Autos
Harley-Davidson, Inc. opened its first dealership in China in April. According to the Milwaukee-based motorcycle company, the dealership, located in Beijing, sells Harley-Davidson motorcycles, parts and accessories, and merchandise and collectibles. The store also plans to sponsor organized rides and provide rider training.
The PRC State Council in late March issued new regulations that require all motorcycle owners to obtain motorcycle accident insurance. Public security authorities may confiscate the motorcycles of riders who fail to comply with this requirement.
In a bid to fight air pollution, the PRC Ministry of Finance (MOF) raised the tax rates on large cars and cut taxes on smaller cars on April 1. Consumer tax on passenger cars with an engine of more than 2 liters rose from 8 percent to 9-20 percent, depending on the engine size, while consumer tax on cars with engines smaller than 1.5 liters dropped from 5 percent to 3 percent.
National People's Congress
At its annual meeting in March, the PRC National People's Congress (NPC) approved China's 11th Five-Year Plan (FYP, 2006-10), the centerpiece of which is the goal of building a "new socialist countryside." The central and local governments will boost spending to improve rural infrastructure, make compulsory education affordable, and expand medical services in rural areas.
China will also attempt to raise its "self-innovation capacity" during the 11th FYP period. The government plans to enact policies that cover loan support, tax incentives, government procurement, and enhanced intellectual property rights protection to encourage research and development, particularly in biotech and information technology.
The NPC also approved the Government Work Report delivered by Premier Wen Jiabao. The report sets the goals for this year of GDP growth of 8 percent, 9 million new jobs in urban areas, and inflation of less than 3 percent. Perhaps most eye-catching is the goal of lowering energy consumption per unit of GDP by 4 percent by the end of this year.
Banking and Finance
The People's Bank of China (PBOC) and National Bureau of Statistics in March unveiled the results of the First Quarter Bankers' Survey Report. The confidence index of respondents reached a historical high of 82 percent, and 81 percent of surveyed bankers indicated that the PBOC's monetary policy was "just right."
The survey also showed that the demand for bank loans remains high, with 62.5 percent of banks indicating growth in loan requests from the fourth quarter of 2005. Loan applications rose at 74 percent of rural commercial banks, 67 percent of state-owned commercial banks, and 51 percent of foreign-invested banks.
Internal auditors account for less than 1 percent of staff in Chinese banks, compared to 2 to 5 percent in foreign banks, according to Ernst & Young International. Analysts say that this may hamper the PRC government's efforts to force domestic banks to enhance internal controls.
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Environmental Protection
The Beijing Municipal Environmental Protection Bureau (EPB) reported that the water quality in the majority of rivers in the Beijing area fails to meet national standards. Forty-seven of 78 rivers have water quality of level V, the poorest water quality on the I-V scale. The Beijing EPB will regularly publicize the results of its water quality monitoring beginning this year.
In mid-March, the Guangdong provincial government announced plans to organize a mass swim across the Pearl River in August to demonstrate its resolve to fight water pollution. Guangdong Mayor Zhang Guangning said that the city has spent ¥9.5 billion ($1.2 billion) on antipollution measures for the Pearl River since the late 1990s when the river began to smell and could no longer support fish. The last mass crossing of the Pearl River occurred in the 1970s, according to Xinhua News Agency.
Standards
The International Organization for Standardization (ISO) in March rejected China's request that its wireless local area networks (WLAN) encryption technology, WLAN Authentication and Privacy Infrastructure, be adopted as an international standard. ISO voted to adopt IEEE 802.11i instead. China plans to appeal the vote at a June ballot review meeting in Prague.
WTO
In late March, the United States and European Union launched a World Trade Organization (WTO) case against China on its tariff treatment of auto parts. The case is only the second WTO case against China for the United States. The first, which involved PRC tax rebates on semiconductors, was resolved during the consultation phase of the case, before it reached a WTO dispute settlement panel.
China criticized the United States for imposing unreasonable investment restrictions based on national security and its export controls over sensitive technology during the WTO's review of US trade policy. As the CBR went to press, the WTO was expected to urge China to adopt a more flexible exchange rate policy and strengthen its protection of intellectual property rights during its review of PRC trade policy.
Media, Publishing & Entertainment
The PRC State Administration of Radio, Film, and Television issued a notice in March mandating that TV programming involving contests should reflect a "correct world view" and values. In addition, the attire of contest participants should not be "vulgar" and must be consistent with "the public's view of aesthetics." According to observers, the notice is aimed at reining in TV shows such as "The Mongolian Cow Sour Yogurt Supergirl Contest," a knockoff of "American Idol" that attracted more than 400 million Chinese viewers last year.
Warner Bros. Entertainment Inc. opened its first store in China in late March. Operated by Hutchison Harbour Ring Ltd., the store is located in Shanghai. Warner Bros. indicated that it plans to open more than 200 stores in the next few years, as the toy market in China is expected to reach $12.5 billion by 2010.
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Telecom
China will not issue voice-over-internet-protocol licenses until 2008, according to Tom Online Inc., a Chinese Internet portal company that has formed a joint venture with Skype Technologies SA. Domestic fixed-line operators are reportedly concerned that allowing calls between computers and telephones would undermine their core business.
Trade
Citing rising costs for manufacturing inputs, most Chinese exporters are likely to raise their prices over the coming year, according to a Global Sources China supplier survey, which polled roughly 1,100 enterprises. More than 60 percent of respondents said they will raise their prices over the next 12 months, with most expecting an increase of 5 to 15 percent. The exporters said that their top two challenges are price competition and rising raw material costs.
In March, Zambia joined Australia, Iceland, New Zealand, and South Korea to become the 53rd country to grant China market economy status. None of China's top three trading partners, the European Union, United States, and Japan, has yet recognized China as a market economy.
Taxation
For the first time, MOF imposed consumer taxes of 10 percent on golf equipment and yachts and 20 percent on high-end watches. The move is widely seen as an attempt by the government to demonstrate its commitment to reducing the widening income inequality in China.
MOF also mandated a tax of 5 percent on wooden chopsticks and wooden floor panels to help slow the consumption of timber. According to press reports, China produces more than 45 billion pairs of disposable wooden chopsticks annually, consuming nearly 1.7 million cubic meters of timber, or about 25 million trees.
US-China Relations
Following their widely anticipated visit to China, Senators Charles Schumer (D-NY) and Lindsey Graham (R-SC) announced that they will postpone until September 29 a vote on their bill, which would impose tariffs of 27.5 percent on imports from China unless Beijing allows the renminbi to appreciate significantly. The two senators said they are convinced that progress will be made on the issue of China's exchange rate policy.
A 25-member US delegation of table tennis officials, coaches, and players visited China in April to commemorate the 35th anniversary of "ping pong diplomacy," which helped pave the way for President Richard Nixon's visit to China in 1972 and the subsequent normalization of bilateral relations. The US delegation included seven members of the original 1971 delegation.
Rail
The PRC Ministry of Railways approved in March the construction of a Beijing-Shanghai high-speed railway. More than 70 percent of the railway's components will be sourced from within China, said Vice Minister of Railways Sun Yongfu.
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