Address at the World Trade Center of New Orleans

Good Morning, Ladies and Gentlemen!

It's my great pleasure and honor to share with you my observations on doing business in China. I wish to express my sincere thanks to Mayor Marc H. Morial, Sheriff Harry Lee, the World Trade Center of New Orleans and all my friends present here today and all those at New Orleans, Louisiana who have contributed to the success of this luncheon.

In the last two decades, China witnessed sustained rapid economic growth and the current economic situation in China is very good despite the Asian financial crisis and the disastrous floods last summer.

According to statistics provided by the State Statistical Bureau, between 1979-97, China's GDP soared dramatically from 360 billion Yuan to 7,500 billion yuan, showing an average annual growth of 9.8 percent in terms of comparative prices. The country fulfilled the target of quadrupling the 1980 GDP in 1995, five years ahead of schedule. In 1997, China's GDP came seventh in the world, with per-capita GDP rising from 379 yuan to 6,079 yuan, an average annual growth of 8.4 percent when allowing for price rises. Last year, China's GDP reached 9,600 billion US dollars, with an increase of 7.8% over 1997.

Over the past 20 years, China's agricultural production has developed steadily. Last year the total output of grain reached over 490 million tons. The output of such major farm produce as grain and cotton now ranks first in the world.

In 1998, the industrial production kept steady growth, and the total value-added of the industrial sector was 3,354 billion yuan, up by 8.9 per cent over the previous year. The product structure was further adjusted. Relative high growth was realized in the production of those products that enjoyed high technology and added value, such as electronics, information and telecommunication products.

The past 20 years have also witnessed rapid development of various construction projects. Since 1981 , the country has invested more than 14,000 billion yuan in fixed assets. In 1998, the total size of investment registered even more rapid growth. The completed investment in fixed assets of the country in 1998 was 2,846 billion yuan, representing an increase of 14 per cent over the previous year. Further improvement was scored in the investment structure. The long-term special treasure bond issued by the state and the backup credits were timely appropriated with respect to the availability of capitals. With growing investment, China has achieved remarkable progress in infrastructure construction.

Under the circumstances of Asian financial crisis and the huge floods that rarely occur once in 100 years, China's economy has not only maintained a good momentum of development but also contributed a great deal to the economic development and financial stability in Asia and the world as a whole. China has kept stable the exchange rate of RMB and participated in the aid programs sponsored by IMF to some Asian countries.

The healthy shape of China's economy has solid foundation. We have the correct policy of reform and opening up which is implemented smoothly and resolutely. Major breakthroughs were made in the reform aimed at establishing a socialist market economy. Now China's economy is an interactive one among different ownerships, with state-owned, collective-owned, private-owned and foreign funded enterprises working together. The Second Session of the 9th NPC amended the Constitution in this regard. It stipulates "The non-public sector, including self-employed and private businesses, within the domain stipulated by law, is an important component of the country's socialist market economy". At the same time, the Chinese government made a series of prompt policy decisions to expand domestic demand, increase investment and promote economic growth. Active financial and monetary policies have been adopted in an effort to increase investment in fixed assets and intensify infrastructure construction. Meanwhile, endeavors have also been made to tap the market and stimulate consumption demand. Priority has been given to five specific areas.

First, readjusting investment plans. The growth rate for total investment in fixed assets has been raised from IO percent to more than 1 5 percent.

Second, expanding the area of investment. While investment in agriculture, forestry, water conservancy, railways, highways, and telecommunications, environmental protection and urban infrastructure facilities has increased, that in grain depots, rural power grids, urban economic and practical housing and ecological environment construction also has been added.

Third, increasing fiscal budget and expenditure. The scale of government loans has been expanded, with the central treasury issuing 100 billion yuan worth of 10-year long-term government loans to state-owned commercial banks. The loans are mainly used in projects that help drive up economic growth.

Fourth, actively issuing bank loans. The People's Bank of China cut the interest rates of savings deposits and loans in due course, and various commercial banks have improved financial service and actively added loans to help expedite infrastructure construction. Fifth, energetically exploring the consumption scope in an effort to promote the continuous growth of domestic consumption.

At present, these policies and measures adopted by the central government have already achieved good results. The growth of investment in fixed assets has quickened on a monthly basis. The economic growth has picked up evidently in the first quarter of this year with growth rate reaching 8.3 percent.

China's foreign trade and economic cooperation with foreign countries have developed rapidly. However, export at present faces serious challenges.

Last year, China's aggregate trade value basically maintained the same level of 1997, with continued growth of exports. According to the custom's statistics, total import and export value reached US$324 billion, down 0.4 percent from 1997. Export stood at US$184 billion, up 0.5 percent, while import amounted to US$140 billion, down 1.5 percent. Trade surplus for the whole year hit US$43.59 billion, up 7.9 percent. The composition of import and export commodities further improved as the export value of mechanical and electronic products increased by 12 percent to US$66.54 billion, accounting for 36 percent of total exports. In the first quarter of this year, China's export was 37 billion U.S. dollars, down 7.9 percent due to the weak demand from Europe and some Asian countries. However, imports reached 33 billion U.S. dollars, up by 11.6 percent. The total trade volume was 70 billion US dollars with an increase of 0.3 % over the same period of last year. Trade surplus was 4 billion US dollars.

The newly signed contractual foreign investment realized recovery growth and the actually paid-in capital continued to grow. Last year, the number of newly approved foreign-funded enterprises nationwide was 19,846, down 5.7 percent from the previous year; the newly signed contractual foreign investment witnessed a growth of 2 percent to US$52 billion, realizing growth rebound after decline by a large margin for two years in a row in 1996 and 1997. The actually utilized foreign capital grew by 0.67 percent to US$46 billion. Features of utilizing foreign capital in 1998 could be summed up as follows: foreign investment from Europe, America and some free ports continued to make headway; the industrial structure of foreign investment further improved; the average amount of foreign capital used by each project increased to some extent; and the increase of foreign investment in central and west regions significantly surpassed that in east China.

In the first quarter of this year, China approved 3,516 foreign-funded enterprises, down 11%. Contractual investment reached 8.7 billion U.S. dollars, up 02%. Actually paid-in capital was 7.3 billion U.S. dollars, down 14.6%. By the end of March, this year, China had approved a total of 328,000 foreign-funded enterprises with US$581 billion of contractual foreign capital and US$275 billion of paid-in foreign capital.

Overseas project contracting and labor service made fairly great progress. The newly signed contracts on overseas project contracting, labor service and design consultation were valued at US$11.77 billion, up 3.7 percent. The accomplished turnover reached US$ IO billion, up 21 percent. At the end of the year, over 350,000 Chinese were providing labor service abroad.

Overseas investment witnessed initial development. By the end of 1998, enterprises investing abroad who had been approved by or registered at the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) had numbered 5,666 involving US$6 billion of contractual investment by Chinese businesses.

Reform of the administrative system of foreign trade and economic cooperation further advanced. For the 1,000 key state-owned enterprises, the system of registration for record on the foreign trade right was enforced, and the coverage of this system was extended to more than 6,800 large industrial enterprises nationwide as of January 1999. The Interim Regulations on Granting the Import and Export Right to Private Manufacturing Enterprises and Scientific Research Institutes was promulgated with the approval of the State Council. The Regulations went into effect on January 1, 1999, and 20 private manufacturing enterprises have obtained the right as the first group pursuant to the approval. The criteria for approving provincial- and municipal-level foreign trade companies to establish subsidiaries in Shanghai's Pudong New Area have been relaxed. New achievements have also been scored in restructuring the export commodities management system.

Multilateral and bilateral economic and trade relations continued to develop. China has strengthened negotiations with the United States and other WTO members, actively participated in the activities of the AsiaPacific Economic Cooperation and played an important role in it. The country has frequently exchanged high-level visits with the United States, European Union, Russia and Japan, laying a solid foundation for bilateral economic and trade ties and pushing forward bilateral collaboration with these countries. Due to the adverse impact of the Asian financial crisis, China's export to Asia plummeted last year. However, its export to other regions increased to varied extent. Export to the United States was US$37.98 billion, up 16.lpercent; Europe, US$28.15 billion, up 18.lpercent; Africa, US$4.06 billion, up 26.5 percent; and Latin America, US$5.32billion, up 15.5 percent. The mainland's export to Hong Kong plunged 9% to US$35 billion in the Jan.-Nov. period last year. The economic and trade relationship between the mainland and Macao developed smoothly which has created favorable conditions for the smooth reunification of Macao this year. Trade volume between the mainland and Taiwan was US$20.5 billion last year, up 3.3%. Taiwan's trade surplus with the mainland was as high as US$12.8 billion last year. By the end of 1998, the mainland's cumulative trade deficit with Taiwan had topped US$90 billion.

This year, we do face a harsh international economic environment, but we still possess quite a number of favorable conditions.

Internationally, China's relations with its trade partners remain good, and the world economy and trade have kept growing. Since China takes a low share of world trade, there is still potential for growth.

Internally, first, the sustained, rapid and sound development of the national economy provides a forceful material guarantee and institutional condition for the progress of foreign trade and economic cooperation. Second, the pattern of diversified operators of foreign trade and economic cooperation has taken initial shape, which represents an unprecedented incentive to all types of enterprises engaged in foreign trade and economic cooperation. Third, the Government has introduced more flexible policies and measures to expand export and attract foreign investment, such as the significant move of further raising tax rebate rates for exports in accordance with international practices. Fourth, by maintaining political and monetary stability and enjoying a huge potential market, China remains an ideal investment site.

Ladies and Gentlemen,

January 1, this year marks the 20^th anniversary of the establishment of China-US diplomatic relations and the signing of the China-US Trade Agreement. In the past 20 years, economic and trade relations have become a major component part of China-US relations.

China is the world's largest developing nation and the US largest developed nation, and the two economies complement each other. The trade and economic co-operation have made remarkable progress and potential is huge.

Chinese Customs figures show our bilateral trade volume reached US$55 billion in 1998, more than 22 times the figure for 1979 when China and the United States established diplomatic relations. From 1979 to 1998, bilateral trade was worth US$364.5 billion. The United States is China's second largest trade partner, and China is the fourth largest trade partner of the United States.

China's modernization drive has provided abundant opportunities for US exports and China's inexpensive labor-intensive products have helped meet US market demand after the United States stopped or reduced its production of middle and lower level consumer goods.

As China furthers its economic reforms and opening up, US investments grew annually. By the end of 1998, 26,600 US-funded projects had been established with contractual value of US$46 billion, and actual spending at US$21 billion.

The United States is China's number one foreign investor in terms of contractual agreements, and was the first to invest in the automobile, computer and life insurance sectors. American companies also have a significant market share in China's chemical products, telecommunications equipment and fast food outlets.

Ladies and gentlemen:

It is the common desire and in the common interests of our two peoples that the annual review of China's normal trade relations be abolished. Mutual grant of NTR is a mutually beneficial arrangement and is the fundamental basis for the development of our bilateral economic and trade relations. The unilateral review by the US side is unfair, and exerts negative impact on the confidence of Chinese and American business leaders in developing our economic and trade cooperation. I hope that the US Government will take the fundamental interests of the people of our two countries into consideration and resolve the issue on a permanent basis so as to lay a more solid foundation for the long-term, steady development of bilateral trade and economic co-operation. I also sincerely hope my American friends present here today will encourage the Louisiana Congressional delegation members to support China in joining the WTO and to grant China permanent NTR.

China's sustained economic development and huge potential market provide enormous room for further development of bilateral cooperation.

With the deepening of China's reform and opening-up drive, the country will open its market wider to other countries.

China plans to give priority to the development of basic industries such as agriculture, energy, transportation and telecommunications, and pillar industries such as automobiles, machinery, electronics and petrochemicals. China now permits foreign investors to establish Chinese-foreign joint and cooperative management travel agencies.

The opening of these areas to overseas investors will provide huge investment and trade opportunities to companies from the United States as well as other countries. China is increasingly becoming a major market where foreign capital, services, and commodities compete with one another.

It is estimated that China will import US$1.5 trillion equipment, technology and products during the seven years from 1999 to 2005. And China welcomes US companies to take an active part in competing in the Chinese market on a equal basis.

Ladies and Gentlemen,

Premier Zhu Rongji has just successfully concluded an official visit to the US. It's of great significance that the Premier Zhu and President Clinton issued a JOINT STATEMENT ON CHFNA'S ACCESSION to the World Trade Organization (WTO) . This is the first agreement on the WTO issue between our two countries. The joint statement stated that the US firmly supports China's accession to the WTO in 1999. During Premier Zhu's visit, China and the US signed three agreements on agricultural cooperation, on Civil Aviation Transportation and on Customs Cooperation. China is committed to lift restrictions on import of US wheat, beef and citrus. To implement the joint statement issued by Premier Zhu and President Clinton, Chinese and US senior officials have been continuing consultations and negotiations on China's accession to the WTO. When China becomes a member of the WTO, China will fulfill its commitment to further reduce tariff rate on such import commodities as automobiles and agricultural produce, further open telecommunication, banking and insurance industries to foreign investors on a gradual basis. This new development will provide unprecedented opportunities for US businesses. Let's work hard together for such a day to come as early as possible.

Even though we have a very favorable environment in doing business in China and business opportunities really abundant, we still need to do a lot of homework in order to make a good start.

First, make a good study of China's policies on foreign trade and economic cooperation. For instance, a clear understanding of China's foreign investment industries guide lines would help you correctly select right industries to invest in. On December 19, 1997, the State Planning Commission and the Ministry of Foreign Trade and Economic Co-operation Promulgated the "Catalogue for the Guidance of Foreign Investment Industries". The Catalogue tells us explicitly the encouraged, restricted and prohibited foreign investment industries. Moreover, we have to keep an eye on the market change which usually have serious impact on the pace of development of specific industries. As the shortage in power supply has been considerably reduced and the growth in power demand has subsided since the mid 90s, only necessary power projects will be allowed to be constructed in the next two years. The focus of power construction will be shifted from expanding the power generating capacity by establishing new plants to the enhancement of power quality and returns.

Second, a good knowledge of China's foreign-related laws is essential to doing business in China. Since the institution of reform and opening policies in 1979, China has drafted and promulgated many new foreign-related laws. Law on Control of the Entry and Exit of Aliens, Patent Law, Copyright Law, Customs Law, Law on Foreign-invested Enterprises and the Law on Foreign Enterprises' Income Tax are just a few among them. According to the relevant laws and regulations, there are three types of foreign-invested enterprises: 1. Sino-foreign joint venture with Chinese enterprises or other economic organizations; 2. Sino-foreign cooperative enterprises with Chinese partners; 3. Solely foreign-funded enterprises. The Lawyers Law, the first of its kind in China, took effect in 1997 . It clearly defines the rights and obligations of lawyers and law firms. During the past five years, Chinese lawyers offered consultation services to more than 250,000 entities, including government institutions and industrial corporations. Many lawyers are now involved in cases concerning intellectual property rights, securities, anti-dumping activities and real estate. Nearly 100 foreign law firms have set up offices in China with the approval of the Ministry of Justice and they are playing a more important role in China's trade and economic cooperation with foreign countries and regions.

Third, Approach the right government departments and choose a reliable partner. The State Economic and Trade Commission of China and local economic and trade commissions at all levels are comprehensive economic departments in charge of the establishment and management of foreign-invested enterprises, providing complete coordinating services. The Chinese economic and trade commissions as well as embassies and consulates general can do a good job in introducing reliable business partners.

Fourth, acquire a good understanding of different communication styles of foreign and Chinese employees. Cross-cultural management and communication conflicts appear to be the norm rather than the exception in international joint ventures. In fact, the successful joint venture may be one that manages cross-cultural communication effectively. Cultural differences often become apparent in the way problems are exposed or resolved. The issue of individual accountability sometimes rises to the fore in the daily operation of joint venture. Western culture emphasize individual responsibility and results and Chinese generally stress cooperation among members of a group. In American culture, individuals traditionally are rewarded for good performance to a far greater degree than in Chinese culture.

Thank you for attention. I am delighted to take your questions.