Agriculture
PLA Becomes Business Powerhouse
China's People's Liberation Army is growing into an enormous business conglomerate. Heavy involvement in China's industrial, agricultural, and service sectors has earned the PLA the title "PLA Inc.". The army is also beginning to expand into the international market in Asia and North America. The PLA's declared profit in 1993 was $1 billion, on turnover of $6 billion, with unofficial profit estimates as high as $2 billion. The PLA's 50 conglomerates comprise some 15,000-20,000 companies and together account for almost 3% of China's GDP. This makes the PLA one of the most powerful entities, both politically and economically, in China. As a result many foreign companies, like US telecom giants AT&T, Motorola and Unisys, are seeking partnerships with PLA, hoping to benefit from the military's tax subsidies and advanced distribution networks. However, the PLA's rigid, military-style management may reduce its flexibility to market trends. The army's businesses are also beset with heavy financial burdens and corruption problems.
South China Morning Post (HK), 12/16/96
TVE Polluters Face Loan Cutoff
A senior government official reported that the Chinese government will cut off all state funding for township and village enterprises (TVEs) that are considered environmental hazards. A National Environmental Protection Agency (NEPA) official said that the State Agricultural Bank would call off all loans to enterprises targeted during a state clampdown on polluting industries. Although the TVEs accounted for more than 40% of industrial output last year, their low technology and inefficiency makes them some of China's worst sources of pollution. China has ordered the closure of more than 70,000 small mines, paper mills, tanneries and refineries for polluting the environment. The NEPA official said that threats to revoke business licenses, cut off power supplies, or detain managers on criminal charges would also be used to bring polluting TVEs into line.
South China Morning Post (HK), 12/17/96
Chinese Bank to Boost Rural Economy
The Agricultural Bank of China will inject $6.5 billion into rural agriculture and enterprises in 1997, an increase of $1.26 billion over last year, said He Linxiang, the bank's vice president. The investment will mostly go toward irrigation and agricultural industrialization projects. About 150 profitable rural firms that produce exports will be financed.
China Daily (PRC), 01/13/97
The Costs For Cleaning the Environment are Mounting
According to the China Environment News, the Chinese Academy of Social Sciences estimates that economic losses from environmental pollution are about $12 billion a year. These figures are more than 30 times China's environmental protection budget. It is believed that the most damaging losses are occurring in agriculture.
China Economic Review (Hong Kong), 01/01/97
Government Raises Grain Procurement Levels
Despite last year's bumper harvest of 480 million tons of grain, officials are planning to increase grain procurement quotas this year. After an official four day meeting to discuss agricultural production, the decision was made. Officials have agreed to increase the 1997 procurement volume by 20 million tons. This will make the new level 110 million tons, sources said. "The party central office does not want to see farmers leaving their farms because of the bumper harvests, even though grain prices are likely to fall because of the increase in supply," one source said. Banks have been directed to make funds available for investment related to grain. Efforts will also be made to increase storage capacity to deal with the rising volumes. Food related companies will now also be allowed to purchase grain in provinces where there are good harvests, instead of only their own province.
South China Morning Post (Hong Kong), 01/18/97
Agriculture to Receive More Investment
During the Ninth Five Year Plan Period (1996-2000) agricultural development will absorb around 20 percent of the Chinese government's budget. The investment in capital construction sector will increase $96 million over 1996 as well as a $60 million increase in irrigation. Around 20 grain production centers will cost China $120 million during this time.
China Economic Information (PRC), 01/21/97
China to Do Away With Chemical Fertilizer Subsidies
In order to create an environment of "equal" competition for competition in domestic fertilizer enterprises, China will dismantle chemical fertilizer import subsidies sometime in the near future. The fertilizers imported will be contingent upon the demand for agricultural production. The new regulations will also put emphasis on strengthening the administration of chemical fertilizer import quotas, banning anyone from scalping quotas.
China Economic Information (PRC), 01/23/97
Enterprises That Pollute Have Bank Loan Privileges Revoked
The Agricultural Bank and the National Environmental Protection Agency announced yesterday that enterprises with hazardous pollution problems will not be granted loans. From this date forward, only enterprises that strictly abide by State policies on industry and the environment will receive loans, according to a notice issued by the bank and Nepa. The notice warned that local branches of the agricultural bank who give loans to the banned factories will receive punishment.
China Daily (PRC), 01/24/97
Research Group Says China No Threat to World Grain
An agricultural research group recently said that China's demand for grain will not threaten world grain supplies, but would rather be a great opportunity to grain exporting nations. The report by the International Food Policy Research Institute said that China's imports of grain will reach record highs but its production would rise at the same time, which would prevent worldwide shortages and increased prices. Wheat and corn exporting nations, such as the United States, Canada, and Australia would benefit, the report said. It concluded that China's demand for grain will total 450 million tons in 2000, and then rise to 513 million tons in 2010 and 594 million tons in 2020. Simultaneously, domestic production will rise to 420 million tons, 486 million tons and 570 million tons respectively. This means that China's imports of grain will reach 24 million tons in 2000, 27 million tons in 2010 and level of at 25 million tons in 2020.
South China Morning Post (Hong Kong), 02/12/97
New BOT Measures to Go Into Effect
Under an experimental package of reforms focused on boosting business interest in China, foreign companies will have greater control over investment projects in 1997. On Tuesday, the State Planning Commission laid forth plans to allow foreign companies to invest in China under the build, operate, transfer scheme. The BOT investments will be allowed for infrastructure projects such as highways, bridges, and water supply plants. If the new experiment succeeds, the BOT method of investment would be expanded to other sectors which were previously denied to foreign control. The SPC will also give "special permission" investment in some now closed sectors. Priority will be given to agriculture, transportation, energy, environmental protection and other important industries. However, the commission has not given a date when this would take effect.
UPI (U.S.), 02/11/97
Rigorous Pollution Controls for Township Enterprises
Although officials say that huge financial losses may result, China is warning that it will enforce stringent pollution controls on township enterprises. This would impose pollution checks on the fastest growing sector of the country's economy. There are 23 million locally-owned mines, mills and factories that are driving China's industrial reforms that will have checks placed on them. This sector of China's economy reported value-added output of $213 billion in 1996, one-third of China's total economy. As a result of the huge discharges of pollution they create, Beijing's Township Enterprise Bureau said the sector "poses a threat to agricultural development. While township enterprises contribute half of the country's industrial production, they disgorge one-fifth of the country's waste water, gas and residue." The regulations come three weeks after state-run banks announced that township enterprises cited as environmental hazards would receive no new credits.
South China Morning Post (Hong Kong), 02/13/97
Credit for Major Technical and Agricultural Projects
This year China will give priority to loans for projects in agriculture, large and medium state enterprises, technical renovation, housing, machinery and electronic exports, environmental protection and inland development. Agriculture remains the top consideration of the financial sector. Around 10 percent of state loans will go to agriculture, according to government plans.
China Daily Business Weekly (PRC), 02/16/97
China Imports Less Grain in 1996
The Ministry of Agriculture's Information Center said that China is cutting the amount of grain imports and exporting more of their crops. The report said that China imported 12 tons of grain in 1996, a 42 percent drop from the previous year. Exports of grain actually increased 42.3 percent to 1.43 million tons. The Europens Union's new tariffs on wheat and flour contributed to China's decreased imports. As a result, wheat imports were down 28.3 percent at 8.3 mililion tons. Tax rebates to foreign traders were down to 3 percent last year which dampened enthusiasm for exports but allowed the Chinese government to save more grain in its reserves. Imports of wheat were 8.3 million tons in 1996 while imports of corn accounted for 440,00 tons; rice - 761,000 tons; soy beans - 1.11 million tons. China also decreased its imports of cotton, cooking oil, sugar, fertilizers, seafood and meat products. However, products such as fresh vegetables, fruit and eggs have increased. China's agricultural produce trade had a trade surplus of $4.64 billion last year, but trade volume decreased 11.8 percent from the previous year. Agricultural exports equalled $14.14 billion, down .14 percent while imports dropped 10.8 percent at $9.5 billion. The United States remained the largest supplier of agricultural products to China while Australia was the second largest with a 90 percent increase over the previous year.
China Daily Business Weekly (PRC), 02/16/97
State Investment in Key Sectors During Ninth FYP
Key sectors such as agriculture, light industries, pillar industries, basic industrial construction and the tertiary industry will be listed as preferential sectors in China's Ninth Five Year Plan (1996-2000), according to Chen Jinhua, head of China's State Planning Commission. State investment will reach $1.08 trillion with $614 billion going to the national seven key sectors. The state will increase investment in agriculture in the construction of water conservancy facilities, develop agricultural technology, develop the national fertilizer industry and upgrade the forestry industry. The investment scale for agriculture will be $34 billion, $24 billion of which will go towards water conservancy. In the energy industry, emphasis will be placed on the utilization of electricity and coal. State investment will increase to $241 billion, equal to the total investment of the previous decade. The country's transportation capacity will be improved significantly over the period. Communications will also be improved. The state will invest $137 billion in the development of these two sectors. The investment scale for the petrochemical, automobile, electronic and machinery industries will reach $55 billion, $33 billion, $54 billion and $60 billion respectively.
China Business and Investment (PRC), 02/01/97
China to Increase Beef Production to Decrease Reliance on Grain
Jia Youling, a senior official of the Ministry of Agriculture said that in order to cut grain reliance China is putting great efforts in producing more beef, mutton and poultry to replace pork as the dominant meat in the Chinese diet. The country's per capita meat consumption will reach 55 kilograms by 2000, an increase of 5 kilograms from 1996. Pork production will likely decrease to 40 percent from last years 68 percent of total meat production. Jia said that because cattle, sheep and poultry generally eat grass, bran and straw rather than grain, the switch will be made. Guo Tingshuang, a division director of the animal husbandry department said he reason for the switch is that if China substitutes grass for grain as livestock feed, it will not need to rely so heavily on imports to supplement its food shortage in 30-40 years. "Only through decreasing the grain use of the animal feed industry, China can succeed in feeding its huge population although the annual birth rate is 15 million people and their farmland size is limited," he said. About 150 million tons of grain are used each year for animal feed.
China Daily Business Weekly (PRC), 03/02/97
Foreign Investment in China's Chemical Sector
As there is not much land allocated for non-agricultural use in China, it cannot produce many natural products and must depend more on synthetic substitutes. Demand for plastics, artificial fibers, pesticides, artificial rubber, herbicides and fertilizers has grown dramatically as a result. The 1995 trade figures for chemicals in 1995 was about $27 billion, with $6 billion more in imports than exports. Opportunities for foreign companies to make direct investments in the sector have been abundant, according to EIU's Multinational Companies in China. The Ministry of Chemical Industry said they would like to see the current foreign investment of $5.1 billion double by the year 2000. All companies that intend to invest more than $30 million need central government approval whereas projects under $30 million do not as they are handled at local levels. Many companies have chosen the later as the large investments can drag on for years. Recently, multinational companies have also been very concerned about the limited intellectual property rights protection they receive as there is widespread infringement. The WTO is also a cause for worry. At first, many foreign chemical firms invested in China because high import tariffs for capital equipment makes domestic production attractive. If China enters the WTO, these foreign firms worry that tariffs could fall too quickly making less efficient investments just as profitable. Investing in China's chemical sector has now become difficult and costly as last years dropping of the exemption from import duty on capital equipment has increased the cost of a typical chemical venture by 25 percent.
EIU Electronic (U.K.), 03/04/97
Agricultural Targets for 1997 Issued
The major targets for China's agricultural development in 1997 were recently announced as follows: 1.68 billion mu of grain growing acreage; 480 billion kg of grain output; 80 million mu of cotton growing acreage; 4.25 million tons of cotton output; 22.5 million tons of oil bearing crops; 86 million tons of sugar output; 62 million tons of meat output and 31 million tons of aquatic products output.
China Economic Information (PRC), 03/06/97
Agricultural Development Needs Healthy Fertilizer Supply
The demand for fertilizer will increase 3.6 percent over 1996 to reach 31.51 million tons, including 20.10 million tons for nitrogenous fertilizer, 7.16 million tons for phosphate and 4.25 million tons for potash. Stocks from last years as well as imports will support the market when supply is lacking. Last year, real-term demand was 29 million tons with production at 25.6 million tons. Year end imports reached 9 million tons, much higher than the country's need. In fact, the market is over stocked with foreign fertilizer. Around 6 million tons was put into stock in 1996. In 1997 the state will implement greater macro-control on imports. Except for the China National Chemical Supply Corp and the agricultural resources departments, no one will be allowed to sell imported fertilizer. Subsidies for imports have also been abolished. Industry analysts believe that China will require imports of 5 million tons of fertilizer annually. Imports should shrink before the end of the century.
China OGP (PRC), 03/15/97
Guangdong Gives New Incentives for Investment
Guangdong Provinces' position as the fastest growing part of China is being taken over by other parts of the country. For the first nine months of 1996 its growth remained flat for exports and direct foreign investment at $41.3 billion. During the remainder of the year it grew 7 percent to $9.3 billion which was below the national average for the first time since the 1970s. However, provincial officials do not appear to want to let their ship sink. There are signs that they are taking away some restrictions on trade, which may be of interest to foreign companies. Xu Dezhi, director of the Guangdong Provincial Commission of Foreign Economic Relations and Trade, announced several new measures at the provincial People's Congress. Some of the new rules will allow more Chinese companies in the Province's three SEZs to have foreign trading rights. If the companies have an office in a SEZ, $240,00 in capital and trading personnel they may now register as import/export agents. The province also has plans to stimulate the establishing of more JVs, Xu said. Nationally this is only possible in Pudong and Shenzhen if the companies meet almost impossible criteria. Guangdong intends to get around this restriction by having companies trade in only one product. Foreign manufacturers would also be given local treatment, cutting restrictions on domestic sales of FOEs. Some sectors, such as agriculture would have restrictions lifted entirely, beginning in Shenzhen.
China Trade Report (Hong Kong), 04/01/97
Structural Steel Shortfall Spurs Imports
The demand in China for structural steel this year should rise 5.72 percent over 1996 which will force the country to import 100,000 tons more. Industries such as machinery, shipbuilding, petroleum and agriculture will to increase consumption by thousands of tons this year. Presently, China is unable to form H-shaped steel production capacity and so needs to import it.
China Economic Information (PRC), 04/01/97
Tax Level Established for Trading Chinese Currency
The People's Bank of China has given confirmation that all foreign banks who are licensed to trade local currency in Pudong will pay 33 percent income tax. This is the common rate that foreign and domestic banks will now pay when doing yuan business. This means that Beijing has also reduced the rates from 55 percent to 33 percent for China's four state banks, Bank of China, China Construction Bank, Industrial and Commercial Bank of China and the Agricultural Bank of China. Foreign banks carrying out foreign currency business will still be charged 15 percent. "They will have to raise it to 33 percent for foreign banks to appease the domestic banks," said Johnson Cheng, deputy general manager of International Bank of Paris and Shanghai, one of the eight foreign banks that have been given permission to conduct yuan business. Since there are still severe restrictions on yuan trading, foreign banks don't believe they will make money in their first year of operation.
South China Morning Post (Hong Kong), 04/02/97
China to Hike Spending in Three Areas
Although China's austerity program aims at keeping inflation low, there are a few areas that China targets for growth in 1997. One area of increased spending will be in agriculture, rising 13.8 percent over 1996 to $7.1 billion. Education spending will also rise to $14.3 billion, an increase of 14 percent. Lastly, defense spending will increase by 12.7 percent to 9.7 billion.
Crossborder Monitor (U.K.), 04/04/97
China Adds to Record Harvest
In addition to China's previously announced record harvest production figures, the country has again revised the figure for last year by increasing the amount by another 10 million tons. The weekend, the State Statistical Bureau said that farmers produced 490 million tons of grain in 1996, a five percent rise over 1995 or several million tons more than reported in March. State planners credited the boost in grain crop to the "wide application of agricultural science and technology." Last years harvest was originally targeted to reach 470 million tons and then later upgraded. "Twenty million tons? That's some variation," one Beijing-based trader said. Chinese farmers have been told by the government that grain output must be raised to 500 million tons by 2000. Despite natural disasters, grain harvest figures have grown 10 percent in the last three years.
South China Morning Post (Hong Kong), 04/05/97