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ASIALINK - April 9th 1999

Mr Chairman, distinguished guests, ladies and gentlemen, good evening. It is my privilege to deliver my speech at the invitation of chairman Carrillo Ganter and thank you very much for your participation. My speech tonight will consist of three parts.

Part 1: A brief introduction to the present economic development of China and Shanghai

Ever since its opening up and reform 20 years ago, China has made great achievements in its economic development. China's economy still maintains a comparatively rapid growth. Last year, though confronted with the external Asian economic turmoil, and suffering from an internal flood disaster, China's GDP in 1998 amounted to RMB7,955.2 billion which is equivalent to US$961 billion, according to the current exchange rate. It was 7.8% up from that of 1997, and 5.8% higher than the global level, and probably three times that of Australia's.

Of that volume, total import - export volume for 1998 reached US$323.93 billion, 0.4% lower than that of 1997. Exports totalled US$183.76 billion, 0.5% higher than that of 1997. Imports totalled US$140.17 billion, 1.5% lower than that of 1997. The actual utilisation of foreign investment amounted to US$58.9 billion last year. Foreign currency reserves reached US$145 billion, an increase of US$5.1 billion from that of 1997.

From 1995 to 1998, Shanghai's GDP maintained a two-digit growth rate. In 1998 Shanghai's GDP growth rate reached 10.1%, which is GDP volume totalling RMB368.82 billion. Under the current exchange rate, Shanghai's current GDP per capita reached US$3,400.

The function of Shanghai's port has also improved. Imports and exports via Shanghai's port in 1998 amounted to US$63.64 billion, which was one-fifth of China's total volume, and a growth of 8.4% from that of 1997. Exports were US$37.46 billion and imports were US$26.18 billion. In 1998 Shanghai's foreign trade volume totalled US$31.344 billion; 5.2 % higher than that of 1997, among which imports were US$15.388 billion and exports were US$15.956 billion; increasing by 4.5% and 5.9% respectively from those of 1997.

Foreign-funded enterprises have become an active new force in pushing forward Shanghai's exports. The total import and export volume of Shanghai foreign-funded enterprises in 1998 reached US$18.217 billion; 9.9% higher than that of 1997. Among that volume, the import was US$10.053 billion, 65.33% of Shanghai's total, and exports were US$8.164 billion, 51.1% of Shanghai's total. That means foreign-funded enterprises have become the number one exporting force, taking out more than 51% of total exports.

And then comes our State Owned Enterprises, altogether maybe 40-something percent. And then the private sector, at the moment, smaller because it only started from the beginning of this year when the private sector became authorised to do import and export business. But I believe that in no time this sector will grow steadily.

Shanghai's utilisation of foreign capital in 1998 showed two obvious changes.

1) Among the newly approved foreign-direct investment projects, wholly owned foreign investment projects take up more than 50%. This is something new. In the early stages, joint-venture enterprises constituted the major part, but now, wholly-owned foreign-owned ventures have taken up half of the whole thing.

2) Contractual foreign investment totalled US$5.848 billion; 9.92% higher than that of 1997, among which the capital increase in the existing projects amounted to US$1.631 billion.

This is a proportion of 28% of Shanghai's total contractual foreign investment, which means existing foreign enterprise companies are increasing their investments in Shanghai.

Part 2: The potential co-operative field and prospects between Australia and China

Recently, the Chinese government adopted a series of active measures to put forward the development of foreign trade. Laws and regulations covering the acquisitions of and mergers with China's state-owned companies are now in the process of formulation. The import tariff covering three categories (1,014 items) has now been reduced.

Foreign banks are allowed to establish their branches in more areas of China. All these measures and policies will hasten China's integration with the global economy and make China's foreign trade even more energetic. At present, China only takes up 3% of global trade. So there is still much room for us to grow. China can strengthen its co-operation with foreign partners in the following aspects:

1) Investment. In the past few years, Shanghai has invested about RMB200 million in fixed assets every year, in which infrastructure construction takes up about 30%. These investment projects bring a series of complementary projects bringing business opportunities to foreign investors.

2) Trade. The economic development of Shanghai still demands the import of raw materials, high-tech equipment, etc. This demand forms a potential market for foreign businessmen. I would like to mention here that we buy a lot of things from this country. Not mostly from Victoria - we buy raw materials from Perth. But we do buy many other things from you!

3) Probe into new trading methods. This includes, for instance, establishing direct links with large international chain-stores/retailers, exploring ways of trade co-operation with high-tech foreign investors and pushing forward the co-operation of the international service trade between various partners etc.

4) Technological scope. Shanghai encourages foreign entrepreneurs to invest in high-tech industries. This will not only benefit Shanghai's technological development but also meet the interests of developed nations.

5) Restructuring State Owned Enterprises with foreign capital. Shanghai's municipal government encourages large and medium sized State Owned Enterprises to reorganise their assets utilising foreign capital, permits small-sized State Owned Enterprises and collective enterprises to look for their foreign joint-venture partners or foreign co-operative partners. So we warmly welcome foreign investors' participation in the acquisition of, merger with and holding shares in our medium and small-sized companies. Of course if you have an interest in our big, big State Owned industries do come. They are too big to handle.

Australia is an important country in the Asia-Pacific region. It has developed close relationships with Asian countries in the past few years. Australia has huge potential in influencing AsiaÍs development. According to statistics from the World Bank, while taking tangible and intangible assets into consideration, Australia ranks first, regarding per capita wealth, which is really something good. And just now when we had our meeting with the Investment Centre, they told me that according to the United Nations, Melbourne is the number one liveable city.

At present Asia is Australia's most important export market with annual exporting volume totalling over US$30 billion. And this market is still growing. Both China and Australia are located in the Asia-Pacific region. They have neither fundamental contradictions nor historically unsolved problems. In the year 1972, when China and Australia established a diplomatic relationship, bilateral trade volume only totalled US$86 million. This figure grew to US$5.33 billion in 1998 with an annual growth rate of nearly 20%. Now China is Australia's fifth biggest trading partner, while Australia is China's ninth.

As far as Shanghai is concerned, our number one trading partner is Japan, which takes up approximately 30% of our market. The States come second, something like 17%, and then the European Union, about 14%. And fourth is Hong Kong. Of course Hong Kong is part of China but when we are talking about trade we consider them outside of China. Hong Kong takes up about 11%. When we are talking about Australia you take up less than 2%, so there is a long way to go.

By the end of 1997, Australia had 3,011 direct investment projects in China with the actual investment capital totalling US$1.27 billion. At the same time, Australia is one of the most important destinations of China's overseas investments. Besides, by the end of May 1998, over 80 Chinese projects utilising mixed government loans from Australia had come into effect with contractual capital amounting to US$995 million.

These technological cooperations and loans not only propel China's economic development, but also facilitate Australia's export of technology and equipment to China, creating job opportunities for the Australian people. Both Australia and China have their own economic advantages. So bilateral trade has an obvious complementary nature.

Since 1992, China has reduced its tariff four times covering a wide range of commodities. Compared with the average tariff rate of 1992, the present tariff rate has been reduced to 17% from 43.2% originally and it will be further reduce to around 10% by the year 2005. The tariff reduction provides good conditions to develop long-term Sino-Australian economic and trade co-operation.

Ladies and gentlemen, please allow me to take this opportunity to share with you my view on economic and trade co-operation and its prospects between Australia and my city, Shanghai. The economic and trade relationship between Australia and Shanghai as well as the whole of China has maintained a smooth and continuous development. Starting from the 1990s, the trade relationship between Shanghai and Australia has maintained a smooth development too.

In the year 1998, the trade volume between Australia and Shanghai added up to US$725 million, a proportion of 2.32% of Shanghai's total. Shanghai's exports to Australia reached US$306 million, taking up only 1.92% of Shanghai's total, which was 2.4 times the figure in the year 1991. Small as it is now, it is already four times as big as it was several years ago. Shanghai's imports from Australia reached US$419 million, taking up 2.73% of Shanghai's total, which was 6.4 times the figure in the year 1991.

Australia has now become Shanghai's 8th biggest trading partner. Last year Australia enjoyed a trade surplus with China of US$113 billion. That is not very big. Shanghai's main exported commodities to Australia include: garments 28.88%; textile products 13.05%; mechanical equipment 6.54%, rubber and relevant products 4.60%; bags, shoes and hats 4.9%. Shanghai's main imported commodities from your country include ferrous metals 56.51% (mostly from Western Australia); fertilising and agricultural chemicals 23.06 %; textiles, raw materials 10.3%; non-ferrous metals 9.75%; edible animal meat and by-products 4.43%. For quite some time since early this year, each morning I drink Australian milk for a change!

The economics of Shanghai and Australia complement each other to a large extent. Shanghai enjoys advantages in mechanical products; whilst Australia in high-tech ones. There will be bright co-operative prospects in economics and trade between Shanghai and Australia. Besides, Australia continues to increase its direct investment in Shanghai. By the end of 1998, Australia had 339 investment projects in Shanghai, with the contractual foreign capital reaching US$339 million, taking up only 1% of Shanghai's total foreign investment. It shows that Australia still has a lot of business opportunities in Shanghai.

I have good news to announce. According to statistics, in the first two months of this year Australia became the third largest investor in Shanghai, next only to the United States and Hong Kong. So I think in the months to come, there will be more and more Australian investors coming to Shanghai.

Part III. Shanghai commodities entering international chain-store networks

Ever since the year 1990, the global economy has been more and more influenced by multinational companies with the strategic target of globalisation. According to relevant statistics, in some developed countries including this country, sales through the retailer chain stores take up 30-50% of the total sale of consumption goods. And this kind of sale enjoys growing momentum. One important task of my delegation or the Shanghai Foreign Economic Relations and Trade Commission is to enlarge the share of Shanghai's commodities in the international retailer shops.

Australia takes the lead in the chain-store business. It has famous chain stores such as Coles-Myer, Woolworths, etc. But unfortunately Shanghai so far has not yet found its way directly into these retailing chains. And our share in the network sale is very limited. I know we sell some outdoor furniture to this market Ü a few million US dollar business. We sell some Asian food to Oriental merchants. We sell some clothes Ü womens' and childrens' wear, but the quantity is not that big. As far as I know, Australia has a large demand for Asian or Chinese products, especially textiles, garments. You have no quota problems as we have with the US and EU countries. And we have some mechanical products that are good markets here in this country.

To try to help our enterprises to establish direct links with Coles-Myer and Woolworths, I have this delegation and now I'm here to talk to you all. Some of you may help us to find better ways to help our enterprises to do our business better here and some of you may help us find opportunities to invest here.

Ladies and gentleman, at the turn of the century, China and Shanghai is imbued with economic vitality and ready to provide investment opportunities and a good investment environment to international entrepreneurs. Meanwhile, Australia has some economic bases. The 27th Olympic games, which is to be held in Sydney in the year 2000 will bring more business opportunities to Australia. So let us make joint efforts to write a brilliant new chapter of mutual co-operation and common development between Australia and Shanghai across the century.

Thank-you very much.