An amount of US$150 million was invested in Europe, mostly in Denmark, Russia and Germany, representing 5.3 percent.
Africa got 2.6 percent, US$75 million, of China's outbound investment in 2003. Nigeria, Mauritius and South Africa were the main receipts.
North America had US$58 million, or 2 percent, almost all going to the United States.
Australia and New Zealand shared the US$34 million to Oceania, or 1.1 percent of China's outward investment in 2003.
Some 18 percent of the yearly investments went to mergers and acquisitions, 14 percent by buying stocks and 35 percent by reinvestment of profits.
Beijing is the largest regional investor in 2003, followed by other coastal regions such as Guangdong, Shandong, Fujian, Zhejiang and Jiangsu provinces and Shanghai.
Some 48.4 percent of the annual investment in 2003, or US$1.38 billion, were put into the mining sector, mainly for exploration of oil and gas.
And US$620 million, or 21.8 percent of the money was invested in manufacturing, mostly in telecommunications equipment, computers and other electronic equipment, textiles and metallurgy.
Wholesale and retail business accounted for 12.6 percent of the annual investment, namely, US$360 million.
Some 9.8 percent, or US$280 million, went to the commercial services industry.
Private investment represented 1.5 percent, or US$42 million of the yearly investment in 2003.
The central government implemented the "go-out" strategy in recent years and encourages all kinds of ownerships to invest abroad, rather than limit themselves to State-owned enterprise.
The Ministry of Commerce and the State Administration of Foreign Exchange have dramatically reduced the approval procedures for companies who want to invest abroad and only have required the approval of local foreign trade authorities beginning this year. Private investment will get a boost in the future.
Accumulated FDI
Some 80 percent of the mainland's FDI stocks, or US$26.56 billion, were in Asia. In Hong Kong, mainland enterprises' investments amounted to US$24.6 billion by the end of 2003, accounting for 74 percent of the mainland's outbound investment.
Latin America had US$4.62 billion, or 14 percent of the total investment.
Some 1.7 percent, or US$550 million, went to North America, mostly to the United States.
The Europe, Africa and Oceania represented for 1.6 percent, 1.5 percent and 1.4 percent of the accumulated investment respectively.
By industry, information transmission, computer services and software received 32.8 percent of the total outbound investment.
Wholesale and retail business ranked second, accounting for 19.7 percent or US$6.53 billion.
Mining and manufacturing industry followed, with investments of US$5.9 billion and US$2.07 billion respectively.
Guangdong Province invested a total of US$1.4 billion by the end of 2003. Shanghai and Beijing followed with US$928 million and US$448 million.
(China Daily October 22, 2004)
Outbound Investment Increasing
The China Outbound Investment Statistics Report, jointly issued by the Ministry of Commerce and the National Bureau of Statistics, gives an overview of the movement in the Chinese mainland. Following are excerpts from the report:
The outbound FDI of Chinese mainland companies reached US$2.85 billion last year, up 5.5 percent year-on-year. The number brought the mainland's total overseas investment to US$33.2 billion by the end of 2003.
According to the 2003 World Investment Report issued by the United Nations Conference on Trade and Development (UNCTAD), the annual international flow of FDI stood at US$647 billion with the Chinese mainland accounting for 0.45 percent. The accumulated world FDI was US$6.866 trillion with the Chinese mainland representing 0.48 percent.
With its growing economic power increasingly driving it to target overseas markets for investment opportunities, the Chinese mainland is expected to become the world's fifth largest outward foreign direct investor this year, according to the UNCTAD 2004 forecast, displacing Japan.
According to the UNCTAD 2004 report, the United States remains far and away the world's biggest foreign direct investor, followed by Germany, Britain and France.
About investors
Some 3,439 mainland enterprises had established 7,470 companies in 139 countries or regions by the end of last year.
Ownership of the investors has been diversified while State-owned enterprises are still the majority, representing 43 percent of registered investors.
Limited liability companies, shareholding companies and private companies account for 22 percent, 11 percent and 10 percent respectively.
Some 41 percent of the investors chose Hong Kong, the United States, Japan and Germany. Hong Kong boasts the highest rate of 21 percent.
Companies in manufacturing and wholesale and retail business are the largest investors.
Most of these investors pour their money into industries abroad like manufacturing, wholesale and retail, commercial services and construction, which have low investment thresholds.
Specifically, 27 percent of the investors run manufacturing businesses, 10 percent wholesale and retail, 14 percent commercial services and 11 percent construction.
FDI in 2003
Half of annual investments went to Asia, in particular, Hong Kong.
The total investment to Asia reached US$1.5 billion. Hong Kong grabbed US$1.15 billion, followed by South Korea, Thailand, Macao, Indonesia and Cambodia.
Some US$1.04 billion flowed into Latin America, accounting for 36.5 percent of the year's total.
An amount of US$150 million was invested in Europe, mostly in Denmark, Russia and Germany, representing 5.3 percent.
Africa got 2.6 percent, US$75 million, of China's outbound investment in 2003. Nigeria, Mauritius and South Africa were the main receipts.
North America had US$58 million, or 2 percent, almost all going to the United States.
Australia and New Zealand shared the US$34 million to Oceania, or 1.1 percent of China's outward investment in 2003.
Some 18 percent of the yearly investments went to mergers and acquisitions, 14 percent by buying stocks and 35 percent by reinvestment of profits.
Beijing is the largest regional investor in 2003, followed by other coastal regions such as Guangdong, Shandong, Fujian, Zhejiang and Jiangsu provinces and Shanghai.
Some 48.4 percent of the annual investment in 2003, or US$1.38 billion, were put into the mining sector, mainly for exploration of oil and gas.
And US$620 million, or 21.8 percent of the money was invested in manufacturing, mostly in telecommunications equipment, computers and other electronic equipment, textiles and metallurgy.
Wholesale and retail business accounted for 12.6 percent of the annual investment, namely, US$360 million.
Some 9.8 percent, or US$280 million, went to the commercial services industry.
Private investment represented 1.5 percent, or US$42 million of the yearly investment in 2003.
The central government implemented the "go-out" strategy in recent years and encourages all kinds of ownerships to invest abroad, rather than limit themselves to State-owned enterprise.
The Ministry of Commerce and the State Administration of Foreign Exchange have dramatically reduced the approval procedures for companies who want to invest abroad and only have required the approval of local foreign trade authorities beginning this year. Private investment will get a boost in the future.
Accumulated FDI
Some 80 percent of the mainland's FDI stocks, or US$26.56 billion, were in Asia. In Hong Kong, mainland enterprises' investments amounted to US$24.6 billion by the end of 2003, accounting for 74 percent of the mainland's outbound investment.
Latin America had US$4.62 billion, or 14 percent of the total investment.
Some 1.7 percent, or US$550 million, went to North America, mostly to the United States.
The Europe, Africa and Oceania represented for 1.6 percent, 1.5 percent and 1.4 percent of the accumulated investment respectively.
By industry, information transmission, computer services and software received 32.8 percent of the total outbound investment.
Wholesale and retail business ranked second, accounting for 19.7 percent or US$6.53 billion.
Mining and manufacturing industry followed, with investments of US$5.9 billion and US$2.07 billion respectively.
Guangdong Province invested a total of US$1.4 billion by the end of 2003. Shanghai and Beijing followed with US$928 million and US$448 million.
(China Daily October 22, 2004)
china fdi overseas
China Internet Information Center
China Pours More Money Overseas
The outbound FDI of Chinese mainland companies reached US$2.85 billion last year, up 5.5 percent year-on-year. The number brought the mainland's total overseas investment to US$33.2 billion by the end of 2003.
According to the 2003 World Investment Report issued by the United Nations Conference on Trade and Development (UNCTAD), the annual international flow of FDI stood at US$647 billion with the Chinese mainland accounting for 0.45 percent. The accumulated world FDI was US$6.866 trillion with the Chinese mainland representing 0.48 percent.
With its growing economic power increasingly driving it to target overseas markets for investment opportunities, the Chinese mainland is expected to become the world's fifth largest outward foreign direct investor this year, according to the UNCTAD 2004 forecast, displacing Japan.
According to the UNCTAD 2004 report, the United States remains far and away the world's biggest foreign direct investor, followed by Germany, Britain and France.
About investors
Some 3,439 mainland enterprises had established 7,470 companies in 139 countries or regions by the end of last year.
Ownership of the investors has been diversified while State-owned enterprises are still the majority, representing 43 percent of registered investors.
Limited liability companies, shareholding companies and private companies account for 22 percent, 11 percent and 10 percent respectively.
Some 41 percent of the investors chose Hong Kong, the United States, Japan and Germany. Hong Kong boasts the highest rate of 21 percent.
Companies in manufacturing and wholesale and retail business are the largest investors.
Most of these investors pour their money into industries abroad like manufacturing, wholesale and retail, commercial services and construction, which have low investment thresholds.
Specifically, 27 percent of the investors run manufacturing businesses, 10 percent wholesale and retail, 14 percent commercial services and 11 percent construction.
FDI in 2003
Half of annual investments went to Asia, in particular, Hong Kong.
The total investment to Asia reached US$1.5 billion. Hong Kong grabbed US$1.15 billion, followed by South Korea, Thailand, Macao, Indonesia and Cambodia.
Some US$1.04 billion flowed into Latin America, accounting for 36.5 percent of the year's total.
An amount of US$150 million was invested in Europe, mostly in Denmark, Russia and Germany, representing 5.3 percent.
Africa got 2.6 percent, US$75 million, of China's outbound investment in 2003. Nigeria, Mauritius and South Africa were the main receipts.
North America had US$58 million, or 2 percent, almost all going to the United States.
Australia and New Zealand shared the US$34 million to Oceania, or 1.1 percent of China's outward investment in 2003.
Some 18 percent of the yearly investments went to mergers and acquisitions, 14 percent by buying stocks and 35 percent by reinvestment of profits.
Beijing is the largest regional investor in 2003, followed by other coastal regions such as Guangdong, Shandong, Fujian, Zhejiang and Jiangsu provinces and Shanghai.
Some 48.4 percent of the annual investment in 2003, or US$1.38 billion, were put into the mining sector, mainly for exploration of oil and gas.
And US$620 million, or 21.8 percent of the money was invested in manufacturing, mostly in telecommunications equipment, computers and other electronic equipment, textiles and metallurgy.
Wholesale and retail business accounted for 12.6 percent of the annual investment, namely, US$360 million.
Some 9.8 percent, or US$280 million, went to the commercial services industry.
Private investment represented 1.5 percent, or US$42 million of the yearly investment in 2003.
The central government implemented the "go-out" strategy in recent years and encourages all kinds of ownerships to invest abroad, rather than limit themselves to State-owned enterprise.
The Ministry of Commerce and the State Administration of Foreign Exchange have dramatically reduced the approval procedures for companies who want to invest abroad and only have required the approval of local foreign trade authorities beginning this year. Private investment will get a boost in the future.
Accumulated FDI
Some 80 percent of the mainland's FDI stocks, or US$26.56 billion, were in Asia. In Hong Kong, mainland enterprises' investments amounted to US$24.6 billion by the end of 2003, accounting for 74 percent of the mainland's outbound investment.
Latin America had US$4.62 billion, or 14 percent of the total investment.
Some 1.7 percent, or US$550 million, went to North America, mostly to the United States.
The Europe, Africa and Oceania represented for 1.6 percent, 1.5 percent and 1.4 percent of the accumulated investment respectively.
By industry, information transmission, computer services and software received 32.8 percent of the total outbound investment.
Wholesale and retail business ranked second, accounting for 19.7 percent or US$6.53 billion.
Mining and manufacturing industry followed, with investments of US$5.9 billion and US$2.07 billion respectively.
Guangdong Province invested a total of US$1.4 billion by the end of 2003. Shanghai and Beijing followed with US$928 million and US$448 million.
(China Daily October 22, 2004)
China Pours More Money Overseas
The outbound FDI of Chinese mainland companies reached US$2.85 billion last year, up 5.5 percent year-on-year. The number brought the mainland's total overseas investment to US$33.2 billion by the end of 2003.
According to the 2003 World Investment Report issued by the United Nations Conference on Trade and Development (UNCTAD), the annual international flow of FDI stood at US$647 billion with the Chinese mainland accounting for 0.45 percent. The accumulated world FDI was US$6.866 trillion with the Chinese mainland representing 0.48 percent.
With its growing economic power increasingly driving it to target overseas markets for investment opportunities, the Chinese mainland is expected to become the world's fifth largest outward foreign direct investor this year, according to the UNCTAD 2004 forecast, displacing Japan.
According to the UNCTAD 2004 report, the United States remains far and away the world's biggest foreign direct investor, followed by Germany, Britain and France.
About investors
Some 3,439 mainland enterprises had established 7,470 companies in 139 countries or regions by the end of last year.
Ownership of the investors has been diversified while State-owned enterprises are still the majority, representing 43 percent of registered investors.
Limited liability companies, shareholding companies and private companies account for 22 percent, 11 percent and 10 percent respectively.
Some 41 percent of the investors chose Hong Kong, the United States, Japan and Germany. Hong Kong boasts the highest rate of 21 percent.
Companies in manufacturing and wholesale and retail business are the largest investors.
Most of these investors pour their money into industries abroad like manufacturing, wholesale and retail, commercial services and construction, which have low investment thresholds.
Specifically, 27 percent of the investors run manufacturing businesses, 10 percent wholesale and retail, 14 percent commercial services and 11 percent construction.
FDI in 2003
Half of annual investments went to Asia, in particular, Hong Kong.
The total investment to Asia reached US$1.5 billion. Hong Kong grabbed US$1.15 billion, followed by South Korea, Thailand, Macao, Indonesia and Cambodia.
Some US$1.04 billion flowed into Latin America, accounting for 36.5 percent of the year's total.
An amount of US$150 million was invested in Europe, mostly in Denmark, Russia and Germany, representing 5.3 percent.
Africa got 2.6 percent, US$75 million, of China's outbound investment in 2003. Nigeria, Mauritius and South Africa were the main receipts.
North America had US$58 million, or 2 percent, almost all going to the United States.
Australia and New Zealand shared the US$34 million to Oceania, or 1.1 percent of China's outward investment in 2003.
Some 18 percent of the yearly investments went to mergers and acquisitions, 14 percent by buying stocks and 35 percent by reinvestment of profits.
Beijing is the largest regional investor in 2003, followed by other coastal regions such as Guangdong, Shandong, Fujian, Zhejiang and Jiangsu provinces and Shanghai.
Some 48.4 percent of the annual investment in 2003, or US$1.38 billion, were put into the mining sector, mainly for exploration of oil and gas.
And US$620 million, or 21.8 percent of the money was invested in manufacturing, mostly in telecommunications equipment, computers and other electronic equipment, textiles and metallurgy.
Wholesale and retail business accounted for 12.6 percent of the annual investment, namely, US$360 million.
Some 9.8 percent, or US$280 million, went to the commercial services industry.
Private investment represented 1.5 percent, or US$42 million of the yearly investment in 2003.
The central government implemented the "go-out" strategy in recent years and encourages all kinds of ownerships to invest abroad, rather than limit themselves to State-owned enterprise.
The Ministry of Commerce and the State Administration of Foreign Exchange have dramatically reduced the approval procedures for companies who want to invest abroad and only have required the approval of local foreign trade authorities beginning this year. Private investment will get a boost in the future.
Accumulated FDI
Some 80 percent of the mainland's FDI stocks, or US$26.56 billion, were in Asia. In Hong Kong, mainland enterprises' investments amounted to US$24.6 billion by the end of 2003, accounting for 74 percent of the mainland's outbound investment.
Latin America had US$4.62 billion, or 14 percent of the total investment.
Some 1.7 percent, or US$550 million, went to North America, mostly to the United States.
The Europe, Africa and Oceania represented for 1.6 percent, 1.5 percent and 1.4 percent of the accumulated investment respectively.
By industry, information transmission, computer services and software received 32.8 percent of the total outbound investment.
Wholesale and retail business ranked second, accounting for 19.7 percent or US$6.53 billion.
Mining and manufacturing industry followed, with investments of US$5.9 billion and US$2.07 billion respectively.
Guangdong Province invested a total of US$1.4 billion by the end of 2003. Shanghai and Beijing followed with US$928 million and US$448 million.
(China Daily October 22, 2004)
