China has opened all areas where private capital was once banned, a demonstration of its efforts to perform its commitments to the WTO and implement the policy of stimulating domestic demand.

The acquisition by the Zhejiang based Junyao Group of the Three Gorges airport and an 18% share of Wuhan Airlines marked this event.

The country used to shut the door to private capital in nearly 30 industries, especially infrastructure, new services and large manufacturing. Now Beijing has allowed private capital into all areas other than those that hold the lifeline of the economy, including banking, telecommunications and tourism. In a speech last week Chinese premier Zhu Rongji said that the government should "expand the areas open to private capital and create an environment for fair competition among all types of market players".

The opening of the restricted areas to private capital is the natural outcome of the rising political status of personages in the private sector. A growing number of business people from both state-owned and private sectors entered China's top political arena when it was announced that 33 leaders from major state-owned enterprises and 65 representatives from China's private sector and other non-public-owned firms would be present at this week's 10th CPPCC National Committee, the country's top advisory board.

Upon his arrival in Beijing, Xu Guanju, president of a large chemical manufacturing plant in Zhejiang province, urged all his fellow business people to contribute more to China's future development by "sharing more worries with the state."

Foreign banks prompt fierce competition

China is expected to witness greater competition between domestic and foreign banks in the near future. Around 2.5 million people are expected to become online banking customers.

Foreign banks such as Bank of East Asia and Citibank have given great attention to the development of their online banking businesses in China. However, only about 50 domestic bank branches have opened online banking business. They only had 1,000 individual and enterprise online banking customers.

Last year HSBC took an 8% stake in Bank of Shanghai for 517 million RMB. Other banks have struck similar deal and bought stakes in the Everbright Bank, Nanjing City Commercial Bank, Xi'an City Commercial Bank and Shenzhen Commercial Bank.

As more and more foreign banks are allowed to deal in RMB business, competition for local companies is becoming increasingly stronger. By the end of September last year, 45 foreign banks were approved by the central People's Bank of China to deal in RMB business. Foreign banks' RMB assets had reached 47.8 billion yuan by that time.

By the end of 2002, foreign banks were allowed to deal in RMB business in nine cities across China - Shanghai, Tianjin, Dalian, Shenzhen, Qingdao, Nanjing, Wuhan, Guangzhou, Zhuhai. As their business expands in an all-around way in the coming years, foreign banks will offer higher salaries and other favourable treatment to compete for quality personnel, perhaps looking to recruit top staff from domestic institutions.

The successful listing of the Bank of China (Hong Kong) was a good example for domestic banks to improve their corporate governance, though the government should also try to reduce their tax burden. Domestic banks should try to attract more quality personnel, establish risk-control mechanism, improve the internal controls and speed up adjustment of their business and personnel structures.

Shanghai Number One for Salaries

Shanghai has for the first time surpassed Shenzhen to take top ranking for white-collar salaries in China.

According to statistics, annual white-collar salaries in the city averaged 49,000 yuan (US$5,900) last year.

The third and fourth places were respectively taken by Beijing and Guangzhou.

Electronic communication still ranks top of all trades in terms of salary. Medical equipment, food and beverages have also witnessed rapid increase over the past year. Proficiency in foreign languages also has a great influence on individuals' salaries.

Source: Shanghai Star, March, 2003.

Zhu Rongji Lists a Legacy of Problems

Making his last annual work report as China's premier, Zhu Rongji said economic growth target of 7% in 2003 was necessary and achievable, after 8% in 2002.

He identified the main problems that he left behind for the next administration: weak domestic demand, the inability of the supply structure to respond to changes in demand, slow growth in farmers' incomes, the rise in unemployment, income inequalities, tough reforms for state-owned industries, industrial accidents, poor public security in places, degradation of the environment and waste, red tape and "extravagance" by officials.

Addressing the opening session of the National People's Congress, he said developing the rural economy was the top priority for the next five years. Corruption and the growing wealth gap between cities and the countryside, where 70% of China's 1.3 billion people live, were deeply dangerous, Zhu said.

Reflecting concern about government debt, he said treasury bonds to finance long-term construction would be cut to 140 billion renminbi ($17 billion) in 2003.

Source: Far Eastern Economic Review, March, 2003.

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