March 2004

Beijing, the capital of the People's Republic of China, is the heart of the nation's politics, culture and international exchanges. The city has a population of more than 14 million people and boasts the most advanced infrastructure in China. With almost 100 institutions of higher education and more than 500 scientific research institutions, Beijing is China's educational center. Most of China's national financial institutions are based in the capital, and so are the headquarters of China's Central Bank, state-owned banks and commercial banks, as well as of many insurance companies, trust & investment companies, finance houses and leasing companies.

Economy

Since the founding of the PRC, particularly since China initiated its reform and opening-up policy in 1978, Beijing's economy has shown a rapid and sustained development. The capital's major industrial sectors include metallurgy, chemicals, automobiles, electronics, machinery, building materials, light industry and textiles. Since the beginning of the 1990s, the city's gross domestic product (GDP) has enjoyed an average annual growth rate of 9 percent.

In 2003, Beijing's GDP soared 10.5 percent to reach 361.19 billion yuan (US$ 43 billion). The city's foreign trade rose by 30.4 percent year-on-year. The total included US$ 15.85 billion in exports, up 33.6 percent, and US$ 51.61 billion in imports, up 29.4 percent. Overseas financed businesses are key players in Beijing's foreign trade activities. Exports by local overseas-funded firms accounted for 69.9 percent of local total exports. The main commodities on Beijing's foreign trade list were electronic products and machinery. Most imported commodities originated from Asian countries and regions with the top three import partners being Japan, the Republic of Korea and Hong Kong. With a 50% increase in volume year-on-year, Europe remained the biggest export destination for Beijing enterprises.

As a result of rapid and steady economic development, the per capita disposable income of Beijing residents increased 11.4 percent year-on-year to reach 13,882.6 yuan (US$ 1,78.6 US dollars) in 2003. The registered unemployment rate of urban residents was 1.43 percent last year. The capital's real estate market saw a strong foreign capital inflow in 2003. T he average price of land in Beijing now ranks the highest in the country and the land prices are expected to continue to increase this year.

Beijing's Investment Environment

In 2003, the Beijing authorities made significant efforts to attract increased investment into modern manufacturing and high-tech industries. The government accelerated reforms in the service sector and urban infrastructure construction. F oreign direct investment (FDI) in Beijing surged by 19.8 percent from the previous year with about 60 percent of the FDI being directed towards the service industry. Multinational retailers opened a record number of 20 outlets in Beijing.

Beijing is seeking to boost the development of the non-state sector and to down-size state-owned assets in many industries. As a result, many state-owned companies are expected to be listed on domestic equity exchanges for Mergers and Acquisitions (M&As) by domestic and international investors. The China Beijing Equity Exchange - one of the major exchanges for the trading of state-owned assets - recently joined the Beijing Investment Promotion Bureau to introduce the so-called "Multinational Merger and Acquisition Express Channel”. The intention of the cooperation is to provide improved services to investors looking for M&As of state-owned assets listed on the exchange. The organization will offer policy consultation and coordination services to international investors, as well as accelerated handling of examination and approval procedures.

Beijing's Development Zones

Beijing has two major development zones at the national level - the Beijing Experimental Zone for the Development of New Technology Industries (BEZ) and the Beijing Economic Technological Development Area (BDA), as well as more than 30 small-scale industrial areas and development zones operated by counties or districts.

The Beijing Experimental Zone for the Development of New Technology Industries (BEZ), established in 1988, was the first national high and new technology industry development zone in China. It is located in the northwestern suburb of Beijing, close to 100 scientific research institutes and 50 institutions of higher learning. Zhongguancun, China's "Silicon Valley", as well as five sub-parks (the Haidian Sub-park, the Fengtai Sub-park, the Changping Sub-park, the Jiuxianqiao Electronics Town, and the Yizhuang Economic and Technological Development Zone) and one belt (the Beijing-rim Hi-tech Industrial Belt) are located in the Zone. Since its establishment, a n industrial structure centering around optical-mechanical-electrical integration, electronic information, biological engineering, new medicines and new materials, energy-saving, environment-friendly, and other high-tech industries has been created.

The Beijing Economic Technological Development Area (BDA) was established in 1991. S ituated in the southeastern suburb of Beijing, t he BDA is a national top-priority development area approved by the Chinese Central Government. The Zone's main tasks are to attract industrial projects and foreign investment, promote exports, and commit to the development of new and high technologies. Five major industry sectors have developed in the BDA, including electronic information, laser-machinery-electronic-integrated industry, bio-engineering and pharmaceutical industry, new material and new energy manufacturing.

Other development zones in Beijing include the Beijing Shangdi Information Industry Base (set up in 1991), the Beijing Yanqi Industrial Development Zone (set up in 1992), the Beijing Linhe Industrial Development Zone (set up in 1993) and the Beijing Shilong Industrial Development Zone (set up in 1992).

By the end of 2004, China's first business park for company headquarters will be launched in the Fengtai District of Beijing. The Advanced Business Park (ABP) is specially designed as office quarters for large enterprises. T he ABP will provide office towers for 500 large enterprises and 2,000 medium and small companies. Among the first 80 corporations to enter the ABP at the end of this year, 95 percent are high-tech companies.

Olympic Games in 2008

Beijing will host the 2008 Summer Olympic Games. This event is expected to become an accelerator for the city's development by upgrading its overall competitiveness and speeding up its modernization and globalization. Beijing plans to spend a total of US$35 billion on the Olympic Games, including $23 billion for modernizing the country's capital. It will be one of the largest construction projects ever in China since the construction of the Great Wall. Much of the money will be spent on construction of Olympic-related sports venues and facilities, major enhancements to transportation and telecommunications networks, and installation of environmental protection systems. Bidding on these projects is open on an equal basis to both foreign and domestic enterprises. To grasp the business opportunities brought about by the Olympic Games, many multinationals have decided to increase their Beijing investment activities.

From April 18 to 19, 2004, Beijing will hold the Market Promotion Conference on the Olympic Economy. The conference will introduce a series of projects related to urban construction, high-tech and manufacturing industries, environmental protection, tourism, culture, sports and logistics. The construction of the Olympic venues and related facilities will begin on a large scale this year.

The Games are expected to drive the rapid growth of the consumer market, especially the sports, transportation, telecommunications, cultural, real estate and automobile sectors. The Olympic Games will also boost market demand for building materials and related equipment for large-scale urban construction projects. In addition, demands for products for telecommunications, transportation and environmental protection, as well as services like financing, healthcare, tourism, logistics, retailing, catering and education are expected to grow significantly.

Beijing's authorities are planning to step up their efforts in reforming investment and fund-raising mechanisms, and improving market access and regulations in order to offer an open and fair environment for domestic and overseas investors.

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