Continuing our look at China with a background overview critical
for importers…
As of 31 December 2005, there were an estimated 37.5 mill*ion
broadband lines in China. It represents nearly 18 percent world
share. Over 70 percent of the broadband lines were via DSL and
the rest via cable modems.
The World Bank estimates that it takes about 18 days to get a
phone connection in China (86 days in India)
With two stock exchanges (namely, Shanghai and Shenzhen),
mainland China’s stock market has a market value of $1 tril*lion
by January 2007, which becomes the third largest stock market in
Asia, only after Japan and Hong Kong. It is estimated to be the
world’s third largest by 2016.
See also: Closer Economic Partnership Arrangement with Hong Kong
and Macau.
Foreign investment
In 1979, the government introduced legislation and regulations
designed to encourage foreigners to invest in high-priority
sectors and regions. A significant example of this is the
Encouraged Industry Catalogue which sets out the degree of
foreign involvement allowed in various industry sectors.
In 1980, the government eliminated time restrictions on the
establishment of joint ventures, provided some assurances
against nationalization, and allowed foreign partners to become
chairs of joint venture boards. In 1991, the PRC granted more
preferential tax treatment for Wholly Foreign Owned Enterprises
and contractual ventures and for foreign companies which invest
in selected economic zones or in projects encouraged by the
state, such as energy, communications and transport. It also
authorized some foreign banks to open branches in Shanghai and
allowed foreign investors to purchase special “B” shares of
stock in selected companies listed on the Shanghai and Shenzhen
Securities Exchanges. These “B” shares are sold to foreigners
but carry no ownership rights in a company. In 2006, mainland
China received $69.47 bill*ion in foreign direct investment.
Opening to the outside remains central to mainland China’s
development. Foreign-invested enterprises produce about 45
percent of mainland China’s exports (note though, the majority
of mainland China’s foreign investment come from Hong Kong,
Taiwan and Macau, two of which are under the administration of
the PRC), and mainland China continues to attract large
investment inflows. Foreign exchange reserves exceeded $800
bill*ion in 2005, more than doubling from 2003 and in November
2006, mainland China became the world’s largest holder of
reserves which exceeded $1 tril*lion.
There are nevertheless companies withdrawing from the mainland
Chinese market. Warner Bros., for instance, withdrew its cinema
business in mainland China as a result of the regulatory
restrictions that ban foreign investors from controlling joint
ventures in the Chinese mainland. The regulation requires that
Chinese mainland investors must own at least 51 percent stake or
play a leading role in their joint ventures with foreign
investors.
As usual, the full story is available from…
