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China Commercial Brief - August 5, 2005

U.S Commercial Service - American Embassy, Beijing
Vol. 2 No. 179

The China Commercial Brief is a biweekly publication featuring 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.

For additional CS China news and events including past issues of the China Commercial Brief, visit our News & Events Archives.

Editor: Matt Gettman
Contributors: CS Guangzhou, Peining Zhao, Baochun Mei, Ling Wang, Shuyu Sun

News Briefs

In addition to the article summaries provided by CS Beijing, 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 • Guangzhou post.

1. Guangdong To Build The Largest Petrochemical Industry Base in China

According to the Petrochemical Industry Development Plan affecting Guangdong Province for 2005-2010, recently released by the Guangdong Government, within the next five years, Guangdong will invest USD 22.2 billion (RMB 180 billion) to build or expand five oil refineries and five ethylene projects. The projects will include the expansion of three oil refineries with capacities of 10 million tons each that will be funded by SINOPEC with separate locations in Guangzhou, Maoming, and Zhanjiang. There will be one new oil refinery in Huizhou with capacity of 12 million tons that will be funded by CNOOC, and three on-going ethylene projects in Maoming, Huizhou, and Guangzhou. Under the plan, there would be five large petrochemical bases along the coastal areas of Guangdong, namely Huizhou Daya Bay petrochemical area, Maozhan heavy chemical area, Guangzhou petrochemical area, Ya-Men-Kou heavy chemical area, and Chao-Shan-Jie petrochemical area.

It is estimated that these projects will increase Guangdong's oil refining capacity to 63 million by 2010 and 100 million by 2020. The annual output value of petrochemicals by then would reach USD 90 billion (RMB 730 billion).

(Source: News Express, Jun/ 29/2005,- Prepared by CS Guangzhou)

2. China will be a leader of world’s machine tool industry

China’s domestic demand for machine tools will reach a record high this year as China steps up efforts to achieve its goal of becoming a leader of the world's manufacturing operations. China’s spending on machine tools is expected to hit about USD10 billion (RMB 81.1 billion) in 2005. Last year, the figure was USD9.46 billion (RMB 76.72 billion), making China the world's largest machine tool consumer and importer for three successive years. Robust growth in the aerospace and aviation, automobile, power equipment manufacturing, ship-building, metallurgic and petrochemical equipment manufacturing sectors, as well as many other industries has lead to sustained high demand for machine tools, especially advanced computer numerically-controlled (CNC) machine tools.

The strong growth has made China a lucrative market for the world's machine tool manufacturers, contributing much to the development of the global machine tool manufacturing industry. For instance, China imported USD8.65 billion (RMB 70.15 billion) worth of machine tools in 2004, recording an increase of 45.24% over the previous year. While maintaining the sustained growth of imports of advanced machine tools and tools from abroad, China has also made great progress in the development and manufacturing of CNC machine tools. In 2004, the country turned out 51,861 units of CNC machine tools, representing a rise of about 50% over the previous year.

(Source: China Machine Tool & Tool Builder’s Association, July/2005 – Translated by Peining Zhao)

3. China to devote great efforts to developing ultrahigh-voltage power grid network

China will devote great efforts to developing an ultrahigh-voltage power grid and will target completion of the project by 2020, according to the State Power Grid Corporation, the largest power grid owner and operator in China.

A 500-kilovolt alternative current and ±500-kilovolt direct current system, with the maximum power transmission distance of 750 kilometers, represents the existing power grid in China. The ultrahigh-voltage power grid with the 1,000-kilovolt alternative current and 800-kv direct current system as the main framework, will have a power transmission distance of 1,000-1,500 kilometers, which may satisfy the demand for better power. As the ultrahigh-voltage power grid is put into operation, it may save the installed generating units up to 20 million kW thereby reducing 20 million tons of coal consumption.

By 2020, the ultrahigh-voltage power grid will transmit more than 200 million kW of electricity, accounting for 25 percent of the total national installed capacity.

(Source: China Electric Power News, 07/30/2005, - Translated by Baochun Mei)

4. Four Ministries Jointly Push Utilization of Scrap Tires

Officials from the China National Development & Reform Commission (NDRC), Ministry of Communications, Ministry of Construction, and Ministry of Education, along with experts from state enterprises and relevant research institutes had a further discussion in Tianjin on the utilization of scrap tires, the related technologies and policies.

In recent years, production of scrap tires in China has increased dramatically. The total production in 2004 reached 112 million tires. It is estimated that the production will exceed 200 million tires in 2010. In the meantime, China has become the No.1 rubber consumption country for 3 consecutive years. China’s rubber consumption in 2004 reached 4.35 million tons, which accounted for 22% of the world rubber consumption. However, China lacks rubber resources. Therefore, China’s rubber imports in 2004 were 2.375 million tons; i.e. over 50% of rubber demanded by Chinese market needs rely on imports. Among the total rubber consumption, 70% will be used for tire production. This demand has raised the interest in using scrap tires. How to recycle and economically utilize scrap tire without jeopardizing the environment has become a very important issue.

The NDRC has initiated the industrialization of scrap tire utilization and drafted “Administrative Regulation on Scrap Tire Recycle and Utilization”. That will be the first regulation on scrap tire recycle and utilization. For the time being, NDRC has approved 3 projects and one State Pilot Engineering Project.

The Ministry of Education will research on how to make full use of scrap tires as resources and provide theoretical, methodological and technical guidance on scrap tire recycling and utilization.

The Ministry of Communication will focus on the development of new application fields of scrap tire recycling and utilization; i.e. the application of asphalt, which is made of scrap tire powder, for road construction. The Ministry of Communication has chosen sample roads with total lengthes of 30km in Guangdong, Shandong, Hebei, Sichuan and Guizhou Provinces.

Meanwhile, the Ministry of Construction also conducted a research on application of asphalt, which is made of scrap tire powder, on the city road construction as well as its research and application in building construction and building materials.

(Source : China Chemical Industry News, 07/04/2005, - Translated by Ling Wang)

5. Specific Administration on Advertisements of Drugs, Medical Devices, and Health Food

The rate of publicizing advertisements on illegal drugs, medical devices and health food has remained high, and in turn, caused a severe public reaction. This year the SFDA is determined to carry out specific administrative measures to strictly regulate the release of advertisements of these products. SFDA is targeting the following actions that go against the “Drug Administration Law” and the Advertisement Law”: promulgating prescription advertisements on the mass media, promulgating advertisements of drugs and medical devices without authorization, changing the approved content of the advertisements, exaggerating the functions of drugs and medical devices, using the image of experts, doctors or patients to propaganda the curative effects, exaggerating the curative effects with words like “ the newest” or ”the best” and such absolute words, distorting or using expired advertisements’ sanction numbers and propagating the medical function of health food.

(Source: China Pharmaceutical Newsletter, No.3, 2005, - Translated by Shuyu Sun)

Consulate News: Guangzhou
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 Guangzhou.

FedEx New Asian Hub in Guangzhou

On July 13, 2005, Consul General Edward Dong, Econ officer Jim Turner, PCO Mike Murphy and SCS Lena Yang, witnessed the signing of a contract between FEDEX and the Guangdong Province, officially moving their regional hub from the Philippines to Guangzhou China. Both will invest in the new facilities that will be built at Guangzhou's new airport, Baiyun. Heavy media coverage, along with senior representatives from government and industry saw Chairman Fred Smith and Governor Huang Huahua sign the agreement scheduled to be implemented by next year.

For more information on CS Guangzhou and the Guangzhou consular region, visit our website at http://www.buyusa.gov/china/en/guangzhou.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.