CHINA BULLETIN JUNE, 1998: CHINA'’S NEW GOVERNMENT STRUCTURE

The 9^th National People’s Congress which concluded in Beijing on March 19th, has approved a comprehensive government reorganization in China. The main objective of this move is to cut red tape.

Some old departments, such as the State Planning Commission (SPC) are no more. The SPC is now to be called the State Development Planning Commission, to reflect new Prime Minister-Zhu Rongji’s conviction that the micro-economy can not b e planned, only macro encouraged. It has lost a third of its staff as well as its remaining powers to approve foreign investment projects.

As the State Planning Commission fades, the star of the State Economic and Trade Commission is in the ascendant. It is created by Zhu Rongji when he was entrusted with overall control of the economy in 1994. Previously, the State Economic & Trade Commission had little direct contact with foreign investors. Now, it is to take charge of nine industrial ministries and ministerial-level bodies, which have been demoted to the status of Bureaux.

These are the ministries up to now have each regulated an individual industry sector. Those to be axed are the ministries of Power; Coal; Metallurgy; Machine-Building; Electronics; Chemistry; Internal Trade; Posts and Telecommunications ; Radio, Film & Television; Geology & Mineral Resources; and Forestry.

• Gross Domestic Product. China’s economic growth slowed down to 7.2 percent in the past months of this year, compared to the annual rate of 8 percent in 1997.

• Industrial Production. Weak domestic demand and a decline in exports held back China’s Industrial production growth rate during the first five months of 1998. Despite these factors, however, industrial value added output posted an increase of 7 .9 percent from 1997 to reach US$93.59 billion from January to May. This figure is down from the double digit growth rate achieved in the corresponding period last year. China’s central government has taken various measures to expand domestic demand since exports, the country’s traditional growth engine, have suffered severely from the financial turmoil in South East Asia. For the month of May, China’s industrial value - added output amounted to US$20.26bn, rising a mere 0.8 percent over April.

• Foreign Investment. Foreign investment in China continued to decline in May. Actual foreign investment went down 6.85 percent from a year ago to US$3.17 billion. The number of newly approved foreign invested firms dipped 9.02 percent in compari son to the same period last year. Contractual investment plunged to 18.41 to US$3.95 billion. The drops of the three indices of foreign investment in China were the first in the decade when foreign investment has surged.

• Export. After 22 consecutive months of growth, exports declined in May, impacting adversely on industrial production. Export volume amounted to US$14.93 bn in May, down 1.5 percent from the same period last year, while imports dropped 3.8 perce nt to US$11.29 billion. Cumulative exports and imports totaled US$123.7 bn to May, 5.4 percent up on 1997. The central government has taken various measures to expand domestic demand since exports, the country’s traditional growth engine, have suffered se verely from the financial turmoil in South east Asia.

• Inflation continued the downward trend, with the consumer price index rising 0.3 percent over the corresponding period of last year and the retail price index falling by 1.5 percent.

• Agriculture, grew by 4 percent over the same period last year.
• Fixed-Asset Investment, witnessed a growth rate of 10.3 percent which totaled 161.8 billion yuan (US$ 19.3 billion) during the first three months.
• The Foreign Exchange Reserve rose to US$ 140.6 billion at the end of March, an increase of US$ 700 million from the figure at the beginning of this year.

China will continue to encourage foreign businessmen to make investments in its pharmaceutical industry focusing mainly on "new products, new technologies and export-oriented products."

China, the second largest pharmaceutical producer in the world, now is producing 1,350 kinds of crude drugs and 4,000 varieties of traditional Chinese herbal medicines each year.

In addition to the traditional Chinese medicines, 97 percent of the chemical medicines turned out in China are "western medicines".

Now the imported medicines have garnered about 60 percent of the Chinese medicine market in big cities due to the declining of research and manufacturing of new medicines and the fact that most of the medicine producers have not achieve d certain scale.

The Chinese government said that in the coming years, China will continue to welcome foreign business people to invest in pharmaceutical joint ventures and particularly in medicine processing, technological transfer and co-developing ne w products in China.

Foreign investments are encouraged in the following fields:

• Chemical medicinal materials effective in the patent period and protected by the Chinese administration and intermediate for pharmaceutical use which need to be imported form abroad.
• Effective anti-inflammatory and antipyretic drugs so far have not been developed.
• Vitamin D3, dextro calcium pantothenate and nicotinic acid and other medicinal vitamins.
• New type anti-cancer medicines and cardiovascular medicines.
• Various kinds of new medicinal agents, including slow release agent, controlled release agent, target agent, and related auxiliary materials.
• Serine, proteinochromogen and histidine.
• New type packaging materials for medicines, containers and up to date pharmaceutical manufacturing equipment.
• New type and highly effective and economical birth control medicine and devices so far not produced in China.
• New technologies and equipment for upgrading the quality of ready-made Chinese traditional drugs and for improving the packaging.
• New techniques for analyzing effective elements of Chinese traditional medicines and new technologies for extracting.
• New medicines produced by employing bio-engineering technologies.
• X-ray equipment with specification above 800 milliamperes, biochemical analytical instruments, electronic endoscopes, medical monitors, multi-functional anesthetic devices and medical catheters.

Meanwhile, as China’s herbal medicine is confronted with strong competition from the Republic of Korea and Japan. Of the US$ 15 billion sales volume of herbal medicines in the world each year, China accounts for only US$ 600 mill ion.

China’s major coal mines incurred losses of RMB1.5 billion (US$180 million) in the first quarter of 1998, with much of the loss blamed on the continued operation of unregistered small-scale mines which fail to adhere to safety re gulations.

China has around 100 key State-run mines, accounting for just under half of the 1.33 billion tons of coal produced in 1997. In addition there are around 2,500 State-owned mines at a local level, and 75,000 township mines.

Subsidiaries of China National Nonferrous Metals Corporation (CNNC) have been ordered to cut their long-term debts and obtain CNNC permission before borrowing funds from overseas. CNNC has tightened checks on the overseas investment act ivities of mines and smelters, in order to prevent further losses of assets; and ordered all units to reduce operating costs and improve hedging activities in the futures markets.

In its parting shot before being demoted to a bureau under the State Economic and Trade Commission, the Ministry of Geology and Mineral Resources renewed a pledge to expand China’s international activity in the mineral industry.

The ongoing worldwide restructuring of mining capital, technology and resources is prompting many countries in Latin America, Africa and Asia to seek overseas investment in mining projects, presenting China with a ‘golden opportunity’ t o participate in world mining cooperative ventures.

Minerals such as oil, iron, copper, gold and sylvite are marked as targets. The ministry was considering setting up exploration units which operated on the same commercial basis as their counterparts in modern international corporations , in order to raise the competency of Chinese mining teams working overseas.

In late 1997 China announced that it would create at least three minerals companies that would spearhead the country’s effort to tap overseas resources. With a minerals trade deficit of around US$10 billion, China is currently the world ’s second largest consumer and third largest importer of minerals.

With 5% annual growth in mineral demand predicted over the coming three decades, and low or negative growth in reserves of most minerals, China is anxious to take steps to secure supplies of many minerals from overseas.

In March, a large Chinese metals firm announced the acquisition of a Zambian copper mine as part of the Zambian government’s ongoing programme of privatization. Zambian President - Frederick Chiluba has announced that the ownership of a ll mines – the pillar of the country’s economy – will be awarded to foreign firms, in the hope of doubling production.

China exported gold and silver products worth over US$45 million in 1997, representing a 37% increase over the previous year. 94 percent of all exported products went to Hong Kong, including a large quantity of half-finished products fo r further processing.

Consumption growth rate has been falling in China continually since the end of 1994.The total retail volume across the country was 712.7 billion yuan (US$ 85.87 billion) in the first quarter this year, growing 6.9 percent from the c orresponding period in 1997. However, this represents a poor performance compared with the peak of 37 percent in the fourth quarter of 1994.

The expansion of consumption accounted for more than half of economic growth for five consecutive years beginning in 1990. However, its share in economic growth dropped to 34.4 percent last year. And retail negative price inflation has also suffered growth for six consecutive months, down from -0.4% last October to -1.2% in March.

The consumption market is in a dilemma where rural consumers with large potential demand cannot afford the surplus products left by the urban market. Average per capita incomes in urban and rural areas across the country stood at 5,160 yuan (US$ 622) and 2,090 yuan (US$ 252) respectively last year.

The irrational product structure has also hobbled the progress of consumption. A survey of 601 commodities found 25.8 percent oversupplied with the remainder basically in balance.

People have become cautious as they witness more redundancies, the abolition of public housing and health care systems, and declining incomes. This feeling is reflected in the steady increases in individual savings, even though the cent ral bank has lowered interest rates on four occasions.

Starting on July 1, the biggest database about Chinese export products will be available on the Internet. The database can be found at http:/www.moftec.gov.cn, the home page of the Ministry of Foreign Trade and Economic Cooperation (Moftec).

Besides information about specific products, information about new technology items is also available from the database. The database has been running on a pilot basis since the Moftec home page came online on March 1.

China is expected to bring out another weapon by the end of June to counter the unprecedented pressure on its exports incurred by the financial turmoil in its neighboring countries. The new weapon is the increased export tax rebate rates for several categories of exports.

The name list of those exports is expected to be made pubic by the end of June. The name list will include coal, ships, complete plants, some other electric and machinery products and several high-tech exports.

Actually, the tax rebate rates for several exports were increased somewhat at the beginning of this year. The textile export tax rebate rate was jerked up from 9 percent to 11 percent. Export rebate rates of Xinjiang cotton and some ste el were enhanced from 9 percent 17 percent, which is a zero taxation rate.

The expected move to increase tax rebate rates comes against the backdrop of the financial turmoil in Southeast Asia, which is likely to worsen following the recent yen devaluation. Chinese government believe that it will be effective i n relieving the pressure on China’s exports.

The financial turmoil has already resulted in much less demand for Chinese exports in countries hit hard by the meltdown, and rendered Chinese exports more expensive than those from Southeast Asian countries. Those countries that are su ffering from the financial turmoil usually buy more than 50 percent of Chinese exports.

In addition, the recent yen slump is also making things much harder for the Chinese economy. The depreciation of the Japanese yen is having a very negative impact on Chinese exports and the utilization of foreign capital. Japan, China’s biggest trade partner in past years, bought only 17.4 percent of China’s exports last year.

The negative impact of the financial turmoil on China’s export sector has already began to take effect in the first five months of this year. The export sector usually contributes 2 to 3 percentage points to China’s GDP growth each year . That picture, however, is expected to change this year.

China’s Export growth slowed down substantially in the first quarter of this year, due mainly to the effect of the financial crisis in Asia.

The quarterly export value increased by only 12.8% on a year-on-year basis to US$ 40.1 billion, compared with 25% for the same period of last year. The quarterly import value, increased by 2.6% to US$ 29.57 billion, leaving a favorable balance of US$ 10.53 billion.

China’s total import and export volume in the first quarter stood at US$ 69.66 billion, up 8.2% over the same period of last year.

The slowdown in export growth was due largely to the effect of the financial crisis in Asia. The country’s export to Asia in the period amounted to US$ 22.65 billion, up only 4.2% over the same period of last year. It included US$ 6.52 billion to Japan, down 2.5%; US$ 1.31 billion to Korea, down 24.5%; and US$ 2.32 billion to the nine ASEAN nations, down 7.8%.

But export to Europe, North and South America, and Africa were up by more than 17 percent.

Although Asia Remains China’s major importer, exports to it have dropped from over 70 percent to less than 60 percent now, while those to Europe and America have grown year by year.

However, exports of China this year still face serious difficulties.

More incentives have been offered to foreign business people to encourage them to invest in the economically backward central and western regions of China.

A number of large-scale agricultural, infrastructure and environmental protection projects in these regions will be given priority in the search for foreign investment. Matching funds will also be channeled into those projects by the ce ntral government. The provinces and municipalities of the hinterland will hand-pick specific industries in which they have particular advantages.

With the central government’s approval, special permission can be given for foreign investment in industries that fall into sectors where foreign investment is normally restricted. The ceilings on joint-venture shares held by foreign in vestors and limitations on market access will be eased in these regions.

Tariffs for imports of capital goods by foreign investors may also be waived if the industries in which they invest are recognized as those encouraged by the State. Another stimulus will be the establishment of pilot join-ventures in th e wholesale and retail, foreign trade and travel sectors in the hinterland’s provincial capital cities.

Specific regulations relating to these pilot joint ventures will be made public soon. The new State policy also urges foreign-invested firms in the coastal cities to "go west".

As for the random local government fees which foreign investors have been complaining about, relevant regulations are being drafted to eradicate the problem.

The measures are part of China’s efforts to lure more foreign direct investment this year, at a time when many big investors are suffering from financial difficulties.

China has been the world’s second-biggest recipient of foreign investment for fours years in succession. By the end of last April, China had approved 310,570 foreign-invested firms, involving US$ 534.72 billion in contractual foreign in vestment and US$ 233.59 billion in actually utilized foreign investment.

China had 820,000 Internet subscribers by the end of March, citing a first-of-its-kind survey profiling the country’s cyberspace population. The subscriber total was up a whopping 32 percent from an estimate of 620,000 issued just five months earlier.

Described as China’s first national survey on the Internet, the study revealed a highly homogeneous subscriber group. Some 78.5 percent of China’s Internet users are between the ages of 21 and 35, and more than half work in computer, sc ientific or academic fields. The connection of the number of users with their professions is a unique phenomenon in the preliminary stage of Internet development.

China plans to inject 450 billion yuan (US$ 54.2 billion) in the construction of communications facilities in the three years to 2000. Projects will include mobile communications, communication networks using optical fibers a nd data communication systems for use in financial business.

A large portion of the investment will be used to import equipment for capacity expansion, creating an enormous market for foreign manufacturers of data optical fiber transmission equipment.

The country will need 20 million personal computers and between 30 million and 40 million cellular phones by the year 2000. Computer software industry and integrated circuit sector need huge investments since domestic manufacturers’ mar ket share is still small.

Shanghai is to accelerate the growth of its computer industry to make it a new pillar industry by the beginning of the next century.

Under the industry’s development plan for 1998, output value is projected to hit 14 billion yuan (US$ 1.7 billion), up 40 percent over 1997. That for software and applications will reach 2.3 billion yuan (US$ 277 million), up 50 percent over last year.

It is estimated that 450,000 computers, 1.4 million monitors, 2 million printers and 10 million chips will be produced this year. Production of each of these items will be more than double that of last year. Sales of computerized cash m achines, such as ATMs and point of sale machines, will reach 1 billion yuan (US$ 12 million) in value.

So far there are 3,000 computer or software companies and research institutes in the city. More than 10 well-know foreign information technology companies have set wholly owned or joint ventures there to produce integrated circuits, pri nters and chips.

The city has absorbed US$ 400 million in foreign capital for computer projects. When all the projects are operational, they will have annual sales estimated at US$ 1 billion.

China’s computer industry has received a fillip with Legend’s production of its one-millionth computer. The computer was presented as a gift to visiting Intel Chairman and CEO Andrew Grove in Beijing on May 13^th.

Legend’s production of its millionth computer has occurred at a time when 10 million computers are being used in China. In 1990, 85,000 units were sold in China; in 1992, the figure was 250,000; while in 1997, the number of computers so ld soared to 3.03 million, making China the world’s sixth largest PC market, following USA, Japan, Germany, Britain and France.

Statistics clearly indicate that Legend has been the domestic leader in pushing the Chinese market to reach such a level. It took Legend, which started to manufacture PCs in 1990, eight years to boost its annual production and sales of PCs from 2000 to over 500,000.

The company, which occupied 10.7 percent of China’s PC market in 1997, has become the 5^th largest PC manufacturer in the Asia-Pacific region. Their goal is to achieve an annual sales figure of 1.5 million units by the turn of the century and establish a market share of 20 percent, to make Legend one of the top 10 PC suppliers in the world.

Legend currently maintains a healthy financial status. The Bank of China will sign an agreement soon with Legend to offer 1 billion yuan (US$ 120.48 million) in loans. Some other companies are also considering giving loans to Leg end.

The Legend Holdings Co. listed on the Hong Kong stock exchange, will announce its first profit report after internal restructuring in late 1997. It will be a satisfying report sheet.

China’s power industry has grown at an annual speed of 8 to 9% over the past decade.

By the end of 1996, the country’s installed power generating capacity totaled 236.54 million kilowatts and the annual power output came to 1,079 billion kilowatt-hours, both figures ranking second in the world.

China has 55.58-milion-kw hydropower stations, accounting for 24 percent of the total installed power capacity, 178.86-million-kw thermal power plants, 75 percent of the total, and 2.1-million-kw nuclear power plants, 1 percent of the t otal.

At present, construction of 66.26-million-kw power projects well under way. Included are 33.66-million-kw hydropower stations, accounting for 50.8% of the total under construction, and 3.2-million-kw nuclear power plants, or 4.8% of the total.

The Three Gorges Project across the Yangtze river is China’s largest hydropower station under construction with a designed power installed capacity of 18.2 million kw.

China is endowed with rich coal resources mainly in Shanxi and Shaanxi provinces and the western part of the Inner Mongolia Autonomous Region. The government is encouraging the construction of thermal power plants in these areas to turn coal into electricity to supply the economically-developed eastern coastal areas.

China’s nuclear power industry is still in its beginning stages with three generating units with a combined capacity of 2.1 million kilowatts now in operation. Eight nuclear power generating units are under construction or planni ng with a total capacity of 6.6 million kilowatts.

Moreover, the Chinese and Russian governments have recently signed an agreement which provides in principle that a nuclear power station will be built in China with Russian equipment and loans.

Sino-Overseas Joint Venture Enterprises are ones in which overseas companies, enterprises and financial entities or individuals join hands with their Chinese counterparts to invest, administer, benefit and shoulder risks of t heir joint holdings with limited responsibilities. All investing parties must put in their share of money in accordance with a certain percentage of the total registered capital and hence benefit from revenue and dividends or shoulder risks and losses.

Sino-Overseas Cooperative Enterprises are ones in which overseas enterprises, financial entities or individuals join hands with their Chinese counterparts to cooperate under contracts in enterprises inside China. Contract conditions and terms will be the gauge via which to function, distribute dividends, shoulder losses, pay debts, reclaim investments and redistribute leftover properties while terminating cooperation by each cooperative party.

The major difference between joint venture and cooperative enterprises lies in the fact that the latter does not convert its investment or cooperation condition into shares and share holding rights of the enterprise or even thoug h it dose convert its investment of cooperation condition into shares and rights, the conversion will not be considered at all or only considered to limited extent when distributing dividends, shouldering losses, paying debts and redistributing leftover p roperties while terminating cooperation. Administration and reclamation of investment can be conducted in a different way from that of joint ventures. This offers the cooperative enterprises more flexibility.

Wholly - Owned Enterprises are ones in which overseas enterprises, financial entities or individuals wholly fund the operation of enterprises in China. These enterprises, also known as sole overseas operations, claim all rights t o the revenues and dividends generated by their enterprises.

Sino-Overseas Share-Holding Companies are ones in which all investment is composed of equal-valued shares. Chinese and overseas share holders take appreciate responsibilities in accordance to the shares they purchase. The company should take full obligation of its debts in reliance on its properties. In these kind of enterprises, shareholders from foreign countries and regions are required to take at least 25 percent share of the company’s total registered capital.

Compensatory Trade Enterprises are ones in which overseas partners provide equipment and technology and are bound to purchase a certain quantity of the finished products for exportation. Purchase of the equipment and technology c an be made on the installment plan. Agreed upon negotiation by both parties of the compensatory trade enterprises, the loans for purchasing and importing the equipment and technology can be paid back in kind with other products as well as the finished pro ducts from the imported equipment and technology as approved of when forming the compensatory trade enterprises.

Processing and Assembling Enterprises are ones in which overseas partners are responsible for providing raw materials, components and designs with the equipment and technology also provided by the overseas partners. The finished products are then taken back by the overseas partners to sell on the overseas market. The Chinese partners earn from processing fees. When overseas partners prefer to evaluate their equipment and technology for sale, the Chinese partners are entitled to m ake payment in installment with their processing fees.

Leasing means that advanced equipment from overseas can be rented for their rights of utilization. It is considered as a special fund-raising measure. Rental fees are paid as described by the leasing contract. Upon expiration of the leasing contract, the Chinese partners can purchase the equipment while the overseas partners or the lease holders can choose to provide technical services, raw materials, fuels and spare parts and components.

Foreign-funded projects should comply with China’s industrial development policies and the specific requirements of the industrial development of China. Projects shall be submitted for examination, then awaits approval of the competent departments.

1. The project proposal and feasibility study of Sino-foreign joint/cooperative ventures with an investment of more than US$ 100 million should first be examined and ratified by the State Development Planning Commission (SDPC) and then submitted b y SDPC to the State Council for approval. The contract and articles of association should be approved by the Ministry of Foreign Trade and Economic Cooperation (Moftec).

2. The project proposal and feasibility study of Sino-foreign joint/cooperative ventures with a total investment of over US$ 30 million but less than US$ 100 million should be examined and ratified by the city Development Planning Commission and thence s ubmitted to SDPC for approval. The contract and articles of association should be examined and approved by Moftec.

3. The project proposal and feasibility study of the primary and second industries (excluding those projects restricted by the State) with a total investment of over US$ 10 million but less than US$ 30 million (inclusive), or Sino-foreign joint/co operative ventures in the tertiary industry with an investment of over US$ 5 million, should be submitted to the city Development Planning Commission for examination and approval.

4. The project proposal, feasibility study report, contract and articles of association of non-restricted Sino-foreign joint/cooperative ventures in the primary and second industries with an investment of less than US$ 10 million should be submitt ed to the local governments of a district or a county and certain authorized bureaus or headquarters of group corporations for examination and approval.

5. The project proposal, feasibility study, contract and articles of association of non-restricted Sino-foreign joint/cooperative ventures in the tertiary industry with a total investment of less than US$ 5 million should be submitted to the local governments of a district or a county and certain authorized bureaus or the headquarters of group corporations for examination and approval.

• Food and drink industry (restaurants, fast-food facilities, food delivery services);
• Consultation and information services (excluding domestic advertisement);
• Minor services (beauty parlors, cleaning services, removal services, housework services);
• Minor tourist and recreational facilities (billiards, bowling, swimming pools, gymnasiums and small tourist attractions);
• Construction of small scale commercial facilities.

6. The Articles of Association of non-restricted foreign ventures in the first and second industries to be set up in a district of a county with a total investment of US$ 3 million and below should be approved by the local government of the concer ned district or county.

According to the State regulations, foreign traders, manufacturers, shipping agents, economic organizations and other groups shall report, according to their nature of the business, to Ministry of Foreign Trade and Economic Cooperat ion (Moftec) or other relevant ministries, committees or bureaux which are authorized for the examination and approval of the set-up of resident offices. The business activities of the established institutions can only be within the range of business conn ection, products introduction marketing, technology exchange and consulting service and etc. Direct business activities are not prohibited.

1. Application for setting up the office. The application shall include background of the enterprise, business conditions, purpose of the office to be established, name of the office, person in charge, scope of business, location and operational term . Application shall be signed by the chairman or president of the enterprise together with the enterprise’s seal. (original)

2. A certificate of authorization to the representatives accredited to the office issued by the chairman or president of the enterprise. (original)

3. Copy of certificate of legal operation or copy of certificate of registration.

4. Bank reference provided by the bank of the country or region where the enterprise state clearly the enterprise’s registered capital and present amount of deposit, as well as the reputation of its flexing capitals after the opening of the account. The bank reference shall be signed by the person in charge or business manager of the bank. (original)

5. Resume of representative accredited to the office. It needs to be detailed, specific, and true. Disconnection is not allowed. Two photographs of each representative are required.

6. Identification of the representatives. For representatives of foreign nationality, copy of passport of the country he holds should be submitted. For compatriots from Hong Kong and Macao, copy of certification for his returning to his hometown and perm anent resident identification should be submitted. If a domestic personnel is to take the post of representative or chief representative, approval and identification from Foreign Enterprise Service Corporation (FESCO) are needed.

With 30 days after receiving of approval certificate, the chief representative of the organization shall go through registration procedures with the Administration for Industry and Commerce, with one copy of original and one duplica te approval certificate, copies of submitted documents (each two copies), a cop of Rent Agreement for office site and three photographs of the chief representative.

Go through the following procedures after obtaining certificate of industrial and commercial registrations:

1. Open an account with the Bank of China.
2. Customs procedures for importing office equipment and daily necessities.
3. Registration for taxation with Foreign Division of Bureau of Taxation.
4. Procedures to comply Chinese personnel through FESCO.
5. Apply for permanent residence of representative of foreign nationality in the Public Security Bureau.

To change any registered items (e.g. Name of the organization, location, scope of business), or when the expiration date of registration certificate is imminent, the office should immediately report to the registration authorities f or relevant procedures. The validity of resident representative offices of foreign enterprises is three years for each approval. In case of extension, the office should report to its proxy three months ahead of the expiration date for the extension applyi ng procedure.

Bilateral trade and economic cooperation between India and China continued growth in first four months in 1998. During this period, China’s export to India has increased steadily while India’s export to China declined in April af ter first three months’ increase. Overall trade balance is in favor of India in the first four months which is likely to be reversed if the trend from April continues.

Among India’s export to China, the increase in the exports of mineral products was mainly due to increased ore sand, ash and dregs exports. Within the category textiles, there is a sharp growth in cotton exports. And the leather exports also had a steady growth. Meanwhile, the exports of fish, wood products, steel products decreased.

The increase in the China’s exports to India was mainly in the fields of compound chemical of valuable metal, organic chemical, pharmaceutical, ink & daub etc. While paper and paper board, plastic products showed a decline.

Unit : Thousand US$

Unit : Thousand US$