U.S. Commercial Service - American Embassy, Beijing
Vol. 2 No. 146

The China Commercial Brief is a biweekly publication including 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.

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Editor: Matthew Gettman
Contributors: CS Shanghai,Wang Yi,Cindy Wang,Peng Aiqun,Shen Yan,Wan Xiaolei

News Briefs
In addition to the article summaries CS Beijing provides , 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 Shanghai post.

1. From Counterfeiter to Franchisee
2. Beijing Urgently Looking for Environmentally Friendly Ice-Thawing Agents
3. China’s Ethylene Industry- Its Present Situation and Prospects for the Development
4. Further Opening RMB Business to Foreign Banks
5. Golden Week Brings Big Income For Retailers
6. South-to-North Water Transfer Project Investment Peaks in 2005 and 2006

1. From Counterfeiter to Franchisee

For many years, famous cartoon characters and popular branded consumer products have been widely counterfeited in China. Some counterfeiters have even invented their own series of products using these internationally recognized names. Many consumers, are duped into buying these fake products.

However, in Shanghai's Commodity Fair held on October 21, 2003, the cartoon character segment of the franchising industry was surprisingly active. Chinese companies were in heated competition with each other to obtain the legitimate franchising rights to the much-sought-after Atomic Kid, Spiderman and Smiley characters. Many of these same Chinese companies had originally been counterfeiters of those products.

According to some experts at the fair, some Chinese companies were engaged in counterfeiting because it could save them money, others simply had no idea about the concept of intellectual property rights and saw no harm in copying a popular cartoon product or product brand name. Now, these companies are realizing through franchising how to make money while supporting the protection of intellectual property rights.
(Source: Jiefang Daily, October 22, 2003 - Translated by FCS Shanghai)

2. Beijing Urgently Looking for Environmentally Friendly Ice-Thawing Agents

Beijing Municipal Administration Commission (BMAC) is currently seeking public assistance to identify environmentally friendly ice-thawing agents that minimize pollution, damage to trees, greenbelts, urban infrastructures and vehicles. Salt continues to be the main ingredient in Beijing's ice-thawing agents, and therefore cannot be considered an environmentally friendly product.

Before the new agent is introduced in Beijing, the plan is to limit the amount of salt based ice-thawing agents used this winter, thus mitigating any adverse effects to the environment.
(Source: China Environmental News, 06/2003 - Translated by Wang Yi)

FCS Beijing Note: U.S. companies that have environmentally friendly ice-thawing agents, expertise and technology interested in exploring the Chinese market with Beijing as a starting point, should contact BMAC: Ms. Pan Fang, Science and Technology Section of BMAC email: panfang@bjmac.gov.cn, Tel: 66012618, fax: 66026627, or call Foreign Commercial Service of U.S. Embassy in Beijing, Ms. Wang Yi, Tel: 85296655 x 837, Fax: 85296559. Email: yi.wang@mail.doc.gov for any assistance.

3. China’s Ethylene Industry- Its Present Situation and Prospects for the Development

The country actually produced 5.4133 million tons of ethylene in 2002, but rated its self-sufficiency level at only 41.9%. At the end of 2002, China had an ethylene production capability of 5.555 million tons per year, ranking fourth highest in the world. China’s demand for ethylene will further rise over the next few years with the rapid and sustainable economic development of the country. According to some insiders, the domestic ethylene demand is expected
to reach 20.32 million tons by 2010. Currently, there are a number of weaknesses in the country’s ethylene industry, such as: small scale facilities; low comprehensive utilization rates; heavy raw materials; inefficiently high consumption of energy and materials; low degree of localization; lack of self-development and innovation; unreasonable product structure; and, low proportion of specialized products. Therefore, the following are some suggestions to get rid of those above mentioned weaknesses:

• China’s ethylene industry should focus on expansion of productivity and the renovation of existing facilities, while at the same time working on plans for the construction of large-scale ethylene production facilities.
• Great efforts need to be made to refine chemical integration processes and to develop technologies for the comprehensive utilization of by-products. As it develops, China’ ethylene industry is likely to face a shortage of raw materials. It is necessary for Chinese to study this issue as soon as possible. It will be costly in the long run to relieve the shortage simply by importing needed materials.
• The country’s ethylene industry should utilize domestic resources and formulate plans for expansion and renovation of refineries to ensure an adequate supply of raw materials for ethylene production.
• Meanwhile, it is necessary to make effective use of light natural gas hydrocarbon resources and to continue lightening raw materials.

(Source: China Chemical News, Vol 10, 2003 - Translated Cindy Wang)

4. Further Opening RMB Business to Foreign Banks

China Banking Regulatory Commission (CBRC) recently announced that Jinan, Fuzhou, Chengdu and Chongqing are new locations in China where after December 1st, 2003, non-Chinese banks in will be allowed to provide RMB services to Chinese enterprises previously only available to Chinese financial institutions. These non-Chinese banks will first gain permission to provide RMB services to foreign enterprises in the currently open locations in China along with these new four locations. Subsequently, these banks after December
1, will be able to apply for permission to provide RMB services to Chinese enterprises both in existing approved locations as well as these new locations in China.

The non-Chinese financial institutions, already authorized to operate RMB businesses, may apply for permission to provide RMB services in these new locations, subject to the following conditions: (a) being profitable for two consecutive years prior to the application; (b) meeting other requirements of the CBRC, including: good corporate governance; sound risk management and internal controls; effective management information systems; good business performance; compliance with applicable laws and regulations; and, efficient anti-money laundering measures. The foreign financial institutions having met these conditions may apply to the CBRC local offices, which will then submit the application to the CBRC head-office in Beijing for approval.

Further, foreign banks already approved to provide non-RMB services in one of those approved cities, may concurrently apply for permission to provide RMB services in that approved location to both foreign and Chinese enterprises in a single application to the CBRC.

CBRC stated that it will adhere to its WTO promises regarding the opening of the financial services sector and will gradually remove the client and area barriers for foreign banks to conduct RMB business; and, at the same time, CBRC will strengthen the supervision of foreign banks in China and promote the co-operation between Chinese banks and foreign banks to ensure a healthy development of financial services in China.
(Source: Financial News, November 7, 2003, Financial News, November
10, 2003 CBRC Announcement No.2, 2003- Translated by Peng Aiqun)

5. Golden Week Brings Big Income For Retailers

According to China's Ministry of Commerce (MOFCOM), major Chinese retailers saw a big sales jump during October 1-7, 2003, the week-long holiday for China's National Day. During that period, about 118 key retailers in 36 large and medium-sized cities sold a combined RMB 2.9 billion (USD 350 million).

As compared to the same holiday period last year, Beijing realized a retail sales increase of 28 per cent, Shanghai's 3,000 plus outlets consisting of 261 large and medium-sized retailers realized a 18.3 per cent increase, and Tianjin grew by 14.8 per cent.

Bestsellers over the holiday period included sporting goods, electronics, decorations, jewelry, apparel, auto products, books and food.

During the first half of this year as compared to the same period last year, retail sales in China rose by 8 per cent to RMB 2.155 trillion (USD 259.7 billion). This growth rate was slightly slower than the targeted 9 per cent annual growth rate.
(Source: Beijing Business Today, 10/10/03, Translated by Shen Yan)

6. South-to-North Water Transfer Project Investments to Peak in 2005
and 2006

According to the overall plan of South-to-North Water Transfer Project, the investment for the entire East Route along with investment for the first phase of Middle Route will reach RMB 124 billion (USD 15 billion). The average annual investment from 2003 to 2010 for the overall South-to-North project will be RMB 13.8 billion (USD 1.67 billion). These annual investments will peak in 2005 and
2006, reaching RMB24.8 billion (USD3 billion).

The precondition and main target for the planning and implementation of South-to-North Water Transfer Project is to transfer clean water from Southern China to the North without adversely affecting the environment along the water routes.

Waste water treatment projects will line the East Route and cover six provinces, 23 cities and a combined 105 county level cities, counties and districts. To ensure the water quality of the entire project reaches the National Surface Water Environment Quality Standard, priority will be given to pollution controls, recycling of polluted water, river basin comprehensive management, integrated pollution control engineering systems, interception and diversion of rivers, wastewater reuse and implementation of local and Central
Government regulations.
(Source: China Economic Times: 11/06/2003 - Translated by Wan Xiaolei)

Embassy News

JCCT Legal Exchange looks at securities industry

A roster of U.S. legal experts from Commerce, Treasury, the SEC, the ITC, the NY Stock Exchange, and private practice traveled to China and held one-day exchanges the week of Nov. 10-14 with a select group of legal and financial officials in Shenzhen, Shanghai, and Beijing under the JCCT Commercial Law Working Group. The focus of the sessions was Corporate Governance and Securities Law in the U.S. and China. Attendees on the Chinese side included officials from MOFCOM, the China Securities Regulatory Commission, the Shenzhen and Shanghai Stock Exchanges, and selected Chinese companies listed on the Hong Kong and New York Stock Exchanges.

Consulate News: Shanghai

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 Shanghai.

CS Shanghai rode a powerful wave of business activity this fall as U.S. companies streamed into China for the meetings they had postponed during SARS, and event organizers made up for lost time by cramming a half year’s shows and conferences into two months. Shanghai with its double digit growth, palpable energy, and visible changes every week drew American firms in every sector looking for the opportunities that had tapered off in the flat markets at
home. Core activity included a dozen Gold Keys, two market studies, eight
trade missions, six expos, seven technical and legal seminars, a TDA reverse mission to the U.S., and two dozen official visitors. Dispute resolution, advocacy, regional outreach, plant and store openings, and TDY support for a secretarial visit added to the mix, CS Shanghai planned carefully to keep ahead of the wave. This fall includes future trade shows, buyer trips to the U.S, staffing challenges, space needs, visa demands, event funding issues, and regulatory trouble-shooting for U.S. engineering and pharmaceutical companies along with core program work. The new year will be just as busy.

For more information on CS Shanghai consular region, visit our website at http://www.buyusa.gov/china/en/Shanghai.html

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 newsletter published by the U.S. Embassy- Beijing.
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INTERNATIONAL COPYRIGHT, U.S. COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2003. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.