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1 China Commercial Brief U.S Commercial Service - American Embassy, Beijing Vol. 2 No /18/2003 The China Commercial Brief is a biweekly publication featuring summaries about developments in China's various commercial sectors, tips on doing business in China, and U.S. Embassy news. This publication is free of charge; please forward it to your colleagues and friends who are interested in China. If you have been forwarded this e-newsletter, you may subscribe by sending a blank to: join-china-commercialbrief@list.xianzai.com. For additional CS China news including past issues of the China Commercial Brief, visit our website at Editor: Matt Gettman Contributors: CS Chengdu, Bai Ying, Cai Hongying, Xu Ye, Cao Shujuan News Briefs In addition to the article summaries provided by CS Beijing, our four China branch offices - Chengdu, Guangzhou, Shanghai and Shenyang submit summaries of commercial articles from their local press to the CCB on a rotating schedule. This week we are pleased to feature a contribution from our Chengdu post. 1. Yi-Wan Railway Has Started Construction 2. RMB 40 Billion Logistics Service Demand for 2008 Olympic Games 3. China's Telecom Equipment Sector Experiencing Five Major Problems 4. China's New Auto Fuel Economy Standards 5. China s New Moves to Further Open its Banking Industry 1. Yi-Wan Railway Has Started Construction: 2. On December 1, the construction of Yi (Chang)-Wan (Zhou) Railway, located in the mountainous Sanxia (Three Gorges) City, formally commenced. Upon completion, together with the Yangtze River and the soon to be completed Hu (Shanghai)-Rong (Chengdu) Highway, this new railway will largely increase the competitive power of the Yangtze River Economic Belt. Following the Three Gorges Dam Project, the Yi-Wan Railway is another

2 large-scale infrastructure project with enormous investment in China. The new railway will be more than 2,000 kilometers long and connect East and West China by traversing seven municipalities and provinces including: Shanghai, Suzhou, Anhui, Jiangxi, Hubei, Chongqing, and Sichuan. It will be built on the bases of the current railways and is planned to be completed in Upon completion of this project, the Yangtze Grand Railway line will be opened to traffic and will greatly benefit the human and logistic flows between regions. In addition, the highway project connecting Yichang (where Three Gorges Project is located) and Enshi has been approved for construction. Upon completion, this will complete the Chengdu-Shanghai Highway. (Source: Chongqing Daily, Dec. 2, Translated by Rose Nickel) Logistics Sector Rises in Chengdu: The logistics industry has become an investment hot spot in Chengdu as a result of the liberalization of trade following China's WTO accession and the rising efficiency of local enterprises. According to the City Planning Committee, Chengdu has decided to develop four logistics centers in order to boost the development of the local logistics industry. The four logistics centers are Chenghua Logistics Center, Wuhou Logistics Center, Shuangliu Logistics Center, and the International Logistics Center. Wuhou Logistics Center will aim to meet the needs of companies in Chengdu, providing distribution services. It will be a regional logistics center, equipped with a distribution center, sales center, warehousing center, supply-chain management center and purchasing center. Shuangliu Logistics Center, located near the Shuangliu International Airport, will be a typical express parcel logistics center. Currently, very few foreign freight forwarders have set up a presence in West China. Since Chengdu was selected as a pilot city for the development of the central and western region in 1994, the number of manufacturing industries have increased thereby resulting in a rapid growth in container freight, although the numbers are still quite low. At present, 80% of the city's foreign trade products are transported in containers. As the number of foreign investments and trade volumes in the region grow, demand for quality freight forwarding services is expected to escalate. Overseas companies may consider starting their logistics networking in West China before the market fully opens. In the wake of the Western development, Chengdu is becoming the region's road and railway transportation hub.

3 (Source: Chengdu Daily, 11/30/ Edited by Rose Nickel) 2. RMB 40 Billion Logistics Service Demand for 2008 Olympic Games A Chinese Olympic Logistics expert said that the 29th Olympic Games to be held in Beijing will incur approximately RMB 41.7 billion (USD 5 billion) in logistics service costs. The logistics demand in support of the Beijing Olympic Games will exceed all previous Olympic Games thereby creating huge business opportunities for domestic and overseas logistics companies in China. Statistics show that in 2008, more than 200 countries and regions will participate in the Beijing Olympic Games, and the set of apparatuses and equipment for athletes, officials and reporters will top 1.2 million pieces. Throughout the entire Olympic season in 2008, more than 75,000 tons of equipment and facilities will need to be transported to Beijing, and over 2,000 transport vehicles of varying types will be used. These efforts will surely bring business to logistics handlers and equipment manufacturers. With more and more transnational logistics companies, like UPS, DHL,TNT, entering the Chinese market, China's huge Olympic logistics demand will become the new target for these logistics giants from overseas. (Source: 12/ Translated by Cai Hongying) 3. China's Telecom Equipment Sector Experiencing Five Major Problems During a speech at the China Mobile Operator Forum 2003 the spokesperson for Zhang Qi, Director General of the Electronic and Information Products Department of Ministry of Information Industry (MII), indicated that China's telecom equipment industry was facing five major problems: 1) China's telecom equipment industry is suffering from weaknesses in technology development and insufficient investments in R&D; 2) The industry's production capacity has far exceeded market demand; 3) There is an insufficient supply of key domestic telecom equipment components, primarily because the domestic telecom equipment manufactures usually rely on the imported components;

4 4) Domestic enterprises have been adopting lower prices and lower quality as their marketing strategy, rather than focusing on technological innovation. The domestic companies need to adjust their marketing strategy. 5) The import of mobile communication equipment is greatly affecting the development of China's domestic industry. Statistics showed that in 2002, a total of million mobile base stations were imported, and in the first three quarters of 2003, million mobile phones had already been imported, representing a 79.17% year-on-year growth. (Source: 11/ Translated Cao Shujuan) 4. China's New Auto Fuel Economy Standards China will soon introduce minimum fuel economy standards for new cars. According to industry analysts, the standards will be significantly more stringent than those of the United States. The new standards are intended to save energy and compel automakers to introduce the latest hybrid engines in China in hopes of easing China's quickly rising dependence on oil imports from Middle East countries. In general, China's new fuel economy standards are applied to new cars, vans and sport utility vehicles (SUV). According to the standards' draft language, large cars would be required to utilize no more than one gallon of fuel per 27.4 miles by 2005 and 30.4 miles by These new standards will require new cars, vans and SUVs to go as many as 2.7 more miles on each gallon of fuel than the U.S. average. Estimates for the new standards for SUVs are expected to rise by as much as 29% higher by 2008 than current U.S. standards. The new standards will not be applied to pickup trucks and commercial trucks. The affluent urban consumers generally do not even consider buying trucks and instead opt for the smaller passenger-type cars. Various Chinese government agencies still have three months to review the draft standards during which time automakers may lobby for changes. (Source: China Automotive Technology Center, Auto News, 27/11/2003- Translated by Bai Ying) 5. China s New Moves to Further Open its Banking Industry

5 As of December 1, 2003, and according to its World Trade Organization (WTO) commitments, China officially launched two moves to further open its banking industry: 1. Expanding the number of cities in which foreign banks are permitted to conduct RMB services from 9 (Shanghai, Shenzhen, Tianjin, Dalian, Guangzhou, Zhuhai, Qingdao, Nanjing, and Wuhan) to 13 by adding Jinan, Fuzhou, Chengdu and Chongqing. 2. Allowing eligible foreign banks to provide RMB services, in the above mentioned 13 cities, to domestic enterprises (previously, foreign banks were only allowed to provide RMB services to foreign enterprises, foreign individuals as well as Hong Kong and Macao citizens). According to China Banking Regulatory Commission (CBRC), China s banking industry watchdog, by the end of October 2003, 62 foreign banks had set up a total of 191 operating entities in China, 84 of which hold a RMB business license. (Source: International Business Daily, 12/02/2003-Translated by Xu Ye) Consulate News: Chengdu In keeping with our goal of making the CCB a more integrated publication, our four China branch offices - Chengdu, Guangzhou, Shanghai and Shenyang - submit consulate news to the CCB on a rotating schedule. This week, we are pleased to feature a contribution from CS Chengdu. Sponsored by U.S. Trade Facilitation Office and China MOFCOM in Beijing, U.S.-China Seminar on Antidumping and Anti-subsidy Practices will be held in Chengdu on December 15. This Seminar will provide an exchange program on the Historical Perspective of Antidumping, U.S. Investigation Process, Transparency & Due Process, Legal Framework/Rule of Law, and Subsidy Issues. CS Chengdu is the organizer of an International Buyer's Program (IBP) delegation from Southwest China to attend the 2004 EBPA Winter Gateway Program in Seattle, Washington to be held from January 15-16, 2004 and the 2004 International Builders' Show in Las Vegas, Nevada to be held from January 19-22, About 15 mission members from local real estate, building and construction companies will participate in this mission. In addition, the delegation will also meet with their U.S. counterparts in Los Angeles, San Francisco, and Hawaii.

6 Deputy Senior Commercial Officer, Denny Barnes visited CS Chengdu and had meetings with Consul General, Mr. Jeffrey Moon, Economic and Political Officers Brook Hefright and Marc Abramson, Administrative Officer, Maureen Gabbard, and CS staff. For more information on CS Chengduand the Chengdu consular region, visit our website at DISCLAIMER: CS China does not guarantee the veracity of the original sources of our news summaries. While we do our best to report accurate and timely articles and news sources, you should always check the source for further information. The China Commercial Brief is a free e-newsletter published by the U.S. Embassy- Beijing. If you have been forwarded this e-newsletter, you may subscribe by sending a blank to join-china-commercial-brief@list.xianzai.com. If you have any questions or comments about this publication, please send an to Beijing.Office.Box@mail.doc.gov. **************************************************** INTERNATIONAL COPYRIGHT, U.S. COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.