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Ann Weeks and Dennis Chen
hina maintains a technical standards and conformity assessment regime to ensure product quality and safety, to protect consumers' well being, and to safeguard the environment. Its system has evolved considerably since the establishment of the first standards-related regulatory bodies in 1949 and the first commodity inspection procedures in 1984. Subsequent adjustments to the system have been made with an eye toward adopting and helping to set international standards. But the changes are as much about installing a system that bolsters the competitiveness of Chinese products in overseas markets as conforming to international practices.
China's World Trade Organization (WTO) entry in December 2001 prompted another overhaul of its standards
and conformity-assessment regulatory structure in part because it had to comply with the WTO Agreement on Technical Barriers to Trade (TBT). Foreign companies have given mixed reviews of the changes so far. Some perceive PRC authorities as making a good faith effort to improve transparency, to revise or eliminate WTO-incompatible standards, and to unify the country's compulsory certification procedures for domestic and foreign companies. Others believe that the changes complicate, rather than simplify, the compulsory certification process and do little to improve foreign participation in China's standards-setting process.
China's standards regime affects a broad range of sectors, from agriculture, audio and video, automobiles, construction, cosmetics, and household electrical appliances to information technology, low-voltage industrial products, medical equipment, and pharmaceuticals. With a number of the affected products falling under what the US and Foreign Commercial Service characterizes as "best prospects" for US exporters, companies' concerns regarding the new changes are understandable. Even companies that are not directly affected by the recent round of adjustments are watching carefully, knowing that future policy changes in China could affect them.
Foreign companies will thus need to ensure that their interests are protected against any adverse impacts of the new government structure and regulatory framework. They must systematically monitor existing and new policies, build relationships with related PRC government agencies, work with standards bodies to influence standards development, and keep US government and advocacy groups informed of problems. This active approach already appears to have helped some companies resolve problems tied to China's new compulsory certification system.
Positive first steps
The first major WTO-related change in China's standards and conformity assessment structure came in April 2001, when the former State Administration for Entry-Exit Inspection and Quarantine (CIQ) and the State Quality and Technical Supervision Bureau (QTSB) merged to form the Administration for Quality Supervision Inspection & Quarantine (AQSIQ). AQSIQ combined the standards and certification systems for foreign and domestic goods to ensure that China was meeting its WTO national treatment obligations. The restructuring also reflects an attempt to consolidate agencies with overlapping authority over various imported products.
AQSIQ quickly established the Standards Administration of China (SAC) and
the China National Regulatory Commission for Certification and Accreditation
(CNCA). AQSIQ supervises the two bodies' budgets, but the State Council oversees
their policy-related activities. SAC establishes and oversees national standards.
This role involves setting the annual standards agenda, coordinating the
drafting of technical standards with the various technical committees, and
representing China at international standards organizations. CNCA implements
the unified China Compulsory Certification (CCC) program, which is designed
to test product safety and conformity to technical standards (see Ying
Xia and Paul Chen). These three agencies, together with the WTO TBT Inquiry
Center,
which
operates
under AQSIQ and liaises with the WTO TBT committee in Geneva, serve as the
institutional nerve center of China's standards regime (see "China's Main
Standards Bodies").
In addition to altering the institutional framework, PRC authorities issued a series of new and revised regulations in 2001-02 to meet WTO obligations. The National People's Congress amended both the PRC Import and Export Commodity Inspection Law and the PRC Product Quality Law. In addition, AQSIQ and SAC issued codes governing the adoption of international and mandatory standards.
Of all of these changes, the move to unify the old "CCIB" mark for imported products and "Great Wall" mark for domestic and imported products under a new "CCC" mark will probably have the greatest impact on foreign companies. The new certification system took effect on May 1, 2002. The transition period during which companies could continue using the CCIB and Great Wall marks ended May 1, 2003. CNCA reported in late February that more than 25,000 domestic and foreign companies had applied for the CCC mark; 37,000 products were approved.
Company concerns
Despite China's efforts to ensure a smooth transition to the new system, foreign companies remain concerned about technical standards and compulsory certifications. These concerns can generally be divided into two categories: those related to the new CCC mark process, and those concerning standards-setting procedures at the central, provincial, and industry levels.
Compulsory certification
Some of the CCC-related issues should disappear once PRC officials become better educated about the new procedures, but other glitches will be resolved only with additional changes to the certification process. In addition to inadequate cooperation and coordination among AQSIQ and relevant bureaus and the poor transparency of testing procedures, foreign companies have faced:
Shipment detention at port
In the early months following the introduction of the new CCC system, many US companies reported instances in which the PRC General Administration of Customs (Customs) detained shipments consisting of products not subject to certification. Customs insisted that the companies to obtain CNCA-certified documentation showing that their products were not subject to CCC even though such documentation is not required by law. To CNCA's credit, the agency undertook a substantial capacity-building program with Customs to clarify CCC requirements and issued the Customs-requested certified documentation to companies until the training programs were completed.
CNCA reported that by November 2002, the number of such cases had declined significantly, but anecdotal evidence indicates that companies importing products into China that are not subject to the CCC system—but share the same harmonized system (HS) code with products that are—may still experience problems. Another headache for companies is that the exemption documentation for these products is valid for only 30 days.
Companies trying to bring into China specialized products that fall under general HS numbers subject to CCC—but for which PRC standards do not exist—also experience problems. Such companies find it difficult to get a waiver for the CCC requirement without jumping through numerous hoops with CNCA and Customs. To solve this problem, CNCA plans to give products not subject to CCC a slightly different HS code.
| China’s
Main Standards Bodies |
Administration
for Quality Supervision Inspection & Quarantine
(AQSIQ)
The April 2001 merger of State Administration for Entry-Exit Inspection
and Quarantine (CIQ) and State Quality and Technical Supervision Bureau
(QTSB) resulted in a new ministerial-level agency, AQSIQ. Li Changjiang,
former director of CIQ and formerly a vice minister of the General
Administration of Customs, serves as director, and Li Chuanqing, former
director of QTSB, is the Chinese Communist Party secretary general.
AQSIQ’s administrative authority is broad. It manages China’s
standards and conformity assessment regulatory structure, enforces
compliance with certification requirements, and conducts quality
and entry-exit inspections for commodities. AQSIQ reviews and approves
the CCC product catalogue issued jointly with CNCA.
The agency employs roughly 210,000 people, of which 3,000 have commodity
inspection and quarantine responsibilities and 180,000 ensure that
products in the market meet standards and technical regulations. This
last group also participates in an anticounterfeit campaign along with
the State Administration of Industry and Commerce.
Standardization Administration
of China (SAC)
Established in 2001 by the State Council, SAC is responsible for
drafting China’s annual national standards agenda and approving,
recording, and publishing the final standards. It assumed the responsibilities
of the Department of Standards under the former QTSB and is responsible
for the further alignment of PRC import and domestic standards regimes.
Although other central-government bodies develop and publish sector
standards, SAC determines the scope of the standards each agency
may
set. SAC also manages and coordinates the technical committees assigned
to draft technical standards.
SAC has the authority to sign and implement international cooperative
agreements and represents China in a dozen international and regional
standardization organizations, including the International Organization
for Standardization (ISO), the International Electrotechnical Commission,
the Asia-Pacific Economic Cooperation Forum, and the Pacific-Asia
Standards Congress. SAC has established cooperative relationships
with 52 countries.
As a participant in international standards development, SAC has
sent experts to join 300-500 working groups among the various international
standardization organizations. SAC is also responsible for carrying
out the notification and inquiry work of standards stipulated by
the
World Trade Organization’s (WTO) Technical Barrier to Trade
(TBT) Agreement.
SAC is interested in working with foreign companies on national standards
matters. In particular, SAC wants to ensure that its standards are
not impeding trade.
China National Certification and Accreditation Commission (CNCA)
The State Council has authorized CNCA to establish, guide, implement,
and supervise the compulsory product certification system.
CNCA designates certification bodies, testing laboratories, inspection
organizations, and certificate-mark issuing bodies; publishes an official
list of certified products and manufacturers; and directs local AQSIQ
branches to find violators of compulsory certification. CNCA also has
the power to approve the exemption of products from compulsory certification
and to deal with complaints or appeals regarding compulsory certification.
CNCA draws up and modifies the product catalogue published jointly
with AQSIQ and issues implementation rules for certification of products
listed in the catalogue. There is no set schedule for revisions to
the product catalogue, but CNCA plans to bring other products into
its certification regime and has been working with the ministries
of Agriculture and Health to extend the certification systems to
agricultural
products. The move is part of the effort to eliminate protectionism
among government agencies in regulation, supervision, and enforcement.
This new system appears to have been launched in late February with
the release of a new regulation. Although lacking detail, the regulation
serves as a rough guideline for China’s agricultural product
certification system; CNCA will regulate the certification regime
of agricultural products. According to CNCA, it is too early to say
how
long it will take to install this new certification system, but apparently
the proposed certification will be voluntary rather than compulsory.
WTO TBT Inquiry Center
To ensure compliance with its technical regulations, standards, and
conformity assessment obligations under the WTO’s TBT Agreement,
China established the WTO TBT National Inquiry Center in 1995. The
center operates under AQSIQ’s supervision and is headed by
Director General Huang Guansheng, who participated in a number of
the WTO negotiation
sessions.
The center serves three primary functions, the first of which is
responding to TBT-related inquiries from other WTO members on the
PRC standards
and conformity assessment regulatory framework. Companies can request
information on pre-existing or new PRC standards by contacting the
center (see Contact Box). The center also represents China when submitting
TBT-related inquiries to other WTO members and conducting research
on international standards and technical regulations. When other
countries issue technical standards or conformity assessment requirements,
PRC
authorities may ask the center to provide technical support through
research and analysis to determine whether the standards are scientifically
based and reasonable. When foreign standards and conformity assessments
are under review at the WTO—such as the European Union’s
new wood packaging rules—the center will also coordinate the
circulation of information among and responses from relevant PRC
agencies.
The center also serves as the clearinghouse for notifying the WTO of
all new standards adopted within China, as required by the WTO, and
the repository for the catalogue of existing standards. This should
increase transparency.
The center will also train AQSIQ employees and other individuals
from the State Council, associations, and industry representatives.
The
center employs a train-the-trainer structure, which it will use to
train 2,000 people (under AQSIQ) and then have those individuals
train others. The training focuses on the basics of WTO-TBT protocol
issues,
including inspection and quarantine. The center had trained more
than 200 people by the end of 2002.
— Ann
Weeks and Dennis Chen
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Lengthy approval processes
Under the new CCC procedure, the application and approval process should
be completed in 90 days "under normal circumstances." But a number of high-technology
and medical equipment companies report that the certification process is
taking between 6 and 12 months to complete. SIMCOM International Holdings,
Inc., which provides clients with turnkey applications and technical support
to meet China's compulsory certification requirements, reports that its PRC-government-approved
US agent status has helped some of its high-tech clients' products
gain approvals within the three-month period (see "Finding Help with the
CCC Process").
Some
telecommunication
equipment companies complain that the new system's 90-day timeframe exceeds
the three-to-four-week approval timeframe under the old CCIB scheme.
Some of the delays are the direct result of companies' lack of familiarity with the new system and the subsequent filing of incomplete applications. More commonly, delays are due to China's inadequate certification and testing facility infrastructure. Bottlenecks emerge because only nine designated certification bodies, which manage applications, and roughly 70 designated testing bodies, which conduct actual tests, exist to handle all goods. Each designated certification body's product scope is quite different from the others, though overlap exists in a few areas. Foreign companies are planning to enter the market soon, but until then delays and even re-testing will be all to frequent. China's WTO commitments may also help— foreign firms will be permitted to take a majority stake in China-based safety-test and quality-inspection ventures by the end of 2003 and will be able to operate wholly foreign-owned testing and certification services by 2005.
Some of the delays US firms experience are exacerbated by US government policies. For instance, PRC regulations require accredited Chinese inspectors to conduct the initial factory inspections, but changes to US visa policies in the aftermath of September 11, 2001 have resulted in significant delays in the approval of travel visas for some of the Chinese inspectors. (Some companies are accredited to conduct follow-up inspections, but a Chinese inspector must perform the initial inspection.)
Lack of independent testing bodies
Currently, China's designated testing bodies are not independent of the government. In many cases, testing facilities are closely connected with research institutes that may be engaged in research and development activities related to foreign products that they are testing. This raises intellectual property rights concerns among foreign companies.
Duplicative testing requirements
Although eliminating duplicative testing requirements was one of the objectives of the new compulsory certification scheme, companies remain frustrated by the ongoing overlap in testing requirements maintained by other ministries, such as the Ministry of Information Industry (MII). For mobile handsets, for example, MII testing requirements for a network access license overlap with testing requirements for CCC. CNCA is working with MII to eliminate the overlap. Companies had previously complained about similar problems with the State Food and Drug Administration and the Ministry of Agriculture; CNCA and eight other government agencies recently announced new procedures aimed at solving these problems.
New exemption requirements
Under the old compulsory certification structure, small batches of products imported for market-testing purposes did not have to go through a formal CCIB exemption process. One electronics company has reported that it could previously notify Customs that a shipment was for market-testing purposes without having to secure additional certifications or documentation. Under the new structure, however, a company wishing to import for market-testing purposes even a small quantity of a product subject to CCC must now undergo a cumbersome exemption process in China before it can import the goods.
| Agency
Contact Information |
Administration
for Quality Supervision Inspection & Quarantine
9 Madian Dong Lu
Haidian District
Beijing, China 100088
Tel: 86-10-8226-2114
Fax: 86-10-8226-0022
Internet: www.aqsiq.gov.cn
International Affairs
Director: Liu Pingjun
Law & Regulation
Directors-General: Liu Zhaobin, Wang Fengqing
Standardization
Administration of China
9 Madian Dong Lu
Haidian District
Beijing, China 100088
Tel: 86-10-8226-0677
Fax: 86-10-8226-0684
Internet: www.sac.gov.cn
International Cooperation Department
Director: Wen Shanlin
China National Certification
and Accreditation Commission
9 Madian Dong Lu
Haidian District
Beijing, China 100088
Tel: 86-10-8226-0825
Fax: 86-10-8226-0799 |
Internet: www.cnca.gov.cn
Department of Certification
Deputy Director General: Bo Yumin
International Cooperation Department
Deputy Director: Huang Shouyun
World Trade Organization
(WTO) Technical Barriers to Trade (TBT) National Inquiry Point
Inquiry Point
7 Madian Dong Lu
Haidian District
Beijing, China 100088
Tel: 86-10-8826-0618
Fax: 86-10-8226-2448
E-mail: tbt@aqsiq.gov.cn
Internet: www.wto-tbt.gov.cn
Internet: www.tbt-sps.gov.cn
(under construction)
Notification Center
2 Dong Chang’an Dajie
Dongcheng District
Beijing, China 100731
Tel: 86-10-6519-7336, -7762
Fax: 86-10-6519-7762
E-mail: wtonoti@moftec.gov.cn
China will notify the WTO of measures related to
TBTs through the Notification Center, which is now under the new
Ministry of Commerce.
— Ann Weeks and Dennis Chen
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High
costs
Because product type testing must be conducted in China, and Chinese inspectors
must conduct all factory inspections (regardless of whether the factory is
located in China or abroad), costs to bring a product to market in China
can be considerably higher for foreign companies than for their domestic
counterparts. The type testing costs in China are in addition to costs affiliated
with testing done in the country of manufacture. For an information technology
product, type testing in China could cost ¥15,000 ($1,814); for a motor compressor
the cost might be around ¥6,200 ($750). For factory inspections, the average
cost of one Chinese inspector per day, according to CNCA, is ¥3,500 ($423.36),
with the initial inspection lasting three to four days. Foreign companies
report that they are charged higher fees for product testing than their domestic
counterparts, a violation of national treatment that unification of the old
certification systems was supposed to eliminate. |
Setting technical standards
Many foreign, particularly US, companies are also increasingly concerned about how China sets and drafts standards at the national, provincial, and industry levels and who is allowed to participate in the standards-setting process. Interbureau coordination has been weak, as multiple agencies at different levels set standards according to the special interests of central and local PRC government agencies and domestic enterprises. The result has been insufficient harmonization with internationally accepted standards, a lack of national treatment, and too many mandatory standards. Recent developments have a number of high-tech firms worried that these processes are creating an environment in which China uses technical standards to protect domestic industry and curtail imports.
The Chinese government sets the standards agenda and then farms out specific standards to China's 260 special technical committees (which report directly to SAC) and 422 subcommittees that consist of 27,800 specialists who draft the standards. Most are drafted without foreign, or even public, input. In contrast, the US government does not dictate the standards agenda. The United States has 450 standards-developing organizations with more than 150 consortia and thousands of committees to address technical requirements and 93,000 active standards. The system also incorporates broad public review and comment periods. American National Standards Institute is an umbrella association of standards developers, technical advisory groups, and conformity assessment systems.
Lack of transparency and national treatment
Transparency is a key issue for foreign manufacturers. The WTO TBT Agreement requires members to provide the opportunity for public consultation and comment on proposed standards and technical regulations, due consideration of comments regardless of origin, and minimum timeframes for allowing public comment. Although China's Protocol of Accession (paragraph 178) reiterates its pledge to abide by these obligations, little, if any, advance notice is given, provisions are often vague or unclear, and the drafting process remains opaque.
Weak harmonization efforts
China has pledged to adopt 2,000 international standards per year during the next five years, at which time 80 percent of "key" industrial products will be aligned with international standards. An examination of China's statistics, however, suggests that "internationally based" is a loosely used term. At the end of 2002, China had 8,931 national standards based on international standards. Of these, 42.4 percent (or 3,794) were not equivalent to international standards. Only 2,169 were identical, and a sizeable portion (2,968) were modified versions of their international counterparts.
 Foreign companies limited to observer role
In some sectors, foreign companies may now have a representative on Chinese technical committees, though not always a vote. Particularly in the high-tech sector, Chinese entities are reluctant to allow foreign companies a voice in the drafting and approval of technical standards. In telecommunications, an MII-affiliated institute with the authority to set standards for telecommunications products drafts a standards agenda once a year. It might distribute the agenda to a few foreign companies and ask them to prioritize the standards with which they would like to be involved. The institute may allow each company to observe the drafting process for one or two priority standards, but not all of them. And even if foreign companies sit in on the drafting process, they do not have a vote when the technical committees vote on a draft.
Some foreigners are involved in the process of drafting standards by participating in certain technical committees. SAC encourages the involvement of foreign companies in the standards drafting process, but the technical committees have the right to decide whether to appoint experts from foreign companies. Foreign companies interested in joining a technical committee can apply directly to the secretariat of the committee. Once admitted, they will receive a certificate from SAC.
European companies' aggressive
activity
Several US companies have expressed concern about European companies' aggressive
efforts to influence standards-setting in China. For example, SAC has recently
signed cooperative agreements with Siemens Ltd., China, and Volkswagen Investment
(China) Co., Ltd. The agreements cover standards exchange, training, and
involvement in drafting relevant standards in China. According to International
Business Daily, Volkswagen is involved in drafting national standards
on the numeration method for automobile recycling—reportedly the first time
that China has worked with a foreign firm to draft national standards in
the auto industry. So far, SAC has not established such a relationship with
any US company, but Wen Shanlin, director of SAC's International Cooperation
Department, says that US and other foreign companies, particularly leaders
in their fields interested in working on standards, may contact him (see "Agency
Contact Information").
The current PRC Standardization Law also seems to rely more on European-based standards than US ones. International Organization for Standardization standards are stacked in favor of the Europeans because of the "one country, one vote" voting structure. In addition, the fact that the European and Japanese governments are directly involved in drafting standards in their countries has helped them negotiate standards deals with the PRC government. For example, the European Commission negotiated directly with the PRC on boiler standards. In contrast, the US National Institute of Standards and Technology does not draft standards itself; rather, its mandate is to ensure "good standards development." Individual regulatory agencies like the US Food and Drug Administration and the US Department of Transportation, among others, draft the actual mandatory standards but the United States has no centralized standards-drafting body.
| Finding Help with the CCC Process |
China National Regulatory
Commission for Certification and Accreditation (CNCA) has received
more than 300 applications for China Compulsory
Certification (CCC) agencies from different countries to become official
authorized agents, according to Chen Wei, a China Quality Certification
Center for Imports and Exports division chief. CCC overseas agents
may accept certification applications and provide CCC-related consulting
services, but may not perform actual certification work, including
testing. CNCA’s website indicates that there are 14 registered
CCC agencies so far—eight in mainland China, one in Taiwan, three
in Japan, one in the United States, and one in South Korea. CNCA will
likely approve more agents soon. US-based companies capable of facilitating
CCC application and approval processes include EMC Compliance Management
Group, SIMCOM International Holdings, Inc., and Underwriters Laboratories
Inc.
EMC Compliance Management Group
EMC, a California-based test lab, now conducts electromagnetic compatibility
(EMC) testing, through a joint venture launched in May 2002. EMC is
equipped to test products in such sectors as medical, information technology,
telecommunications, and power systems.
Paul Chen, President/CEO
670 National Avenue
Mountain View, CA 94043
Tel: 650-988-0900
Fax: 650-988-6647
E-mail: pfchen@emclab2000.com
Internet: www.emclab2000.com
SIMCOM International Holdings, Inc.
SIMCOM was the first PRC government-approved agent in the United
States to facilitate CCC applications in China. SIMCOM claims that
it can reduce the approval timeframe from an average of six to eight
months to three months (or the average time based on PRC regulations).
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Hao You, Vice President
6111 Peachtree-Dunwoody Road, Bldg. E
Atlanta, GA 30328
Tel: 770-730-9980
Fax: 770-730-9976
E-mail: hyou@allaboutknowledge.com
Internet: www.allaboutknowledge.com
Underwriters Laboratories Inc.
Underwriters Laboratories (UL) has been assisting clients in obtaining
Chinese compulsory certifications for many years through its Intermediate
Applicant Program. As of May 1, UL’s joint venture in China,
UL-CCIC Co. Ltd., will officially launch its CCC Agent Services Program.
Ning (Daniel) Chen
UL-CCIC Co. Ltd.-Beijing Branch
16 Ronghua Road
Beijing Economic and Technical Development District
Beijing, China 100176
Tel: 86-10-6787-3739
Fax: 86-10-6787-4606
E-mail: Ning.Chen@cn.ul.com
Internet: www.ul-ccic.com
Thomas Smith
Underwriters Laboratories Inc.-Camas Office
260 NW Lake Road
Camas, WA 98607-8545
Tel: 360-817-5504
Fax: 360-817-6211
E-mail: Thomas.J.Smith@us.ul.com
Internet: www.ul.com
— Ann Weeks and Dennis Chen
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Chinese industry associations
A number of Chinese industry associations have emerged since 1998, when PRC government restructuring led to hundreds of layoffs. Others have been spawned by government agencies. Leaner government agencies have begun turning to some of these associations for assistance in shaping technical standards. The practice has also emerged at the local level—Shanghai authorities issued the Regulations on Promoting the Development of Industry Associations in Shanghai in February 2002, which enables associations, upon the direction of the municipal government, to draft relevant technical standards.
More progress to come
China has made notable strides toward a unified standards and conformity-assessment regime, but room for improvement remains in several areas. Companies would benefit from developing standards management programs that monitor standards agendas of PRC government agencies and recently issued standards, build effective relationships with relevant PRC government agencies, pursue participation in PRC technical standards committees and membership in Chinese industry associations, and promote bilateral cooperation through conferences and training sessions. For instance, Rockwell Automation has developed a standards management system that has helped prevent shipment delays and influence the national fieldbus standard.
Companies have also developed other solutions. One auto company has been able to use its joint venture partner to participate in standards discussions among relevant industry associations. Though the arrangement falls short of direct foreign-invested enterprise participation in the association, it provides an early warning mechanism for the company and allows it an indirect voice as standards are drafted.
Creative strategies that allow foreign companies to voice concerns and to apply pressure for improvements in the system will be key to their ability to navigate China's standards regime. In the long run, such strategies may even encourage the rise of a more transparent and equal-treatment structure in China's standards regime.
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Ann Weeks
is manager of Business Advisory services at the US-China Business Council in Washington, DC.
Dennis Chen
is research associate at the US-China Business Council in Beijing. |
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| May-June
2003 THE CHINA BUSINESS REVIEW |
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Copyright 1997-2008
by The China Business Review
All rights reserved.
Last Updated:
09-May-2003
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