Foreign companies see green
Lan Xinzhen

David Dollar, the World Bank’s Country Director for China and Mongolia, stated at the Fourth China Investment Climate Forum held in Hangzhou, capital of Zhejiang Province, on November 11 that foreign companies’ return on investment in China reached as high as 22 percent.
Dollar noted that this figure was from a World Bank survey of 12,400 enterprises in 120 Chinese cities. About 8 percent of the respondents are state-owned, 28 percent have foreign investment, and the remaining 64 percent are private businesses. The return on investment of foreign-funded companies is 22 percent, while that for private enterprises is 19 percent.
“Judging from the worldwide situation, the return on investment of both foreign-funded and private companies in China is very high,” Dollar said.
The white paper of the American Chamber of Commerce in China shows that among the 450 U.S. companies surveyed in 2005, some 68 percent were profitable or prosperous.
Foreign investment has entered hot industries like banking, insurance, telecommunications, automobiles, logistics, retailing, manufacturing, energy, iron and steel, IT, websites and real estate. According to a report from Xinhua News Agency, among industries that are open to foreign capital, the top five companies in each industry are controlled by foreign capital. Foreign capital has control over the majority of assets of 21 industries among China’s 28 major industries.
The tempting returns from the Chinese market inspire foreign-funded enterprises to constantly expand investment in China.
Most profitable industries
According to statistics from the Ministry of Commerce, National Development and Reform Commission (NDRC) and the National Bureau of Statistics, foreign-funded enterprises in manufacturing, retailing and pharmaceutical industries are making the largest profits.
The manufacturing industry in China has always been the first choice for foreign investors, and foreign-funded enterprises now take the largest share in the market of this sector.
Statistics from the National Bureau of Statistics show that from January to October this year, all state-owned industrial enterprises as well as non-state enterprises with annual sales exceeding 5 million yuan reported total profits of 1.47 trillion yuan, increasing by 30.1 percent compared with the same period last year. The total profits of foreign-funded and Hong Kong-, Macao- and Taiwan-invested companies hit 410.5 billion yuan, up 27.7 percent year on year.
The Ministry of Commerce once published a list of China’s top 500 foreign-funded companies in terms of sales from 2004 to 2005. They included 405 manufacturing companies, accounting for 81 percent, and nine of the top 10 belonged to the manufacturing sector.
In the five years from 2001 to 2005, the annual increase of industrial added-value of foreign-funded companies was around 30 percent, contributing to one third of the country’s gross industrial output value. The tax paid by foreign-funded companies during the five years increased by 22 percent annually, accounting for over one fifth of the country’s total tax revenue.
At present, major telecommunications, petrochemical, automobile and mechanical equipment manufacturers worldwide have extended their production networks to China. More and more multinational companies have placed China as their bases for manufacturing, marketing, raw material purchasing, research and development and human resources development.
Retailing industry
Statistics from the Ministry of Commerce show that the average profit rate of foreign-funded retailing enterprises was around 3.7 percent in 2005.
Since the Chinese retailing industry was fully opened to foreign capital on December 11, 2004, transnational companies have made great strides in penetrating into the Chinese retailing market. Statistics from the National Bureau of Statistics show that from January 2005 to September 2006, another 1,580 foreign retailing enterprises opened up shops in China, five times that before the opening of the market. After China opened its business sector in 1992, and until the end of 2004, only 314 foreign-funded retailing companies opened shops in China.
The substantial increase in the sales of foreign-funded retailing companies as well as the huge potential of the Chinese consumption market have tempted foreign retailing companies to open more stores in the country. Currently, the number of stores of Lotus Super Center, Wal-Mart and the British furniture retailer B&Q has all doubled from the year 2004.
In big metropolises like Beijing, Shanghai and Guangzhou, the retailing market is in the main controlled by foreign retailers.
Pharmaceutical industry
According to statistics from the National Development and Reform Commission, in the first half of this year, the aggregate industrial output value of the pharmaceutical sector was 251.09 billion yuan, a rise of 19.47 percent compared with the same period last year. The total profit of the pharmaceutical industry reached 18.09 billion yuan, up 7.65 percent. Among the sales of the pharmaceutical industry, that of Hong Kong-, Macao-, Taiwan- and foreign-invested companies accounted for 75 percent, and their combined profit made up 80 percent of the sector’s total nationwide.
When foreign companies began to invest in the Chinese pharmaceutical industry, they first set up a production base in China, and then transferred the whole operational body, including research and development, production, sales and purchasing into China. In recent years, they have been devouring the Chinese traditional medicine market and entering the market of the country’s medical treatment system. The world’s top 20 multinational pharmaceutical companies have already established joint ventures in China. Among the list of the top 500 foreign-funded companies in China cited by the Ministry of Commerce for 2004 and 2005, there were 14 involved in the pharmaceutical industry, with 13 of them controlled by foreign capital.
New investment trend
The past two years have witnessed new changes in foreign investment in China owing to China’s commitments to the World Trade Organization to fully open the country’s market.
“Foreign capital is now being invested in the financial sector,” noted Xin Houyuan, researcher with the Chinese Academy of International Trade and Economic Coope-ration under the Ministry of Commerce.
Following the listing of the Bank of China, the Construction Bank of China and the Industrial and Commercial Bank of China, foreign companies have been investing in China’s financial sector through the securities market. For instance, since June 2005, Bank of America has bought $2.5 billion and Singapore’s Temasek Holdings $1.4 billion in stock of the Construction Bank of China. In August 2005, the Royal Bank of Scotland held $3.1 billion in the Bank of China.
With its full opening on December 11 this year, the financial sector is expected to become a focus of foreign investment.
According to statistics from the China Banking Regulatory Commission, by the end of December 2005, foreign banks had set up 254 offices in China. Standard Chartered plans to extend its network to over 20 branches before 2008 and aims at grabbing 5 percent of China’s retail banking market by 2015.
The Chinese securities market is a new hot area for foreign investment. Currently, China has opened the B-share market to foreign investors, and begun to open the A-share market to qualified foreign institutional investors, which means China has opened its domestic stock market to foreign capital. In terms of securities firms, China is beginning to widen market access to foreign capital. In 2005, UBS paid 1.7 billion yuan to acquire 20 percent of the shares of Beijing Securities to become the largest shareholder of the latter.
Energy-related fields have also attracted significant attention from foreign investors. In September 2005, Peabody Energy, the biggest private coal company in the United States, launched a representative office in Beijing. Currently, Peabody Energy has had contacts with China Huaneng Group, the Shenhua Group Co. Ltd. and some large iron and steel companies in China, and will provide raw materials for and carry out technological exchange with Chinese electric and iron and steel companies.
Energy companies based in Australia, South Korea and Japan are also seeking opportunities to develop coal mines in Shanxi, Shaanxi and Inner Mongolia through shareholding.
In addition, foreign capital will sweep into the petrochemical industry. On December 11 this year, China opens its refined oil wholesaling market to foreign capital, marking the end of the transitional period following China’s WTO accession and the full opening of the domestic oil and petrochemical market.
Currently, BP, Oman Oil, ExxonMobil and Shell have all been involved in the Chinese petrochemical industry.
It is foreseeable that in the next few years, more foreign capital will pour into China’s petrochemical sector.
“In terms of the investment strategy, foreign investors give priority to acquisition or exclusive investment,” noted Xin.
In the early years of China’s reform and opening up, foreign investors chose to set up joint ventures or cooperate with Chinese enterprises. In 2005, however, exclusive foreign-funded enterprises accounted for 73.4 percent of the total number of newly established companies. Meanwhile, acquisition has become another important method for foreign capital to enter China. From 2005 to 2006, acquisition with foreign companies acquiring Chinese ones became a common practice. For instance, Wal-Mart acquired Trust-Mart, which ranked 11th in the Chinese retailing market. After acquiring 40 percent of Shandong SEM Machinery Co. Ltd.’s stocks this year, Caterpillar is seeking stock in China’s leading engineering and mechanical enterprises like Xiamen Machinery and Shanghai Diesel Engine Co. Ltd. The number of acquisition cases involving more than 100 million yuan each has exceeded a dozen between 2005 and 2006.

(The Daily Mail-Beijing Review Articles Exchange Item)


Empty promises of Olmert to Palestinians
Uri Avnery

A FRIEND of mine, who was brought up in Egypt, took part in the interrogation of Egyptian officers captured in the 1956 Sinai war. An Egyptian lieutenant-colonel told him: “Every time David Ben-Gurion gave a speech declaring that he was holding out his hand for peace, we put our forces on alert.”
And, indeed, it was a typical method of Ben-Gurion: Before launching a military operation, he would make a speech culminating with “We are holding out our hand for peace!” He frequently added that he was ready to meet the Arab leaders face to face, that he was in favor of negotiations without pre-conditions, and such.
Now, Ben-Gurion has an heir.
True, even in his darkest dreams Ben-Gurion could not have imagined an heir like Ehud Olmert — a politician personifying all the traits that Ben-Gurion detested. But, as the Bible says, “the dead praise not the Lord” (Psalm 115) nor can they choose their heirs.
Last week, Olmert went all the way to Ben-Gurion’s grave in the remote Negev and made a speech designed to establish his status as his successor. No point wasting words on this pretension. But it is certainly revealing to analyze the speech itself.
On the face of it, a peacenik speech the likes of which we have not heard for some time. Some said that this was an answer to the words addressed to him by the writer David Grossman at the Rabin memorial rally. And indeed, there is a resemblance between the two: Just as Grossman’s speech was rich in sublime values and poor in practical proposals, so Olmert excelled in impressive phrases but failed the test of content.
What did he say, after all?
“If you (the Palestinians) set up a new government that will undertake to fulfill the principles of the Quartet, a government that will realize the Road Map and bring about the release of Gilad Shalit — I shall propose to Abu-Mazen (Mahmoud Abbas) to meet him immediately, with the aim of conducting a real, open, sincere and serious dialogue between us and you.” (I have translated the words literally, since the official translation has edited the text.)
Looks good. But if one looks again, one realizes that it is just a soap bubble.
Since the days of Ben-Gurion, all our governments have used this tactic: say “yes” to every peace proposal, and add a small prior condition that turns “yes” into “no”.
What does Olmert demand from the Palestinian government? Little things: To recognize Israel’s right to exist without fixed borders (and without Israel recognizing the right of a Palestinian state to exist within the 1967 borders), to stop the violence (without a parallel commitment by Israel) and to recognize all the agreements signed in the past (almost all of which have been violated by Israel no less than by the Palestinians.)
On top of this, the Palestinian government must fulfill its “obligations” under the Road Map. This ridiculous document, a product of Bush & Co., demands that the Palestinians’ first step must involve dismantling all the “terror organizations”. Meaning: All the military organizations of the Palestinian parties. As long as the occupation is in force, this is a completely impossible and unreasonable demand and the Palestinians, of course, do not agree. It’s like demanding that Israel must dismantle the IDF as a first step.
Olmert does not suggest that Israel, too, would follow the Road Map. According to that document, parallel to the dismantling of the Palestinian organizations, Israel must stop all settlement activities. In practice, these were not suspended for a moment and are in full swing even now.
What will happen if the Palestinians fulfill all these one-sided conditions? Olmert will agree to meet Abu-Mazen “immediately”. What for? In order to conduct a “real, open, sincere and serious dialogue.”
The words were chosen meticulously. Not “negotiations”, God forbid, but “dialogue”. A strictly non-committal term. If we eliminate from the text all the nice words that only serve as decorations — “immediately”, “real”, “open”, “sincere”, “serious” — all that remains is the agreement to a meeting. Perhaps there are people who are eager to meet Olmert — it’s a matter of taste — but this has no political meaning at all.
Olmert does not spare words. “In the framework of the dialogue (again “dialogue” and not “negotiations”) and in accordance with the Road Map (see above) you (the Palestinians) will be able to establish an independent and viable Palestinian state, with territorial contiguity in Judea and Samaria (Olmert uses these occupation terms instead of the term “West Bank”, which has become a symbol of the opposition to the occupation), a state with full sovereignty and defined borders.”
Now that is really nice. No more “temporary borders”, as in the Road Map, but “defined borders”. Only one little detail: Where will these run? Some might say: One does not disclose his final positions before the start of the negotiations (sorry, dialogue). But the Palestinians are expected to give everything before the start.
“We, the state of Israel, will agree to the evacuation of many territories and the settlements that we have established therein. This is extremely difficult for us — akin to the Parting of the Red Sea (a Hebrew saying) — but we will bear it, in exchange for true peace between us and you.”
Sounds nice. But what does it mean? The evacuation of “many territories” and not “all the territories”, not even “most of the territories”.
Also, not “the borders that existed on the eve of the Six-Day War”. Not even “borders based on the Green Line”, which would allow for small changes and an agreed swap of territories. But a new border which would annex to Israel the “settlement blocs”, as defined by the Separation Wall. That means the annexation of at least 10 percent of the West Bank, and perhaps much more.
And what’s to stop that? After all, at this stage the other side would already be disarmed and would have agreed to recognize an Israel without fixed borders.
That is the old plan of Ariel Sharon: To dismantle the small and dispersed settlements, in which some 20 percent of the settlers live, in order to annex to Israel the territories occupied by the remaining 80 percent. Olmert does not say what would happen to the expanded Jordan Valley, which constitutes about 20 percent of the West Bank and which is already completely cut off from it (with the exception of Jericho). Nor does he mention East Jerusalem, in which another 200,000 settlers have established themselves.
He promises that with the release of the captured soldier, Gilad Shalit, he would be prepared “to release numerous Palestinian prisoners, including ones who were sentenced to lengthy prison terms, in order to increase the trust between us and prove that we indeed hold out our hand for peace.”
After eliminating all the bla-bla from this sentence, what it says is that he would agree to release veteran prisoners, with “blood on their hands”, which he and his predecessors have always refused to do, in return for the soldier, as demanded by Hamas. That only confirms the Palestinian view that Israel understands only the language of force and that it would never give up anything unless compelled to do so.
It seems that Olmert was in an especially generous mood, so he added: “(After) the cessation of terrorism and violence...we will significantly diminish the number of roadblocks, increase freedom of movement in the territories, facilitate movement of people and goods in both directions, improve the operation of the border-crossings to the Gaza Strip, and release your monies held by us, in order to alleviate the humanitarian hardship which many of you suffer.”
The correct definition is “spin” — just some more sleight of hand prepared by “image advisors” and publicity experts.
True, even spin can have some positive value. Olmert has decided to devote the spin to matters of peace, not matters of war. This shows that he believes that Israeli public opinion is moving in this direction. The Israeli peace camp can congratulate itself for that. But there is no cause for dancing in the streets.
Why did Olmert make such a speech at all? And why now?
There is an internal reason. In Israel, the impression has (quite rightly) gained ground that this is a government without an agenda, without a political plan, a “hollow” government (to use Grossman’s phrase), whose only concern is political survival.
Olmert thought it necessary to fill the vacuum and to create the image of a prime minister who knows what he is doing and is working towards a clear goal.
And there is also an external reason, which may be more significant. Olmert may be bankrupt, but President Bush is even more desperate. He has come to the Middle East in order to convince the American voter that he knows what he is doing in Iraq and in the whole region. He needs a manifest achievement. He is carrying on the tradition of his predecessors that an American president who does not know what to do turns to the Israeli-Palestinian conflict and achieves a “breakthrough”. Bush demanded that Olmert make a gesture to impress the world. So he made a gesture — delivering a speech full of nice phrases and promises with nothing behind them.

Reflections on war and peace
M. J. Akbar

The last time Switzerland went to war was over five centuries ago. We are at the Geneva Center for Security Policy, in the sunlight of the Alps, to discuss what is politely called the “security” environment of South Asia. What they mean of course is insecurity, and South Asia extends up to the arc of Central Asia: The epicenters of the latest conflict are Afghanistan and Iraq . Geneva is arguably the world capital of peace, a safe haven for the United Nations and NGOs. Peace is a militant ideology of Switzerland, a far stronger virtue than morality for a country that has sidestepped the rough winds of high militarism, rampant imperialism and barbaric Nazism to place itself on the lofty peak of neutrality. When such a nation feels the surge of war at its doorstep, then the shadows have stretched far beyond the epicenter. The sequence is lethal, the consequence bitter. War kills, maims and, perhaps worst of all, dehumanizes, since it treats death, rather than life, as normal.
It is a myth that the world has been at peace since World War II. War merely shifted its theater of operations to Asia, Africa and Latin America. What is the corpse count of the last 60 years? No one knows, except that we are still counting in the bloodstained crevices of Rwandan memory, or the daily bulletins of Iraq. I have not checked the dictionary, but it seems logical that bulletin should be a philological cousin of bullet. How many have died in Iraq already? Half a million? Less? This much is certain: Each dead man, woman and child, whether Arab, American or British, has relatives and friends who will live the pain and alchemize their anger into some stream of political lava. This lava has already scalded the principal architects of this war, George Bush and Tony Blair. Both have aged twenty years in five. Both have been defeated by Iraq, although their nations fight on. Both are in the process of handing over leadership of this conflict to a successor. Blair will go in a few months. Bush will struggle through a blinding mist for a little longer, having, in the words of Lee Hamilton, co-chair of the American Iraq Study Group, depleted America’s blood and treasure. And moral authority.
Sequence dominates the headlines, consequence rarely gets honored by similar attention, since it kills deviously, in silence, with a slow poison that courses through the sinews of society. One of the most startling statistics I heard is that there are now five million heroin addicts in Pakistan. That means, roughly, that one out of 30 Pakistanis is an addict. Heroin is a war crop of Afghanistan, a byproduct of a quarter century of invasion, turbulence, civil war and occupation. The Taleban have much to answer for, but in one respect they were right: They burned out poppy cultivation. Before they were defeated Afghanistan’s share of the world’s drug supply was down to seven percent. This year, Afghanistan will supply 90 percent of the world’s street drugs, and production is at such a record all-time high that prices of heroin are going to fall in the dark alleys of America, Europe and Australia.
What is the cash flow of the Afghan drugs trade? Not billions, but trillions of dollars. Who gets rich from this business? Not the Afghan farmer, who gets a pittance. The value addition from field to Amsterdam street is 500 times. How does Afghan poppy reach every corner of the civilized world? On Aladdin’s flying carpet? In the secret pouches of medieval “Islamic fundamentalists” in the pay of some dreaded “caliph”? The business and cash flows are run by men who drink gin and tonic, or bourbon and rye, or shampers in their yachts before they write a check to political lobbies of their choice in flourishing democracies.