Overseas Investors Eye China's Service Sector

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Last updated at: (Beijing Time) Wednesday, September 11, 2002

Overseas Investors Eye China's Service Sector

A tough fight is brewing among overseas investors who expect to gain full access to China's burgeoning service sector in the wake of the country's entry to the World Trade Organization (WTO).

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A tough fight is brewing among overseas investors who expect to gain full access to China's burgeoning service sector in the wake of the country's entry to the World Trade Organization (WTO).

Percy Weatherall, managing director of Jardine Matheson Holdings Ltd., said: "In the eighties and early nineties the FDI (foreign direct investment) which China required was in hardware for manufacturing plants. But now, China requires the software which the service industry provides."

Addressing the "2002' International Investment Forum" held during the ongoing Sixth China International Fair for Investment and Trade in Xiamen City, in east China's Fujian Province, Weatherall said that the rise in Chinese people's disposable incomes brought increased demands for more higher quality goods and services.

"And these demands will translate into the need for better ports, roads and distribution channels," he said.

Hu Jingyan, an official from the Ministry of Foreign Trade andEconomic Cooperation (MOFTEC), said here Tuesday that the timeframes for opening up all China's service sectors such as civil aviation, marine transport, tourism, foreign trade and the commercial sector were all set.

Investment in the country's chain stores and logistics sector was now being encouraged although the further opening up of other sectors would be based first on regional pilots, he said.

In response to the policy, Jardine Matheson announced its planat the fair to open a further 250 7-11 convenience stores over thenext four years in China.

Five months ago, France-based Carrefour selected 34 Chinese companies specializing in producing general merchandise and daily necessities as its global partners. The OBI Company, a world-wide retailer specializing in home building materials, signed supply agreements with five Chinese manufacturers and decided that its new shops in Russia would purchase all goods from China.

With China keeping to its WTO membership commitments and drafting a series of laws to regulate its service industry on time,the country's investment climate has improved and the development of many pilot programs is speeding up.

In Shanghai, 10 overseas travel agencies recently were given the go-ahead to establish their solely foreign-funded or jointly-invested agencies although the country's WTO commitment allows nationwide easing of such investment limitations until the end of 2005.

In terms of the civil aviation sector, foreign investment of 30.3 billion US dollars has been utilized since 1980. And the Beijing Aircraft Maintenance and Engineering Corporation, a joint venture set up by Lufthansa AG and Air China, has become one of the more sizeable aircraft equipment providers in Asia.

As the 2008 Olympics Games will be held in China's capital of Beijing, overseas investors believe the country's finance and insurance business will witness fast growth in the coming years.

Tom Jensen, Consul-General of the Royal Danish Consulate General, said: "We'll make no secret of our commercial interest inChina, especially in the insurance sector."

Risk management and designing insurance packages for specific businesses were a specialized area which might help companies saveenormous amounts of money, he said. To become integrated into the global economy, China would surely need to open up this sector andborrow from developed countries' expertise.

Shi Guangsheng, minister of MOFTEC, said at the fair China would continue to follow its WTO commitments by establishing a universal access system for foreign investors, further regulating its service market and rationalizing its industrial structure.

Statistics show that the proportion of the service industry inthe country's gross domestic product has gone up from 21.4 percentin 1979 to 33.2 percent in 2000.

In 2001, a total of 5,212 foreign-invested companies were established within the service industry with actual foreign investment reaching 11.411 billion US dollars, about 24.35 percentof the country's total.

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