November/December 1998                               Issue No. 98-5

Life and Death Struggle

China's custom tariff revenue jumped 52.5% to a record high of 11.2 billion
yuan (US$1.3 billion) for the month of November from the same period last
year.  The Chinese authorities have taken in 8.9 billion yuan on average
since July, up 46.6% from the monthly average for the first half of the year. 
The increase was due partly to the "Life & Death Struggle" anti-smuggling campaign launched by Premier Zhu Rongji in July and spearheaded by
President Jiang Zemin.  One of the goals of this campaign is to uproot
rampant smuggling and corruption which threatens the country and severely
curtails the government's tax revenues.

Both domestic and foreign manufacturers welcome the government's action
which makes it more difficult for imported products to compete with
domestically produced goods.  Domestically produced products ranging
from cigarettes to timber, from PCs to vehicles have reported better sales
since the campaign has started.  China
auto sales rose 29% in September from
August, reversing a 4-month decline. 
In the first 9 months, Chinese customs
uncovered 3,754 smuggled vehicles
worth 415 million yuan (US$50
million).

The Chinese leaders recognized that
anti-corruption is a long term crusade
that they are determined to flight. 
Other measures recently announced
include: i) the establishment of an
electronic database to be shared
between Customs and the State
Administration of Taxation Control. 
This database will link computers
between Customs, banks and foreign
exchange control offices.  This sharing
of information will help prevent
customs related frauds; and ii) the

		development of a revised government purchasing system.  Last year, the government purchased a total of 923 billion yuan.  Of these purchases it is estimated 5% went to kickbacks and corruption; iii) High level prosecution of government officials charge with corruption.  On November 5, Chinese police arrested 89 county officials and sentenced a top tax inspector to death because of their involvement in embezzling some 6 billion yuan by issuing counterfeit invoices.  A day prior to the arrest, the government sacked the director and deputy director of the Anti-Corruption Bureau, two of the country's top graft-busters for "violating discipline".   Not only is the army being called to divest all interests in business, but the government is also accelerating the pace to separate state-owned companies from all government departments.  State-owned companies will have to compete equally with the rest of the market and become more efficient and market oriented in order to survive.  However the government is allowing those mainland firms which were incorporated overseas to split from their respective government parents at a later stage until a new plan is drawn.  These changes will affect many so-called "Red Chip" companies and it's still unclear what impact the split will have on them.   China's exports for the first 11 months totaled US$163.9 billion, a gain of only 0.2% from the same period last year, imports totaled US$122.6 billion, a drop of 0.6%.  Foreign reserves by the end of November totaled US$144 billion, an increase of less than US$5 billion compared to a year ago.  This is despite a trade surplus of US$41.3 billion.  This apparent leakage or loss of over US$40 billion in foreign currency in part explains why the Central Bank has tightened verification procedures for all foreign exchange transactions.  This loss also helps explain the crackdown on smuggling which is also a tremendous drain on foreign exchange.   Tax Exemptions Extended For the first 11 months of 1998 foreign direct investment increased by only 2.66% to US$41.07 billion, year-on-year.  To encourage continued foreign investments, China's State Taxation Bureau has recently announced that foreign-funded enterprises established in China before the end of 1993 will have existing tax exemptions (VAT, customs duties on exports) extended to the end of 2000.   Foreign investment has started to slow in China.  However, compared with many of its neighbors China's has maintained a stable economic environment.  As a result, investors particularly large multinationals, continue to execute long range plans that include significant long-term investments.  Maarten van Alkemade, general manager of Rabobank Netherlands (China) Ltd. recently said "Southeast Asian countries may present good investment opportunities for "punters", but not for serious multinationals.  These countries may have relatively cheaper assets for investors to buy at present, but they do not have as stable an economic environment as China".  Moreover, even ignoring China's huge domestic market, China's labour costs are still lower than in Southeast Asian countries.   Tapping into China's Rural Markets China's huge rural markets often fail to attract the attention of foreign marketers.  Since China began its reform 20 years ago, many farmers have been free to move around in search of work.  Some ended up working in township and village enterprises, or even in big cities.  Today, millions of these so called "migrant workers" are scattered all over the country's big and small cities, earning more money than at home.  According to the Far Eastern Economic Review, at Chinese new year, tens of millions of migrant workers will return home for vacation and will bring with them new products (many foreign made), new service ideas and new attitudes.  Young migrants, especially young women, are adaptable and quickly develop brand awareness.  They become a vital conduit for market influence in China's gigantic rural areas where are still homes to some 750 million Chinese.  New Year's travel has become an extremely important medium and advertisement for companies who wish to penetrate China's rural markets.  Are there any serious investors taking note of this incredible trend?
INTERESTING FACTS AND FIGURES		?Fortune magazine has chosen Shanghai as the location for its 1999 global forum. The theme will be "China - The Next 50 Years". This high-profile meeting will be attended by the world's top CEOs, policy makers and scholars. The discussion will focus on key issues facing multi-national corporations.   ?China will issue digital identification cards to foreign trade enterprises beginning January 1. The ID cards will help banks and foreign exchange bureaus authenticate declaration forms through a national network linking customs offices. The move is designed to eliminate fraud and the illegal purchase of foreign currencies from banks, according to a report in the China Daily News.   ?In 1999 American Express cardholders will be able to withdraw cash in Chinese currency from the Bank of China's 2,600 automatic banking machines across the nation.  The Bank of China has already opened its ATM network to Visa and MasterCard holders.   ?Bicycles have been banned on one of Beijing's busiest streets. From now on it's cars only along a 300-metre strip of Xisidong Street.  Bicycles density on the street reaches more than 6,000 per hour at peak times.  The ban is designed to improve traffic flow in a city where the two-wheeled vehicle is still king of the road.  Bicycles outnumber Beijing's 1.2 million cars by five-to-one.   ?The free ride is over for Chinese officials. In a cost-cutting move, the government will eliminate the free use of its cars for staff at or below ministerial level.  Instead, officials will be given a monthly travel allowance ranging from 100 yuan (US$12) to 3,000 yuan. Cars previously owned by work units will be sold or auctioned off.  The drivers will have to find new jobs.   ?China Telecom has been added to the FT/S&P Actuaries World Indices. The indices are jointly compiled by FTSE International, Goldman, Sachs & Co. and Standard & Poor's in conjunction with the Institute of Actuaries and the Faculty of Actuaries.   ?Sanya, a city in Hainan province, will become the second city in China to have a complete natural gas supply.  The city is speeding up the laying of 108 kilometres of natural gas pipe in a bid to make natural gas available by next year.  With an estimated cost of 130 million yuan (US$15.7 million), the project is partially financed by a US$4.6 million loan from the Norwegian government.   ?China produced more than 6.3 billion pairs of shoes last year, about four times the 1985 figure. Nearly half of the shoes are sold abroad.  Nevertheless the shoe industry is now facing serious challenges in a more competitive market.  Shoes are among a lengthy list of consumer goods now in oversupply in China. These include foods such as: cereals, sugar, wine, chocolates, instant noodles, tinned vegetables, alcohol, beer, yellow wine, meat products, dried and fresh fruits.   ?China also has an oversupply of textiles such as gabardine, bleached yarn gabardine, bleached twill cloth, wool navy cloth, wool elysian fabrics, fancy wools, mixed silk quilt cover, damask, silk quilt cover and polyester gauze. In knitted goods the list includes: kapok socks, sportswear, bath towels, table napkins, wool/chemical fiber blended plush yarn, woolen and blended sweaters and trousers, woolen carpet, plain colour cotton blankets, and T-shirts.  Other items on the list are: toothbrushes, suitcases,  enameled bowls, clocks, glasses, toys, television sets, video players, radios, electric fans and dust catchers.   ?To push domestic demand and offset slowing exports, the Chinese government plans to launch a national commodities trade network. Companies within China will be able to buy and sell goods online.  Some 100,000 companies from 37 industries have already signed up to use the network which should be 80% operational within three years.   ?Internet use in China will reach about 9.4 million by 2002, up from 1.4 million in 1997, according to a recently survey by IDC Asia/Pacific.  By 2001, China is expected to have the largest Internet user base in Asia, excluding Japan. E-commerce revenue is also expected to increase.   ?Lucent Technologies announced it will spend US$24 million on research and development at a new global design center in Qingdao, Shandong province.  Lucent has seven offices, six joint ventures and two wholly owned companies in China. It employs more than 2,000 people. Lucent's investment follows Microsoft's recent announcement that it will spend US$80 million on a new research lab ?its first in Asia - in Beijing.   ?The top three players in China's switch markets are 3Com, Cisco and Bay Networks. All three are U.S. companies.  3Com leads the pack, holding 25% of market share, followed by Cisco with 16% and Bay with 11%.   ?Remedios & Company, a law firm based in Vancouver recently opened an office in China, making it one of three Canadian law firms with offices in Beijing.  The others are: Blake Cassels & Graydon and Goodman Phillips & Vineberg.   ?China Southwest Airlines opened a new Chengdu-Lhasa air route. The first Airbus A340-300 carrying some 370 passengers landed November 20 at Lhasa's Gongkar Airport.  The airport is located at one of the highest elevations in the world, 3,700 meters above the sea level on the Tibet plateau. The airport also services Boeing 707 and 757 aircrafts.   ?China's first glass-bottomed boat will be launched next year in Harbin, Heilongjiang province. The 74-seat boat was designed by Harbin Engineering University.   ?Across the strait in Taiwan, private citizens, no matter how rich they are, are barred from owning any ocean-going craft. Boats are still considered a security risk for fear that people will sail across the Taiwan straits to mainland China, violating Taiwan's ban on all direct contact with the mainland.
GOVERNMENT		?Ma Ying-jeou, the former Justice Minister of Taiwan and a Nationalist, has recently been elected as Mayor of Taipei, replacing the pro-independent Democratic Progressive Party's incumbent, Chen Shui-bian.   ?According to China's State Commission of Economy and Trade, the Ministry of Foreign Trade and Economic Co-operation (Moftec) is formulating a plan for overseas-incorporated mainland companies to separate from their parent government bodies.  The army, paramilitary police, judiciary bodies and the central government's ministries and commissions would have to split off their enterprises by the end of 1998.  Military enterprises would temporarily be handed to the commission before they were allowed to merge with others, go bankrupt or close-down.  Overseas-incorporated mainland firms could split from their respective government parents at a later stage.   ?China plans to raise taxes as much as 50% on gasoline and diesel fuel. The new taxes would produce as much as US$11 billion worth of revenue for the central government, while cutting revenue collected by the provinces.  The central government plans to re-distribute part of the tax revenue to the local governments, according to a Bloomberg new report.  Poorer provinces are expected to get a larger share of the money to improve their infrastructure. The existing highway and road maintenance fees paid to regional governments by car owners would be replaced by taxes of about 1.15 yuan (13.9 U.S. cents) a litre on gasoline and 0.95 yuan a litre on diesel.  In Shanghai, the retail price of gasoline is 2.30 yuan a litre while diesel costs about 1.70 yuan a liter.  China's agricultural and industrial sectors, which do not pay the road fees and are the biggest consumers of diesel, will have to incur higher costs.  Public buses, taxis and transportation companies will also be affected.  China consumed about 33.8 million tons (290 million barrels) of gasoline and 51 million tons (375 million barrels) of diesel fuel in 1997.   ?The Independent Commission Against Corruption (ICAC) of Hong Kong has recently been asked to join an exclusive international panel set up to flight global corruption.  The invitation confirms the ICAC's status as one of the world's top four anti-corruption agencies.  The other members of the panel will be:  the US Federal Bureau of Investigation, Europe's crime fighting body Europol, and South Africa's Office for Serious Economic Offences.  The first meeting of the new group will take place in Lyon, France early in 1999.
AGRICULTURE, FOOD AND FORESTRY		?Hoken Trading Ltd. of Toronto, Canada signed a Cdn$2.7 million joint venture agreement with China's Ningxia Islamic International Trust and Investment Corp. and Ningxia Machinery and Electrical Group. The new venture will develop a plant to process 100,000 tons of fresh alfalfa each year. Hoken will own 30% of the venture.  Hoken has also signed a Cdn$4.6 million contract with China's Bailong Vegetable Engineering Ltd. to supply a pig breeding farm in Xi'an. Included in the deal are 150 breeding swine, buildings, equipment, training and technology.   ?Hydronov Inc. of Quebec has signed a Cdn$4.3 million contract with the Administrative Committee of Beijing Shunyi ("Three High" Agricultural Pilot Area of Science and Technology) for the immediate construction of a greenhouse facility.  The project will produce more than 800,000 kgs of fresh vegetables annually using Hydronov's advanced floating rafts hydroponic technology.   ?The world's first remote sensing satellite system to monitor desertification and crop yields in China will be developed by the Netherlands-based Environmental Analysis Remote Sensing Company (EARS) and State Forestry Administration of China. The 32 million yuan (US$3.8 million) project will be funded by both governments. Hofung, a Dutch trading company specializing in the transfer of western technologies, will coordinate the project.   ?OPI Systems Inc. of Calgary opened its Beijing sales center, Jiahua OPIsystems Co. Ltd., following the recently-signed joint venture between OPI of Canada, China's Super Union Co. and Linangmao Science and Technology Development Co., to bring advanced grain storage management to China.   ?An International Agriculture and Food Technology Exhibition, sponsored by the China Council for the Promotion of International Trade will be held in Beijing on April 20-23, 1999.  So far, companies from 10 countries have registered as exhibitors.   ?The shortage of potash fertilizer is worsening in China.  In 1997, the country imported 4.63 million tons of potassium chloride and 628,000 tons of potassium sulfate to make up for the deficiency.  China will need in excess of six million tons of potash fertilizer, but last year the country produced only slightly more than 200,000 tons. The current output ratio between the nitrogenous, potash and phosphate fertilizers in China is 1:0.31:0.014, which is out of proportion and unable to meet the market demand, according to the Xinhua News Agency.  The ratio should be 1:0.37:0.25.  China will have to spend at least US$2.5 - 3 billion a year on imports of potash and phosphate fertilizer.   ?The Nasdaq-listed Embrex Inc. and Shanghai's Great Wall Food Company will be working together on an egg production project. Embrex Biotech Trade (Shanghai) Co. Ltd. has installed its INOVOJECT(R) automated egg injection system in a Great Wall hatchery located in Dalian. The system can inoculate 20,000 to 60,000 eggs per hour, eliminating the need for manual, post-hatch injection of certain vaccines.  China is the second largest poultry production country, after the U.S.  More than 3.3 billion broiler birds are produced in China annually.  China's poultry meat consumption is expected to increase 5% in 1998 and 1999.   ?Canada's Transway Technology Ltd and China's Guangzhou Jiangcun Poultry Enterprises Development Corp. have teamed up to produce Canadian Ginseng chicken, develop animal feed and process poultry products. Annual output is expected to be worth US$1.2 million.  All poultry raised by the venture will be exported.
BANKING, FINANCE AND INSURANCE		?The Nasdaq of New York and the Stock Exchange of Hong Kong have recently announced a preliminary alliance.  Beginning in mid-1999 both exchanges will conduct a pilot project in which 25 companies that now list on one of the markets will list on both.  A joint internet site in which U.S. and Hong Kong investors can get access to financial information about U.S. and Hong Kong companies will also be created.  Currently there are 18 Hong Kong-based companies listed on Nasdaq.  Meanwhile, China's Ministry of Communications said recently that it will continue to promote overseas listings for infrastructure companies to raise funds for construction projects at home.  Two-thirds of construction spending are expected to be financed this way.   ?On November 15, the Shanghai branch of the People's Bank of China (PBoC), became the first regional office of the restructured central bank.  Nine regional offices are formed to govern local banking:  Tianjin to cover the city of Tianjin, Inner Mongolia, Hebei and Shanxi provinces;  Shenyang to cover Liaoning, Jilin, and Heilongjiang provinces; Shanghai to cover the city of Shanghai, Zhejiang and Fujian provinces;  Nanjing to cover Jiangsu and Anhui provinces;  Jinan to cover Shandong and Henan provinces; Wuhan to cover Jiangxi, Hubei and Hunan provinces; Guangzhou to cover Guangdong and Hainan provinces, and the Guangxi Zhuang Autonomous Region; Chengdu to cover Sichuan, Guizhou, and Yunnan provinces and Tibet; Xian to cover Shaanxi, Gansu, Qinghai, Ningxia and Xinjiang provinces.  These nine regional offices are designed to function similarly to the U.S. Federal Reserve.  The Beijing and Chongqing branches of PBoC have been abolished and their business will be put under the direct control of the business department of the central bank.   ?By the end of October, PBoC reported 9.3 trillion yuan in deposits, 8.3 trillion yuan in outstanding loans and US$143.7 billion in foreign exchange reserves. Total saving deposits stood at 5.2 trillion yuan (US$630 billion), an amount 250 times greater than the 1978 figure.   ?Foreign exchange adjustment for foreign-invested enterprises will be abolished throughout China. The buying and selling of F/X by FIEs will be integrated into the system used to regulate F/X trading by banks beginning on December 1, 1998. Local foreign exchange adjustment centers will be reorganized. The National Foreign Exchange Adjustment Center (NFEAC) will merge into China Foreign Exchange Trading Center (CFETC) and be renamed as China Foreign Exchange Trading Center, Beijing Branch.  The other 35 adjustment centers associated with CFETC across the country will be renamed as CFETC, by respective local branch name.  Under the business and technical guidance of CFETC, the local branches will look at the operations of the F/X market between banks and other financial institutions' RMB interbank loan business. Any remaining local exchange adjustment centers will be closed down.   ?Sun Life of Canada has produced the first Chinese-English dictionary of insurance terms.  Sun Life, which received approval to open an office in Chongqing, hopes to provide various financial products such as life insurance, pensions and mutual funds to Chinese consumers.  Lincoln National Corp., the 10 largest U.S. life insurer, plans to set up a joint venture with Shenzhen-based Ping An Insurance to sell life insurance.  China's new medical insurance scheme, effective from 1999 will replace existing company-based medical insurance schemes for urban employees with a mix of individual, company and state support.   ?Co-managed by Goldman, Sachs and Credit Suisse First Boston, China has recently sold US$1 billion global bond.  This is double the amount originally planned as investors think the country will keep its economy on course while some of its neighbours are foundering.   ?The China Construction Bank (CCB) launched its first computerized account transferral services in 138 Chinese cities.  The service will be available on the bank's nationwide computer network and operating systems. Customers of CCB can now electronically send money to almost anyone in the country.  The money can be withdrawn from one of the CCB's 9,000 branches.  CCB plans to expand the service to cover more communities. Due to a sharp increase in economic activities and the  increasing mobility of its citizens, China's remittance volume surged to 300 billion yuan (US$36 billion) in 1997 from 52 billion yuan in 1991, an increase of 35% on an annual basis.  By the year 2000, the volume is expected to reach 450 billion yuan.   ?The Shenzhen branches of the Hongkong Bank, U.K.-based Standard Chartered Bank, Japan-based Toyo Banking Trust Corp. and Hong Kong-based Nanyang Commercial bank and Bank of East Asia have recently obtained licenses for conducting business in Chinese currency in Shenzhen.   ?The Taiwanese government has recently taken over the Taichung Business Bank after authorities began investigating NT$7.4 billion (US$228 million) worth of suspect loans to companies.  It is the first time that Taiwanese government had taken over a listed bank.   ?The New York-based law firm Coudert Brothers recently tied up the year's largest financial deal in Asia for Shanghai General Motors. This joint venture between GM and SAIC of China is worth US$1.52 billion.  The lending group includes 35 international banks and 9 Chinese banks. A total of US$472 million and the RMB equivalent of US$350 million will be lent under a series of five secured, multi-currency loan agreements.  This is the largest PRC project ever financed solely by commercial banks.   ?Restrictions on capital raising have been eased by Taiwan's Securities and Futures Commission . The change means listed companies whose China investments exceed 20% of their capital or net assets can sell stock or bonds in Taiwan, provided the proceeds are not diverted to China projects.  Previously, the government discouraged companies from expanding their operations into China by making it difficult for local companies to raise funds in Taiwan's financial markets, except through the banking channel.
CONSUMER / RETAIL MARKETS		?Proctor & Gamble made four of the top 10 brands of shampoo sold in China during the first half of this year. The other six brands are also made by foreign companies.  P&G operates 11 joint ventures in China, including a US$120 million plant opened in the northern port of Tianjin in August. China's sales of cosmetics through department stores reached 1.62 billion yuan (US$195 million) in the first seven months of 1998, up 9.4% compared with the same period last year.   ?Egana Int'l (Holdings) Ltd., a Hong Kong-based manufacturer and retailer of watches and jewelry, announced it is buying German leather goods manufacturer Goldpfeil AG from the closely held Willi Leibbrand GmbH & Co. at a total cost of US$33.5 million.   ?Coty Inc. has recently teamed up with TV celebrity Yue-Sai Kan, the Barbara Walters of China, to create the first globally marketed Chinese cosmetics brand.  Yue-Sai Kan Cosmetics Ltd. (USA) LP, the name of the new joint venture, recently opened a US$20 million state-of-the-art fragrance and cosmetics manufacturing facilities in Pudong, Shanghai.  The plant, with a capacity of 60 million units per year, will manufacture Yue-Sai brand cosmetics, as well as other Coty brands.  The Yue-Sai brand, which will eventually be marketed on a global basis, is the number one cosmetics brand in China. It has  95% brand recognition among Chinese consumers.   ?LSG Sky Chefs, the airline catering unit of Germany's LSG Lufthansa Service Holding, is expanding its Hong Kong operations by introducing the "business class" meals it serves aboard airlines to local stores and supermarkets.  The ready-to-eat meals, something like TV dinners, but more deluxe, will be on the shelves early next year.  The frozen meals will include salmon, veal and pasta dishes, and Asian specialties.  The grocery store version will have larger portions than typical airline fare.  Dinners, which include dessert, are expected to be priced at HK$50. LSG will invest HK$500 million in a new kitchen facility at the Hong Kong International Airport. The kitchen will produce an average of 15,000 meals daily, catering to 70 flights and 26 different airlines, plus another 7,000 to local customers.   ?Diamond jewelry sales in some Asian countries are expected to fall as much as 30% in 1998 after a 13% decline in the region in 1997, according to De Beers.  China is expected to be the only bright note on the sales front. China's diamond jewelry sales grew 8.5% in the first six months of this year, compared with the first half of 1997.   ?Coca-Cola has opened a new US$25 million bottling plant in Taiyuan city. The 40,000-sq. metre factory, is Coke's second opening this year, and its 22nd plant in the country.  The northern location of the plant will put another 31 million Chinese consumers within its reach.  Two more plants are expected to open by mid-1999 in the southwestern cities of Kunming and Chengdu. Coke's total investments in China is expected to reach US$800 million.   ?The Consumer Electronics Expo China 99 will be held at the Beijing Exhibition Center July 28 to 31, 1999.  The latest AV products and household electric appliances will be on display. Both domestic and foreign electronics firms will be invited to participate.  Sales of household electric appliances is expected to reach 140 billion yuan (US$17 billion) in 1998, up 10% over 1997, while exports should increase by 12% to US$3.6 billion.  The exposition is organized by the China Council for the Promotion of International Trade, Electronics Sub-Council, China Electronic News and the Research Institute of TV and Electro-Acoustics .
HEALTH CARE		?The Vancouver-based Biotech Holdings Ltd. has recently announced that its DIAB II diabetes drug has been selected as the best new drug sold in China. The drug was selected by the China Consumers Association during its annual survey. In order to make DIAB II available as widely as possible to China's 25 million Type II Diabetics, Biotech has applied to have the drug included in the list of drugs covered by the national health plan in China.   ?Telemedical services for more than 1 million patients a year and training for thousands of medical professionals will be available through a deal struck between China's Golden Health Medical Network Corp. and American STM Wireless Inc. (ASTM).  ASTM will provide 1,500 sets of satellite communication facilities for China, enabling the national network to serve 1,500 hospitals by the year 2000.  Major hospitals in some 20 provinces and municipalities have joined the network so far. About 80% of health resources of China's 60,000 hospitals are concentrated in hospitals in large cities.  With this network, the country's best doctors can diagnose the illnesses of distant patients through satellite communications.   ?HIV and AIDS have become major public health issues in China.  In late September, the government started to ban the sale of blood to stop the spread of HIV/AIDS.  It is estimated that as much as 17% of Chinese AIDS cases were contracted through blood transfusions.  Instead of testing blood, which could pose dangers by accidental exposure, the Chinese National AIDS Center for Prevention and Control recently said it has begun evaluation of the HIV-1 urine anitbody test system produced by Calypte Biomedical of the US. Using urine to test HIV/AIDS will give better protection to health care workers and patients.   ?The International Cancer Society of Canada has recently signed a letter of intent with the Cancer Institute and Cancer Hospital of the Chinese Academy of Medical Sciences to cooperate on the development and implementation of cancer care facilities throughout China.  The first facility is to be based in Beijing, and will be associated with the cancer hospital.   ?According to the China Daily News, China's State Drug Administration plans to tighten control on imported pharmaceuticals by requiring drugs to be registered by customs and meet other validation requirements.  Imported drugs will also have to carry packaging in Chinese, details of the producing company and an expiry date.   ?The Nasdaq-listed Thermogenesis Corp. (TC) announced recently that its BioArchive(tm) System, which harvests and cryopreserves units of placental blood stem cells (used to reconstitute the bone marrow of patients with leukemia, lymphomas and other genetic blood diseases), will be installed in the Guangdong Hematopoietic Stem Cell Therapy Center in  Guangzhou, China.  TC's exclusive distributors, Aniche Inc. and its subsidiary Shanghai Ecom International Trading Co., have signed an agreement with China Dongfang Group to represent BioArchive System to the 100 major research hospitals and blood centers in China.
MANUFACTURI NG		?Lavergne China Inc. of Quebec has signed a Cdn$10.5 million contract with two Beijing companies to build a plant that will treat contaminated plastic and turn it into a usable product. Olympic Li Kang Transportation Corp. and Beijing Shilong Industrial Zone Investment and Development Zone will work with Lavergne to make high-value, semi-finished plastic products, such as thermoforming sheets used in packaging.  Lavergne will own 51% of the new venture to be named Kang Jie Long Environmental Material Co.   ?Transit railcars for the world market will be manufactured in China's Shandong province by Power Pacific Corp. Ltd. (a subsidiary of Power Corporation of Canada) and Bombardier Inc. of Montreal. The two Canadian companies have signed a contract with China's Sifang Locomotive and Rolling Stock Works to form a joint venture named Bombardier Sifang Power (Qingdao) Transportation Ltd in Shandong province.  The new venture will manufacture transit railcars both for China and the world market. The Cdn$110 million project is expected to produce 100 high grade passenger railcars and 600 car bodies annually. Together Bombardier and Power will own 50% of the venture.   ?GIMV and Boortmalt, the largest independent malt companies in Belgium, have recently formed a joint venture with Beijing Beer Material Factory, a Chinese township enterprise, to produce malt for the Chinese beer market.  The two Belgium partners will invest about US$7 million in cash in the venture named Beijing Boortmalt Malting Company . The Beijing Beer Material Factory currently produces about 57,000 tons of malt a year. The new venture expects to increase annual production to 125,000 tons by 2003.   ?Tenneco Inc. of the U.S. has recently established a joint venture, Shanghai Walker Exhaust Systems Corp., with Shanghai Tractor & Internal Combustion Engine Corp. to produce exhaust systems and parts in Shanghai.  Shanghai Tractor is a unit of Shanghai Automobile Industry Corp.  Production is expected to begin by mid-1999.   ?After failed negotiations with Boeing and Airbus, a group of six Chinese aerospace companies recently decided to build a regional passenger jet by themselves.  The proposed jets, which might pose a threat to Bombardier of Canada, the dominant player in the industry,  would have 58 or 76 seats and travel up to 3,200 kilometres.  The six companies include: Harbin Aircraft Manufacturing, Xian Aircraft Industry Group, Shanxi Aircraft Co., Shanghai Aviatioin Industrial Corp., Shanghai Aircraft Research Institute and the Xian Design and Research Institute. To continue courting the China market, British Aerospace Plc, a 20% partner in Airbus, recently indicated that Airbus may let Chinese companies  make some wing parts and even the entire wing sections for the A320s, Airbus's best selling plane. Boeing might also look to China as a second supplier of wings for the 717 jetliner.
MEDIA AND COMMUNICATI ONS		?Spending on advertising in China reached 24 billion yuan (US$2.9 billion) for the first half of this year, a 27% increase over the same period last year. The money spent in the ad industry breaks down as follows: 10.9 billion yuan went to ad companies; 5.7 billion to TV stations, 740 million to radio broadcasting, 4.7 billion to newspapers and 330 million to magazines.   ?More money was spent to promote household electric appliances than any other product in China. A total of  3.7 billion yuan was spent to advertise the appliances,  followed by 3.4 billion yuan on food products,  2.04 billion yuan on medicine and 1.99 billion yuan on cosmetics.  These four categories made up 46% of the total ad spending for the first six months of the year.  Ad spending in Beijing ranked first, amounting to 5.91 billion yuan, followed by Shanghai at 4.01 billion yuan, and Guangdong at 2.58 billion yuan. Taken together the three cities accounted for 12.5 billion yuan or 52% of the country's total spending on ads. There are now 56,957 ad companies in China, employing 536,146 people, as against 57,024 and 545,788 at the end of 1997, a drop of 0.12% and 1.77% respectively, showing native growth for the first time in ten years.   ?R.H. Donnelley Corp. of New York, a marketer of yellow pages advertising, has recently announced a strategic joint venture with China Unicom to publish yellow pages and provide  Internet directory services in China.  Subject to Chinese government approval, Donnelly will acquire a 15% interest in the new company called Unicom Media. (Donnelley will have an option to increase its stake by 25%.) Unicom media will own ChinaBiG (www.ChinaBiG.com), a bilingual Internet directory covering China, Hong Kong, Taiwan and Macao. The company maintains a database with information on more than 2 million Chinese enterprises. There are plans  to expand it to add 3 million enterprises by the year 2000.  ChinaBiG enables Chinese firms to market their services both locally and internationally.   ?The Hong Kong Economic and Trade Office (HKETO) of the HK Government in Canada, in association with the Canadian Association of Journalists, has recently awarded fellowships to two journalists: Stephen Ewart, the energy writer with the Calgary Herald and Theresa Lalonde of CBC Radio in Windsor.  Funded by HKETO, the two will spend 10 days touring Hong Kong and meeting people of diverse views, and cultural background.   ?Philip Morris would not renew its US$7 million a year title sponsorship of China's professional soccer league after its 5-year contract expired in October this year.  China recently introduced a law banning tobacco advertising, which limited Philip Morris to a single advertising board in soccer stadiums.  The tobacco company is re-evaluating its sponsorship strategies in China where it recently sponsored a bridge tournament and a re-employment center.  International Management Group, the Cleveland sports-marketing firm that owns marketing rights for the league, is seeking a new sponsor. It has been in talks with Swedish telecommunications giant, Ericsson and Danish brewer Carlsberg.   ?Xinhua News Agency, China's largest media organization, has teamed up with U.S.-based Commerce International Group LLC to boost U.S. distribution of three English language business publications: Xinhua Electronics News, Xinhua Business Weekly and China Facts & Figures. The publications focus on China's growing market, particularly on the high-tech industry. The Hoffman Agency, a PR firm in the Silicon Valley, has also agreed to help by expanding the U.S. subscriber base for the publications.
MINING AND RESOURCES		?With the improvement in living standards and the push to use cleaner fuel, China's demand for liquefied petroleum gas is expected to rise 52.4% -- 12.6 million tons by 2000 from 8.27 million tons in 1997.  More Chinese are using the gas for home cooking and powering cars.  In Beijing alone, some 12,000 cars are expected to be using it as fuel by 1999.  Currently, only 2,000 cars in the country are powered by LPG.  China's domestic consumption of LPG rose at an annual rate of 24.6% during the period 1993-1997.  Guangdong, the fastest growing province, accounts for a fifth of the country's LPG demand. In 1997, China imported about 4 million tons of LPG, mainly from Saudi Arabia, while its output totaled about 5 million tons.  Today, it accounts for 48% of China's total fuel consumption, while coal gas accounts for about 31% and natural gas 7%.   ?China's proven gold reserves of about 4,000 metric tons rank it third in the world after South Africa and the U.S.  However, experts say China is only mining to a depth of about 800 metres, leaving some to speculate that more gold may be found in deeper deposits.   ?Tesco Drilling Technology of Calgary, Canada has recently signed a Cdn$1.57 million contract with China National Star Petroleum Corp. for the sale of one of Tesco's 500ECI electric top drive systems.  The system will be used to drill directional, horizontal and vertical wells with downhole problems in Tarim Basin. It should substantially reduce drilling costs.  This is the 5th top drive Tesco has sold in China.   ?Patrick Chua, co-chairman of Sunwing Energy, recently announced the Calgary company's third oilfield project in China. Sunwing Energy will undertake a joint study of the potential development of the Tuyuke Oilfield in the Tuha Basin of Xinjiang Autonomous Region with the Tuha Petroleum Exploration and Development Bureau.  Preliminary Chinese exploration has identified more than 800 million barrels of oil-in-place in the field, located 100 kilometres east of Turpan. Tuha, which currently produces about 21 million barrels of oil a year, is a unit of the state-owned China National Petroleum Corp. Sunwing Energy  already has two active contracts with the company.   ?Santa Fe Energy Resources of Houston, Texas signed a production sharing contract with the China National Offshore Oil Corp to explore for hydrocarbons in the South China Sea. By signing for Block 26/35, located about 100 miles south of Hong Kong, the American company adds about 380,000 acres to its holdings in the Pearl River Basin. The deal follows the successful exploration earlier this year of the Ursa discovery. Sante Fe Energy Resources now holds 1.6 million gross acres in China's largest offshore producing area.
POWER / UTILITY / INFRASTRUCTU RE PROJECTS		?CAE Electronics Ltd., a unit of Toronto-based CAE Inc., has won a Cdn$5 million contract to supply a hydro-electric resource automation dispatching system in Henan province. Located in east central China, the area has a population of 80 million. The total installed generation capacity in Henan is about 11,000 MW, ranking it 7th in the country.   ?Vancouver-based Westcoast Energy International has recently formed a joint venture with Shanghai No. 1 Steel. (SN1) to build, own and operate a 50-MW simple cycle power plant in SN1's manufacturing complex. Westcoast, which owns 32.5% of the venture, will be the project manager and advisor on plant operations for the first 15 years of a 20-year contract.  The plant, which is under construction, will commence operations in late 1999. Blast furnace gas will be purchased as a major fuel source from the SN1 plant.  SN1 will purchase all the power produced from the power plant.  The total value of the project is Cdn$43 million.   ?Hong Kong's subway company, MTR Corp., recently awarded four of its 34 major contracts for the construction of the 12.5 kilometre Tseung Kwan O Extension.  Total value of the four contracts is HK$2,090 million, or US$268 million). Work will start in late 1998. The Tseung Kwan O Extension is expected to be completed in late 2002.  The companies awarded the work are: Dumez GTM - Chun Wo Joint Venture  will build the Black Hill Tunnels at a cost of HK$580 million; Hyundai-Kier Joint Venture will build the Pak Shing Kok Tunnels for HK$460 million; Mitsubishi-Hyundai Consortium were awarded the rolling stock contract worth HK$920 million, and Nissho Iwai-Nabco Consortium was given the contract for platform screen doors at a value of  HK$130 million.   ?The upgrading of the communications system on China's railways will be handled by  Shanghai GPT, a joint venture company formed in 1996 between UK-based Marconi Communications and China's Shanghai Railway Communications Equipment Factory.  The new orders are part of a US$10 million program called The Sixth Railway Project.  Shanghai GPT will supply the ministry of railways with products sourced from both its UK factory in Coventry and the Shanghai factory.  Marconi and Shanghai GPT will supply the project with a comprehensive range of equipment for network transmission, access and management, using the company's synchronous digital hierarchy technology.
REAL ESTATE/ CONSTRUCTIO N		?CEEB ANG International Group Ltd. of Quebec, Canada and Beijing Splendour Architecture Technology Consultants will build a residential and commercial development on a 12-acre lot in Beijing. The US$120 million development is to be called Canadian Village. The five-year project consists of 20,000 sq. metres of office building and 180,000 sq. metres of residential space. Phase one will include 15,000 sq. meters of office space to be occupied by the Housing Industry Office under the Ministry of Construction and will also include 50,000 sq. meters of residential space. The joint venture company is called the Beijing Sino Canadian Energy Conservation Development Co.   ?The Shanghai government has introduced a Western-style tax break system to spur home sales.  The new tax policy allows home buyers to deduct as much as the full purchase price of their home from their income taxes for the next five years.  Initial responses have been very positive and this temporary policy may be extended.  Other cities are also studying the policy.   ?Architects Crang and Boake Inc. of Ontario, Canada has recently signed a Cdn$1.44 million contract with Chang Hong Real Estate Development Co. Ltd. for the planning and design of the 100,000 sq. metre Tianjin Electrical Shopping Centre.  The Architect firm also signed a Cdn$720,00 deal with the government of Qingshan District, Baotou, for the planning and design of the 2 million sq. metre Baotou Qingshan Industrial Development Area.   ?Residential housing costs in China are becoming slightly more expensive. Sale prices and rents rose by 1.3% and 0.9% respectively in the third quarter of this year, compared with the same period last year.  Prices for resale houses registered the highest growth rate of 4.7%, while prices for villas and luxury homes dropped by 1.6%, according to China's State Statistics Bureau. The survey of  35 major cities also reported that rental costs of office and commercial spaces declined by 4.7% and 0.5% respectively. Prices for hotel rooms dipped by 3.9%.
TECHNOLOGY AND TELECOMMUNI CATIONS		?AT&T Labs and the Chinese Academy of Sciences in Beijing launched a five-year research program to develop an English-Chinese speech translation prototype.  It's hoped that by  2003, English and Chinese speaking travellers will be able to communicate in their native languages when directing a taxi, ordering a restaurant meal or making a retail purchase. The translation will occur automatically and be delivered to the recipient by mobile phone.  In the future, the technology will allow users to communicate with people speaking other languages by telephone and in video conference sessions.   ?The Vancouver-based Conor Pacific Environmental Technologies Inc. announced it has appointed an agent to represent its water and wastewater treatment technologies and expertise in China.  Conor has recently been working in conjunction with Environment Canada in China to help Chinese government agencies determine the most effective solutions to water and wastewater problems. Conor will have access to Canadian government concessional financing, funds that are available to Canadian companies operating in foreign countries. It guarantees payment for goods and services rendered.   ?The Nasdaq-listed Andrew Corp. has begun production at its new 5,000 square metre factory in China-Singapore Suzhou Industrial Park.  The first products off the production lines were the company's flagship HELIAX(R) coaxial cables and SKYPATH(TM) base station antennas for the wireless communications market in China.  The Suzhou plant will begin producing other HELIAX products such as connectors, accessories, and assemblies  essential to cable installation.   ?ABL Canada Inc. of Quebec has recently signed a distribution deal to market  ABL's VideoExpress products in China. The ABL VideoExpress solution is comprised of video-based hardware and software. The agreement with STR International Ltd., a subsidiary of Shanghai Industrial Investment (Holding) Co., includes a stocking order by STR of Cdn$720,000 worth of ABL equipment.   ?California-based MedianiX Semiconductor Inc. said recently that its single-chip implementation of the Spatialize(r) N-2-2(tm) virtual surround sound technology has been selected by the Golden Regent Investment Ltd. as the basis for its next-generation NICOLE(r) brand mutlimedia PC speaker systems.  The Hong Kong-based Golden Regent  ships five million speaker systems a year and has 600 outlets in China.  The systems can create the impression of multiple speakers using only two physical speakers.   ?In September, China's Ministry of Information Industry issued a circular calling for the ban of Chinese-Chinese-Foreign (CCF)" or the "Zhong-Zhong-Wai" model used by the country's  telecom operator, China Unicom.  However, there has been a strong negative response to this circular and it is unclear if the call for a ban will be followed with further action. CCF joint ventures have allowed foreign firms to earn income from Chinese telecom services through a mix of management contracts, equipment leasing, consulting and license royalties. At least 45 major foreign companies such as Deutsche Telekom, France Telecom, Sprint, NTT, Bell Canada and Hong Kong Telecom had invested under such CCF models.   ?Ksat Satellite Networks of Vancouver and Omnitronix Ltd. of Montreal have signed a Cdn$5.5 million contract with Beijing Gaida Satellite Communications Networks Ltd. for the purchase of 1,000 VSAT units.  The units will be used to monitor flood-control and water resource systems.
TRANSPORTATI ON, Travel, tourism and leisure		?Kelowna Flightcraft International Air Cargo and Winnport Air Cargo, both of Winnipeg, will be flying cargo from any location in China serviced by Air China to any point in Canada served by Kelowna. The agreement with Air China is expected to generate Cdn$8 to 12 million per year.  Kelowna and Winnport already offer a B-747 all-cargo air service between Winnipeg and Nanjing and Shenzhen three times a week.     ?China Airlines, Taiwan's biggest air carrier said recently that it is scheduled to complete a project dealing with the Year 2000 computer bug by June 1999.  To ensure its flight safety, the airline established a Y2K treatment committee in 1996 and set aside some NT$150 million (US$4.6 million) for research.   ?The Toronto-based Four Seasons Hotel has recently partnered with the Hong Kong-based Shanghai Industrial Holdings to build the first Four Seasons Hotel in Shanghai.  The 34-storey hotel will have 440 rooms and will be open for business next July.   ?The hotel division of the New Jersey-based Cendant Corp. has recently signed a master franchise agreement with Hong Kong businessman Wilbert Cheng to develop the Howard Johnson (HJ) hotel brand in China.  Some 20 Howard Johnson properties with more than 2,000 rooms will be built in China over the next five years.  While hotel business in the rest of Asia has slowed, demand in China is holding up.  Cendant has a separate agreement in China with businessman Yue Yang, who has bought the right to develop Days Inn hotels. Ten mainland properties have already opened. In addition to Howard Johnson and Days Inn, Cendant controls another six hotel brands: Super 8, Knights Inn, Wingate Inn, Ramada, Travelodge and Villager.   ?Richard Branson, chairman of Britain's Virgin Group, was recently promoting the group's Virgin Atlantic Airways in Shanghai, paving the way to launch the Shanghai-London route which is sought-after by the British Airways as well.  The group also wants to open a supermarket, a cinema and a teahouse in Shanghai.   ?China Southern Airlines has recently launched its new frequent-flyer program, the Sky Pearl Club.  Members can earn free flights on any of the airline's 328 routes in China and internationally. The Club offers three mileage levels, Basic, Silver VIP and Gold VIP.  Benefits to Gold VIP members include immediate check-in at all China Southern's first class counters regardless of the class they have booked; priority class upgrades, and unlimited use of all international departure lounges for themselves and a travelling companion.   ?To boost the badly hit tourism industry, the Hong Kong government has recently relaxed visa requirements for nationals from some wealthy countries.  Visitors from Japan, the U.S., Germany, Greece and Finland can stay in Hong Kong visa-free for up to three months, instead of just one.   ?Japan Air System Co. has announced recently that it will add routes between Narita and Guangzhou, Narita and Xi'an, Osaka and Xi'an and between Osaka and Kunming, beginning  next spring.  The company will be the first to offer direct flights from Japan to Xi'an and Kunming, which are famous Chinese tourist spots.
deloitte & touche in china related activities / projects		?China: The Consumer Revolution, a book written by Deloitte Consulting China specialist Conghua Li, is now available on the book shelves of major retailers. The publisher, John Wiley & Sons, is currently in the process of translating the book into Chinese and Japanese.

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