April 2006

Quarterly Issue No: 2/2006

NEWSLETTER

This Newsletter is distributed quarterly, free-of-charge, to clients of International Business Center (IBC), and to other parties that have requested it. It is essentially newsworthy items regarding trade in Hong Kong and China, as well as IBC specific news.

CONTENTS

News from IBC

World's freest economy draws record foreign business ventures

Official expects China’s foreign trade to grow 15 to 20 percent in 2006

Ten features in China's 11th five-year plan

News From IBC

Hong Kong Holidays

Public holidays this quarter are:

5 April Ching Ming Festival

14 – 17 April Easter Holiday

1 May Additional General Holiday for Labour Day

5 May Additional General Holiday for The Buddha’s Birthday

31 May Tuen Ng Festival (Dragon Boat Festival)

Staff News

Linda Lam joined IBC in August 2005 and is working initially in Reception. She will also work as secretary to some of our clients.

Amy Ng has been promoted to Assistant Manager in March - - we all congratulate her and wish her all the best.

Travel

David has a tight travel schedule this quarter, and will be in Manila, Beijing and Kuala Lumpur several times, plus trips to London, Guangzhou, Skopje, Podgorca, Dushanbe, and Tashkent.

Web Site

For those who do not already know, we have a web site at www.ibchk.com where you can find full details of our services.

World's freest economy draws record foreign business ventures

The Year of the Dog got off to a roaring start with Hong Kong being voted the world's freest economy for the 12th consecutive year by the Heritage Foundation.

The 2006 Index of Economic Freedom Study found that out of 161 economies worldwide, Hong Kong ranked first in six broad factors, namely trade, monetary policy, foreign investment, banking, finance, property rights, and regulation.

Hong Kong also had one of its best years for attracting foreign companies to set up operations in the city, with investors putting in nearly HK$9 billion (US$1.15 million) last year. Invest Hong Kong, the government's investment promotion arm, assisted 232 foreign companies to establish or expand their presence in Hong Kong in 2005, a rise of 13 per cent compared to 2004, itself a record year.

Invest Hong Kong's director-general Mike Rowse noted that foreign investments were made in different sectors including consumer products, sourcing, financial services, tourism, IT, multimedia, professional services, transportation and manufacturing.

Global giants move in Foreign companies such as UK home improvement retailer B&Q expects to invest HK$200 million (US$26 million) to open its first store in the city in 2007. Global restaurant chain KFC plans an additional HK$150 million (US$19 million) to expand its number of outlets from 52 to 90 by 2009.

Mr Rowse is confident that 2006 will be another year of growth for investment promotion in Hong Kong. "We are targeting to assist between 240 and 250 companies this year. The target is challenging but we are confident."

Upbeat sentiments were also reflected in the recent Business Outlook Survey conducted by the American Chamber of Commerce (AmCham) in Hong Kong. The ACNielsen survey found an overwhelming majority of AmCham member companies strongly believe in the strength of Hong Kong's economy and business environment conditions, with the majority planning for growth for the next three years.

"The positive feedback can be credited to Hong Kong's ability to provide an excellent platform for conducting business and a world-class commercial hub for the region," the survey noted.

Banking sector strong

Hong Kong's banking system was in good condition in 2005 and will continue to show healthy growth despite keen competition and an uncertain interest rate environment, said Monetary Authority (HKMA) Deputy Chief William Ryback.

He expects interest margins to continue to do well and their earnings in the first half of this year to show "reasonable growth" given the strong underlying economy.

Other positive indicators included record figures for passenger throughput, aircraft movements and cargo at Hong Kong International Airport (HKIA) last year. Due to a surge in transit passengers and visitors, passenger throughput rose nearly 10 per cent to 40.74 million in 2005 when compared to 2004.

Robust demand for intra-regional trade with the US and Europe saw cargo rising 9.9 per cent over 2004 to 3.4 million tones, while aircraft movements rose 11 per cent to more than 263,400.

© Hong Kong Trade Development Council

Official expects China’s foreign trade to grow 15 to 20 percent in 2006

The growth rate of China’s foreign trade in 2006 may not be as rapid as last year’s but it is still expected to increased between 15 percent and 20 percent, an official with the Ministry of Commerce said.

The total volume of imports and exports will reach 1.63 trillion to 1.7 trillion U.S. dollars in 2006, according to Lu Jianhua, director of the Foreign Trade Department under the Ministry of Commerce.

China’s foreign trade volume totalled 1.4 trillion U.S. dollars in 2005, up 23.2 percent over the previous year, statistics from the General Administration of Customs show.

The country’s exports amounted to 762 billion U.S. dollars last year, up 28.4 percent year on year; and imports were 660.12 billion U.S. dollars, a rise of 17.6 percent.

China will continue to witness a large trade surplus this year, which will probably be lower than last year’s, Lu said.

Rocketing exports helped China post a trade surplus of 101.9 billion U.S dollars in 2005, an increase of 69.9 billion dollars from 2004.

Lu listed some unfavourable factors that may affect China’s foreign trade growth in 2006. These include the unbalanced development of the global economy, increasing trade friction, continued growth of the U.S. trade deficit and fluctuations of global exchange rates and trade policies.

New trade disputes between China and United States, the European Union will probably occur in textiles, auto parts, home appliances, chemical products and steel and iron products, he said.

China still faces a serious oversupply problem domestically, requiring many industries to find more export channels for their over-stocked commodities, he said.

A recent survey by the ministry shows that supply of 430 types of goods, 71.7 percent of the sample survey, exceeds the demand on the Chinese market, while supply of 170 other goods remains stable and equal to demand.

Despite these unfavourable factors, China’s foreign trade growth will continue to be the main driving force behind the economy, Lu said.

The world economy is expected to grow about 4.3 percent this year, and the demand from international markets will continue to expand along with China’s exports, he said.

Lu suggests Chinese companies enhance their technological innovation as well as research and development in order to beat competition in lower-cost countries.

Chinese companies should follow the international rules and use international rules to protect their own interests in dealing with international trade disputes, he said.

© People’s Daily Online

Ten features in China's 11th five-year plan

Minister Ma Kai and vice minister Zhu Zhixin of China's National Development and Reform Commission (NDRC) answered reporters’ questions at a press conference on the draft 11th five-year plan for national economic and social development.

As for the draft 11th five-year plan, which has been delivered at the Fourth Session of the Tenth National People's Congress (NPC) for deliberation, Ma Kai said the draft distinguishes itself from previous ones both in form and content.

1. Two strategic lines -- the scientific concept of development and the goal of building a harmonious society -- run through the whole draft outlines.

2. The goals proposed cover not only economic areas but also those concerning people's life, social development and environment. In particular, it is the first draft that classifies development indexes into prospective and restrictive.

3. In terms of strategic tasks, one whole chapter is specially devoted to discussing building a new socialist countryside, leading all the other tasks.

4. On the industrial sector, the draft plan makes clear that the five-year main task is not expansion in scale, but structural upgrading to turn China's big industry into a powerhouse.

5. As for the relations of the three industries, the draft outlines for the first time gives a highlighted chapter solely to the services sector.

6. On regional development strategy, it further makes clear the description and policy inclination for four types of function zones, namely, optimized, prioritized, limited development and banned exploitation.

7. The draft plan includes into it the two basic state policies of saving resources and protecting the environment, setting forth the strategic tasks of building a resources-saving, environment-friendly society as well as concrete measures to be taken.

8. The draft puts forward a few tasks of great significance and policy measures such as building an innovation-oriented country and implementing the strategy of developing the country with talents.

9. Contents on reform are seen throughout the draft.

10. Political civilization, cultural development and social construction are discussed in exclusive chapters. It puts special stress on putting people first and solving the significant problems that concern people's vital interests.

When answering what benefits will be brought to people through the implementation of the 11th five-year plan, Ma Kai said, the draft guidelines proposes that China's per capita GDP would top 2,400 U.S. dollars in 2010, when China would be more powerful in its overall strength.

With further economic development, people will find their pocketbooks more stuffed.

China's average urban per capita disposable income in 2010 would increase from last year's 10,493 yuan to 13,390 yuan, while rural per capita net income will rise from 3,255 yuan to 4,110 yuan.

45 million jobs will be created in urban areas and the same number of farmers will be trained to take up industrial jobs in five years.

People's life quality will be further improved with safer food, more convenient transportation, and public services offered to people in a more equitable manner.

The country will gradually improve its medical health system as a cooperative medical scheme will cover 80 percent of the country's rural areas.

People will enjoy better environment. The emissions of major pollutants will be cut by 10 percent and the forest coverage rate will be increased to 20 percent. An addition of 100 million people will have safe drinking water. The group of people with special difficulties will be better taken care of by the government and the society.

© People’s Daily Online

Disclaimer

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