The Shanghai Lawyer
Vol. 1 , No. 04 - March 5, 2002
Shanghai is one of the most dynamic and fastest growing mega-cities in the world. It is quickly establishing itself as the leading financial and economic center of the Far East, on par with the likes of Paris and New York. The Shanghai Lawyer is a bi-weekly publication providing up-to-date newsworthy articles and legal information to professional and business persons around the world. We hope you enjoy the newsletter and welcome your comments and feedback.
Year of the Horse Seen to Bring 11th Double-Digit Growth
The local business community is betting Shanghai's economic growth will gallop at full speed during the Year of the Horse, despite many of its biggest export markets suffering from a global slowdown. With hard work, the city will record its 11th consecutive year of double-digit growth, local officials predict. "The government has injected a lot of money into infrastructure," said Zhang Youwen, deputy director of the Shanghai Academy of Social Sciences' Finance Institute. This year the city should start to reap the economic benefits of that investment, Zhang pointed out.
Signs of that investment are everywhere in Shanghai, from the world's first rapid magnetic levitation train line, which is set to open next year, to the numerous roads, tunnels and bridges currently under construction. The Shanghai government plans to spend 55 billion Renminbi (US$6.63 billion) on urban construction projects this year.
Much of the planned investment, which is 20 percent higher than last year's spending, will be used to complete projects already under construction such as the Lupu Bridge, the 98-kilomentre Outer Ring Road and three new suburban expressways. The money will also fund new endeavors, including a long-awaited deep-water port near the Hangzhou Bay, a second runway at the Pudong International Airport, and a massive revitalization of areas along the Huangpu River near the Bund.
Spending will jump even higher if the Paris-based Bureau of International Expositions chooses Shanghai to host the 2010 World Expo. That announcement, which will be made at the end of this year, could see the local officials spend a minimum of 21 billion Renminbi (2.5 billion US$) to revamp the city. Consumer spending will be another engine for the city's economic growth, according to Pan Jianxin, director of the Shanghai Statistics Bureau.
Retail sales in Shanghai these years are expected to increase 8 percent over last year, when local stores chalked up record sales worth 186.1 billion Renminbi (23 billion US$). Besides spending more on cars, food, consumer electronics, travel and services, locals are expected to spend more on housing, due to a new wave of urban construction, that will push many to relocate to new apartments.
The real estate sector will also be helped by government plans to introduce a long heralded housing subsidy policy, which will offer subsidies to public sector employees when they buy new homes. The Shanghai Real Estate Office predicts that home prices will rise this year, but not as much as they did in 2001. Last year saw the price for residential housing jump 10 %, while the cost of office space rose 1.2 %.
The government is also hoping for a robust performance from the industrial sector. Shanghai Bao Steel's third-phase expansion and a new production line at Shanghai General Motor are expected to generate output of 8 billion Renminbi (1 billion US$) this year. The economy is nonetheless saddled with problems the most pressing of which is the slumping export market. In 2001, the city failed to meet its goal of 10.4% growth for exports, so this year's target has been set at a relatively low 5 percent.
Local financial institutions are also facing a tough year, as foreign competitors can enter the market more freely under the country's WTO commitments. Many foreign banks have already filed permission to deal in the local currency following the central bank's announcement of detailed rules governing overseas financial institutions last month.
(Source: Shanghai Daily)
Shanghai to Create 100,000 Jobs
The Shanghai Labor and Social Security Bureau promised to create at least 100,000 jobs, 30,000 more than the original plan, and implement back-to-work programs in an attempt to curb the city's growing unemployment rate.
The bureau plans to select 50 companies will-known for good management policies for initial placements next month. The government will buy insurance for trainees including liability insurance, and assist to pay salaries to the companies where trainee are placed. The bureau will also start a warning system monitoring the number of unemployed according to surveys and investigations rather than merely using registration figures.
The bureau estimates this year's registered unemployment rate will be 4.8 percent, up 0.5 percent from last year. According to bureau expectations, the rate will continue to rise for the next few years. The rising unemployment rate is an indication of lay-offs relating to the closing of inefficient State run companies. The good news is that it is believed that in the long term, the establishment of better managed private companies will off-set the lay-offs.
(Source: Jiefang Daily)
Shanghai Essentials
The Shanghai Jinqiao Export Processing Zone was approved in April, 1998 to attract hi tech foreign export manufacturers. It is located in the middle of Shanghai Pudong New Area and contains a hi-tech industrial park and an international residential community. Many Fortune 500 companies have established manufacturing facilities in the Zone. Jinqiao has excellent physical infrastructure as well as services including finance, trade, commodity inspection, custom declaration, warehouse, transportation, and research & development. The residential community provides modern expatriate housing, schools, supermarkets and recreational facilities. Preferential tax treatment is available to companies offering corporate tax rates less than half what is normally paid in China. Products manufactured for export are exempt from import and export duties and import-related value added tax. Due to these many advantages, the Jinqiao EPZ should be strongly considered as a location for establishment of manufacturing operations in China. |
Shanghai City Imposes Strict Family Planning
Shanghai will enforce stricter control of technologies used in family planning services, stop illegal gender-checks of fetus and reduce unplanned births among the migrant population. However, the city's Family Planning Department also reported they would lessen punishment for unplanned births. Family Planning officials stated the "more practical and feasible approach" to birth control will be introduced under a revised local regulation to be adopted after China's first law on population and family planning takes effect on September 1, 2002.
Lawmakers and health officials are now doing field studies and research to map out the new version. This will be the fourth amendment since the city issued its own regulation on family planning in 1990. The last amendment was made in 1997. "The city is revising the regulation to bring it in line with the new national law, which is a milestone for family planning in this country," said Wei Longgeng, spokesman for the Shanghai Population and Family Planning Commission.
The regulation, with seven chapters and 47 articles, contains policies on population development, birth control, social guarantees, technological service for family planning and legal responsibility. The new version of the local regulation will provide a comprehensive outlook on birth control, including additional restrictions on technology adopted in family planning service, fairer treatment for families with unplanned children and stricter administration of the migrant population.
For instance, the law rules that it is illegal to check the gender of the fetus using ultrasonic equipment. But Shanghai, with its advanced medical standards, has other means to do so, the official said. "Our revised regulations will take care of more aspects like these," Wei said.
While retaining the one-child policy as the cornerstone for family planning, the national law clarifies that couples can have a second child under certain circumstances. Every province can have its own guidelines on this issue. Under the new regulations, parents in Shanghai whose first-borns are non-hereditary handicapped, or when both the parents hail from one-child families may, after paying about 100,000 Renminbi (US$12,000) for the so-called "social expenditures" to the government, have a second child.
In the past, the child and the parents would suffer in other ways apart from the payment. For example, the child could face problems going to school or finding a job. The parents would receive less welfare, or their chances of promotion could be far less, compared to those who have one child. "These kinds of restrictions will be removed in the revised rule. After paying the money, both the child and the parents can enjoy the same rights as others," Wei said.
He scoffed at claims that the ruling was nothing but a relaxation of curbs on unplanned birth. "The employers and the neighborhood committees will face punishment if their employees or residents violate family planning laws. It will be up to them to try and persuade the couple to go for an abortion if it is found that the pregnancy does not conform to the policy on having a second child," he said. "But that is not the main problem. The important thing is how to control the movement of the migrant population and the unplanned births among them. In the new regulation, more detailed rules and management measures will be issued," Wei said.
Officials, however, admitted that it is difficult, if not impossible, to enforce the one-child policy among migrants. The new regulations will push for the establishment of a tracking system to register migrants. Health workers and neighborhood committee staff will be asked to give regular lectures on birth control, launch strict supervision and provide the same service for them as permanent residents, such as distributing contraceptives and offering consultation from time to time.
The city's population has maintained a negative natural growth rate for the past nine years. The present birth rate is 0.55 percent. Last year, about 69,400 children were born in Shanghai with a total population of 16.7 million.
(Source: Shanghai Daily)
Shanghai is City of Choice for Young People
Shanghai has become the traveling and residential paradise for many Chinese people, and it's especially popular among the younger generation, a nationwide survey indicates. Nearly two-thirds of people younger than 19 say Shanghai is their favorite city in China. Of the whole population surveyed, the percentage is lower, but still near the 50 percent level.
The survey, conducted by a local data research company, Datasea, the results came from 1,232 random samples they collected during February 2002, in three major cities, Shanghai, Beijing and Guangzhou. A wide range of questions grouped into seven categories including people's life, the country and the Spring Festival were asked. Among the questions, were some asking about people's attitude towards different cities in China.
On the whole, most people say they love the city they were living in most. But the percentage varies between cities. Eighty-five percent of the Shanghai residents say they love Shanghai most, 79 percent of the Beijing residents choose the capital city as their favorite, and only 50 percent of Guangzhou people say their favorite city is the one they live.
Of the people who choose non-native cities as their favorites, Shanghai also enjoys the highest rate of approval. Apart from a small portion of Shanghai residents who say they love Beijing most, the vast majority of Beijing and Guangzhou residents who chose another city as their first favorite chose Shanghai. Among the people below 19years old, 61percent say they love Shanghai most.
The survey also tracked the reason why most people would choose Shanghai as their favorite. In their eyes, Shanghai is first considered a metropolis that integrates fashion, beauty and good taste. Secondly, it is cited as an ideal city to reside in with respect to quality of life. The many new and fashionable urban districts in the city were the third main reason for choosing Shanghai.
(Source: China.biz.com)
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German Media Giant Bertelsmann to Enter Chinese Market
German media giant Bertelsmann signed a letter of intent to establish a joint venture company with the Shanghai Packaging Group and the Shanghai Printing Group. The corporation will provide printing services for books, magazines and newspapers, and the packaging industry. Bertelsmann further plans to break into the still tightly-regulated media market by entering the television, radio and e-commerce sections, several media outlets reported.
Bertelsmann will take a 50 percent share in the joint venture company, which according to the German firm will make it one of the largest in the mainland printing market. Bertelsmann will invest US$ 29 million in the first stage, with estimates of further investment ranging from US$ 145 million to US$ 500 million in the coming years. Bertelsmann has already been in the Chinese market for eight years.
Although not formally mentioned in the bilateral agreements on the WTO, the Chinese government has put severe pressure on the Chinese media industry to prepare for more foreign competitors in the Chinese market.
This project shows once again that although Chinese regulations exist that prohibit foreign investment in the Chinese media industry, overseas media companies are able to circumvent in gaining footholds in the local market. Major foreign players like News Corporation and AOL Warner have managed to gain similar access on previous occasions.
(Source: Chinabiz website)
Sinopec trims 20,000 staff
China Petroleum & Chemical Corp., Asia's largest oil refiner, plans to cut 20,000 jobs this year, 5 percent of its work force, to boost efficiency and trim costs.
The move is part of a five-year plan to cut 100,000 workers, Sinopec says. Last year more than 50,000 employees were let go after being offered two-and-a-half-month's pay for every year served at the company. Sinopec has to improve efficiency to compete with overseas giants like Exxon Mobil Corp. and Royal Dutch/Shell Group, as China pledged to open up its fuel market after China's entry into the World Trade Organization. Even after completing its staff retrenchment program, Sinopec will have some 400,000 workers, about four times as many as Exxon Mobil, the largest oil refiner.
(Source: South China Morning Post)
State Owned Shares: to Sell or not to Sell
Beijing's plan to sell State shares to finance its social security system might be revived very soon, state media report. A meeting has been planned between ministers involved in the sale resulting in investor confidence sinking reported the China Daily.
The Shanghai Stock exchange market has dropped about 40 percent from its June 14 record high of 2245 to a mere 1358. The speculation has also brought down the Shenzhen stock market to half of its rate after the securities regulator CSRC announced a plan to sell ten percent of the shares of listed enterprises held by the government.
On average, 70 percent of the shares in listed companies are non-tradable shares held by the government. The plan to sell a part of them had to be shelved in October of last year as the value of shares kept dropping. Economist Dong Fureng called the heavy falls in the market "extremely unfavorable for economic development," as it not only leads to heavy losses for investors, but also negatively affects the introduction of new shares, corporate financing and consumption. For the present time, the most critical problem is how to restore investors' confidence, he said.
The China Securities Regulatory Commission drafted some incentives over the past few months. However, they can "only ease the declining momentum, not reverse the trend", said Wang Tao, analyst with Southwest Securities.
State departments kept their thoughts behind closed doors but calls for salvage policies are increasing. "With the market sliding to such a low level, it is time for the government to take a stand," said Wang Hong, a researcher with the State Information Centre. As an example, Wang mentioned the US Government's reaction to jointly renew the effort in market confidence after the September 11 terror attacks.
Other important financial issues like possible interest rate cuts, dealing with foreign financial institutions waiting for post-WTO regulations and other hot issues might also be on the agenda of top-level meeting for coming weeks.
(Source: South China Morning Post)
Foreign Travel Agencies Given Green Light
Shanghai will allow major foreign travel agencies to become controlling shareholders in joint ventures beginning this month, the Shanghai Tourism Administrative Commission announced yesterday. Currently, there are no joint-venture travel agencies in the city, but officials would like to see one or two established by the end of this year. The city may even allow wholly owned foreign travel agencies to set up in town before 2005, the date China promised to open the travel business as part of its bid to enter the World Trade Organization.
At present, there are about 10 joint-venture travel agencies in other parts of the country. Setting up a joint venture is still a long way off for many local companies. "We have just decided to transform from a state-owned company to a listed company and have not considered setting up a joint venture yet," said Chen Jisheng with Shanghai Spring International Travel Service Co.
"Shanghai's tourism industry is still at the elementary stages in terms of service, management and profit compared to the industry in developed countries," said Ma Xueping, an associate professor with the Shanghai Tourism Vocational School. Ma predicts that joint ventures will do better than wholly foreign-owned companies because they will have a better understanding of local culture, an important ingredient for success in the tourism market.
(Source: Jiefang Daily)
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