Dear friends from the Press:

Welcome to the regular press conference of the Ministry of Commerce. I am Yao Jian, spokesperson of the Ministry. Today is Lantern Festival. First of all, I wish you and your family a happy festival! I am very glad to see you here. Now I would like to brief you on the commercial development of China in 2010 and in January of 2011, and then I will take your questions.

I. China’s consumption market operation

1. China’s consumption market operation in 2010

In 2010, stimulated by the policies of invigorating circulation and expanding consumption, the domestic consumption market kept a steady and fast development. The total volume of retail sales amounted to 15.45 trillion yuan with a year-on-year growth of 18.4%, 2.9 percentage points higher than that in 2009. The real growth was 14.8% after deducting the price factor. The growth rate fell back by 2.1 percentage points compared with that in 2009. Consumption played an important role in the economic growth, as consumption boosted the economic growth by 3.9 percentage points, a contribution rate of 37.3%. Here are the main features of the consumption market:

First, regional consumption has achieved coordinated development. Provinces and cities whose growth rate of consumption was over 18% accounted for 83.9% nationwide. Among those, moderately developed regions like Tianjin, Hainan, Anhui, Jiangxi, Guizhou, Heilongjiang and Hunan witnessed over 19% of fast consumption growth,

Second, the upgrade of consumption structure is accelerating. Urban and rural residents’ demand for transportation, communication, housing, education, culture and entertainment is increasing remarkably, and the upgrade of consumption structure is accelerating In 2010, enterprises above designated size reported 126.1 billion yuan of retail sales of gold, silver and jewelry. with a year-on-year growth of 46.0%, 30.1 percentage points higher than that in 2009. Demand for automobiles increased steadily. According to the statistics of the China Association of Automobile Manufacturers, sales of automobiles totaled 18.06 million nationwide throughout 2010, up by 32.3% year on year.

Third, sales of large circulation enterprises have been thriving. With the improvement of development environment, reform of circulation enterprises has deepened, demand for medium and high-end commodities has picked up steadily, and sales of large circulation enterprises have soared. In 2010, the retail sales of enterprises above designated size rose by 29.9% year on year to 5.8 trillion yuan, accounting for 37.6% of the total volume of retail sales nationwide, and 3.4 percentage points higher than that in 2009. In addition, sales of 3,000 major retailers rose by 18.1% year on year, 10.6 percentage points higher than the growth rate in 2009.

Fourth, new consumption modes have developed rapidly. The change of structure of consumption groups and consumption concept has boosted the transformation of consumption modes. Such consumption modes like on-line shopping, group purchase and shopping by bank cards developed very fast. CNNIC estimated that the sales volume of on-line shopping amounted to 52.31 billion yuan in 2010, up by 109.2% year on year, taking up 3.4% of the total volume of retail sales nationwide.

2. China’s consumption market operation in January 2011

Since the beginning of this year, the consumption market has kept a steady and fast development. According to MOFCOM statistics, sales volume of 3,000 major retailers rose by 26.6% year on year, 7.6 percentage points higher than that in last December. Here are the main features of the consumption market in January:

1) Spring Festival sales flourished. Spring Festival stimulated the sales of commodities like clothes and foods. In January, food sales of 3,000 major retailers rose by 38.6% year on year, drinks up by 32.1%, liquor and tobacco up by 51.05%, 23.5, 17.7, 36.2 percentage points higher than the growth rate in last December respectively. The sales volume of clothes and footwear & hats rose by 37.2% and 33.2% year on year respectively, 18.2 and 13.4 percentage points higher than the growth rate in last December. The thriving Spring Festival shopping also drove up the sales of department stores and supermarkets. The sales of major department stores and supermarkets monitored by MOFCOM went up by 37.1% and 30.55 year on year respectively, 17.6 and 16.4 percentage points higher than that in last December.

2) Sales of gold, silver and Jewelry has kept increasing. Affected by traditional customs and international gold market, sales of commodities as a store of value like gold, silver and jewelry has increased markedly. In January, sales of gold, silver and jewelry of 3,000 major retailers rose by 46.2% year on year, 7.1 percentage points higher than that in last December.

3) The growth rate of sales of home appliances and automobiles fell back. In January, sales of home appliances of 3,000 major retailers rose by 8.1% year on year with the growth rate falling back by 11.1 percentage points compared with that in last December. The sales of automobiles rose by 6.7% year on year, with the growth rate dropping 25.3 percentage points.

As the result of a series of recent policies aimed at stabilizing commodity prices , price hike of major farm produce registered slowed down, with prices of vegetables and aquatic products declining, and the range of price increase of wheat, oil, poultry, meat and egg narrowing down. As suggested by MOFCOM monitor program between February 7th and 13th, average wholesale price of 18 vegetables and 8 aquatic products in 36 large and medium-sized cities dropped by 4.3% and 0.9% week by week respectively, which was the first decline since December 2010 and January 2011 respectively. Vegetable prices declined in 27 of the 36 cities such as Lanzhou(19.2%), Chengdu (15.4%) and Yinchuan (14.6%). It is expected that overall vegetable prices will remain stable with slight decrease as the temperatures rises and vegetable dealers come back to cities after the Spring Festival holiday.

Commerce departments will pay close attention to price changes of bulk commodities in international market as well as the impact of winter drought in regions of North China and Yellow Sea on agricultural production and sales, The work plan of the State Council will be implemented and market monitor will be strengthened in order to track market supply and demand and take corresponding measures to guarantee market supply:

First, emergency supply plan of vegetables, dairy products, and refined oil will be formulated based on weather changes and supply-demand situation. Second, obstacles in supply channels will be unchoked and supply increased through the direct link between the production and sales parties. Third, the role of backbone companies and 1,600 key companies producing important daily necessities and emergency products will be fully played so as to improve emergency response capability. Fourth, commodities like meat, sugar and vegetables will be purchased, reserved and released into market in a timely manner to meet people’s basic needs. Fifth, emergency distribution mechanisms in large and medium-sized cities will be improved on the basis of the existing 330 plus emergency commodity distribution centers and the emergency commodity release network nationwide that covers over 3,100 outlets.


III. Foreign Trade

According to statistics of the Chinese Customs, China’s import and export totaled US$ 295.01 billion in January 2010, up 43.9% year-on-year. In breakdown, export trade amounted to US$150.73 billion, up 37.7% year-on-year, and import US$ 144.27 billion, up 51.0% year-on-year. Trade surplus was US$ 6.46 billion, down 53.5% year-on-year. The main features of China’s foreign trade are as follows:

1. Import and export grew rapidly, and trade balance further improved. In January, export continued a relatively fast growth since last year, as a result of stabilized demand in international market and a rapid increase of export before the Spring Festival. At the same time, driven by the booming domestic economy and price rise of bulk commodities, import hit a record monthly high. Since import grows faster than export, trade surplus decreased substantially, and China’s import and export trade became more balanced. In January, trade surplus of FIEs was US$ 6.07 billion, down 25.1%, and that of state-owned and private enterprises US$ 390 million (of which trade deficit of state-owned enterprises was US$ 18.38 billion, up 97.9%). Al this led the trade surplus down to a 9-month low.

2. Export of textile and light industrial products saw a rapid growth, and the volume and price of import of bulk commodities both soared. Export of mechanical and electronic products increased by 35.3% in January. And export of textile and light industrial products grew fast with that of clothing and garment, textiles, footwear, furniture, plastics, suitcase and toys rising by over 30%. Both volume and price of major bulk commodities soared with the total import value of crude oil, iron ore, unwrought copper, soybean and edible vegetable oil jumped by 74%, of which 32.8 percentage points was caused by price rise.

3. Export to emerging markets maintained fast growth, and import from some of the resource-rich countries increased remarkably. Export to the EU, US and Japan grew by 25%, 34.7% and 34.7% respectively, Exports to emerging markets such as Russia, Brazil and South Africa were better than overall export, up 62.1%、49.7% and 43.4% respectively. Import from some of the resource-rich countries saw a strong growth momentum, of which import from South Africa, Canada, Brazil and Australia increased by 212.5%, 146.7%, 95.4% and 83% respectively, 161.5, 95.7、44.4 and 32 percentage points higher respectively than overall increase rate.

IV. Foreign capital utilization

In January 2011, 2,243 new foreign-invested enterprises were approved to establish in China, up 20.2% year on year. The actual input of FDI reached US$10.03 billion, up 23.4% year on year. The main features are as follows:

Actual FDI in service sector is higher than the country’s average. In January, it reached US$4.69 billion, up 31.8% year on year, and accounting for 46.8% of the country’s total in the same period. Actual FDI in agriculture, forestry, animal husbandry, and fishery sectors amounted to US$140 million, up 15.2% year on year, and that in manufacturing sector stood at US$4.7 billion, up 18.9% year on year, down by 0.1 and 1.78 percentage points respectively in terms of proportion in the country’s total actual FDI inflow in the same month.

FDI inflow into the western regions is much faster than that into eastern and central regions. In January, the actual FDI inflow in western regions reached US$510 million with an 81.1% year-on-year increase. The figures in eastern and central regions were US$8.98 billion and US$540 million, up 23% and down 2% respectively year on year.

The investment from ten countries and territories in Asia to China saw an evident increase. In January, 1,777 enterprises were newly established in China by investors from Hong Kong, Macao, Taiwan, Japan, the Philippines, Thailand, Malaysia, Singapore, Indonesia and Korea, up 24.4% year on year. The total value rose by 32.4% to US$8.52 billion.

The sources of foreign investment are highly concentrated. In January, the top ten countries and territories investing in China were Hong Kong, Singapore, Taiwan, Japan, Britain, US, Korea, France, the Netherlands, Luxembourg and Macao. Materialized FDI commitment from the above sources accounts for 92.8% of the country’s total.

In terms of service outsourcing, MOFCOM statistics suggest that 3,756 new service outsourcing corporations were established in 2010, creating 781 thousand new jobs, of which 486 thousand were taken by university graduates, accounting for 62.2% of the total new employees. The total value of service outsourcing contracts reached US$27.4 billion, in which executed contracts valued US$19.8 billion, up 37.0% and 43.1% respectively. In breakdown the value of international (offshore) service outsourcing contracts reached US$19.83 billion, in which executed contracts valued US$14.45 billion, up 34.3% and 43.1% respectively. By the end of 2010, there had been 12,706 service outsourcing companies in China, employing2.328 million people, including 1.65 million employees, 70.9% of the total, with university degree or above.

V. Outward investment and economic cooperation
According to the statistics of MOFCOM, in January 2011, domestic Chinese investors had directly invested in 489 overseas companies in 78 countries and regions, and their investments in non-financial sectors reached US$2.736 billion on a cumulative basis, up 15.9%. By the end of January 2011, China’s cumulative outward investment in non-financial sectors reached US$261.5 billion. In terms of geographic distribution of outbound Chinese investment given the January figures, Asia remained the biggest destination of Chinese investors whose investment there reached US$1.886 billion accounting for about 70% of the country’s total outbound investment in the same period. Investment in Oceania, Europe and Africa increased by 261.1%, 253.3% and 105.4% respectively year on year. In terms of industrial distribution, business services, mining, wholesale and retail, manufacturing and transportation remain the hot industries for Chinese enterprises.

VI. Minister Chen Deming’s visit to Africa and Sino-Africa trade and economic cooperation status

Chinese Commerce Minister Chen Deming visited Morocco, Equatorial Guinea and Ghana upon invitation, from Feb 13 to 17. The visit is of great significance against the backdrop of 55th anniversary of cooperation between the People’s Republic of China and African countries, and of the overall implementation of the eight new measures proposed at the 4th Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC).

During his visit, Minister Chen called on the leaders of the three countries, held talks with related government departments, paid field visits to some major projects under construction, visited local markets targeting different consumer groups, and talked in Ghana to local media, Western media and representatives of non-governmental organizations. The objectives set for his visit to “promote implementation, strengthen communication, enhance mutual trust, dispel suspicions and deepen cooperation” have been realized.

The FOCAC was officially established in 2000. Over the past decade, bilateral cooperation has been expanding in scale. The bilateral trade reached $126.9 billion in 2010 from $10 billion in 2000. China’s investment in Africa amounted to around US$1 billion, while the investment stock exceeded $10 billion, covering such fields as mining, manufacturing and agricultural industries. Currently, China is Africa’s largest trading partner, while Africa stands as the 4th largest investment destination for China overseas. China has been stepping up assistance to Africa, whose structure is being optimized constantly. China’s aid to Africa has been doubled in value compared with that of 2006. By the end of 2010, China has helped Africa train over 30,000 of its government officials and various technical personnel.
　
Whatever the international situation may be, the Chinese government will continue to deepen Sino-African trade and economic cooperation in the principles of equal treatment, result-orientedness, mutual benefits and common development. First, it will actively promote trade liberalization and facilitation, and create an easier trading environment for the business communities of the two sides. Since July 1, 2010, China has begun to exempt and reduce tariffs for 60% of the products originating in 26 African countries, covering more than 4,700 tariff lines. Second, the Chinese government will encourage and support Chinese enterprises to increase investment in Africa, and direct their investment to such fields as agriculture, manufacturing, finance, commerce and environmental protection. Third, it will elevate comprehensively the level and quality of trade and economic cooperation and give further preferences to fields relative to people’s livelihood, such as agriculture, education, health, poverty alleviation and drinking water purification when it comes to assistance to Africa. Fourth, it will promote the negotiation and implementation of investment protection agreements and double taxation agreements so as to create a more just, transparent and predictable business environment for the enterprises of the two sides.

Sina.com: Will MOFCOM promulgate any specific measures or policies to promote the restructuring, consolidation and integrated development of the rare earth industry? Could you please elaborate on those policies, and is there a timetable? As the first batch of rare earth export quotas was released at the end of 2010, by how much will this year’s total rare earth export under the quotas be reduced compared with that in last year? Thank you. (2011-02-17 10:34:45.0)

Yao Jian: I have noticed that it was reported yesterday that the State Council had an executive meeting on rare earth policies. The Ministry of Industry and Information Technology is responsible for the development of rare earth industry, and will make work plans for the restructuring, reform and development of the rare earth industry within the frame of their jurisdiction. MOFCOM will, according to the overall state policy on rare earth industry development, assume its own responsibilities mainly in the areas of circulation and exports. China’s policy on the export of rare earth is clear, i.e. to formulate and manage policies on rare earth export in accordance with WTO rules. Enterprises of rare earth exports have been regulated and rectified, as I have mentioned in the previous session. We will make more of an effort in the export and circulation of rare earth according to the requirements of the executive meeting of the State Council to regulate the market order and crack down on rare earth smuggling. (2011-02-17 10:35:11.0)

BTV: I have two questions. First, how will you comment on the opinion that China’s drought help push up world food prices? Second, according to the National Bureau of Statistics, China’s January CPI was up by 4.9%, to which the rising of food prices contributed 15.1%. Could you please share the specific measures MOFCOM will take to stabilize food prices? Thank you. (2011-02-17 10:43:49.0)

Yao Jian：The winter drought in North China and the low temperatures in Southern regions have indeed exerted a great impact on food production. The State Council particularly held a videoconference to arrange the work concerning this, while all departments have adopted relevant measures. As for MOFCOM, there are two main tasks: First, enhance regulation on the import and export of farm produce and food. Second, ensure domestic market supply, especially the sufficient supply of vegetables and daily necessities. Commerce departments of all provinces and cities have taken relevant measures to ensure market supply, for example, the commerce authority of Tianjin has established a system for vegetable reserve and emergency distribution to address the possible impact of the late spring coldness and freezing rain and snow disaster. A reserve system with 15,000 tons of winter vegetables has been established and agreements on vegetable reserve were signed with the enterprises responsible for the supply. Another example is that the commerce authority of Jiangxi Province has provided subsidies for the transportation of vegetables from Hainan and Shenzhen, considering the long distance of travel. The commerce authorities of Jiangsu Province has communicated and coordinated with CNPC and Sinopec, and some key wholesalers of refined oil in order to ensure the sufficient supply of refined oil for production and livelihood consumption.

In addition, we have intensified market monitoring, and introduced a daily report system in 139 large- and medium-sized agricultural wholesale markets on January 1 this year so as to monitor market changes. For example, according the some statistics I saw yesterday, the average vegetable price in China’s 139 large- and medium-sized agricultural wholesale markets was 3.8 RMB per kilo, down by 6.6% as compared with that of the previous week. This suggests that the price is falling as the holidays have passed. However, it still rose by 20% as compared with that of January 1 at the beginning of the year when a price peak appeared. It indicates that although the price rise has slowed down as the Spring Festival elapsed, it is still a prominent problem for a specific period of time in some cities, which calls for our attention. As for food prices, I would like to reiterate that the annual output of China’s grain production exceeded 500 billion kilos for four consecutive years, while food import and export were mainly for adjustment of product variety. China’s food consumption mainly depends on domestic production, and both summer grain crops and autumn grain crops will be ensured with the implementation of the work plan of the State Council. (2011-02-17 10:44:04.0)

First Financial Daily: The first question, you have just mentioned that import in January was more than previously expected. Is it a result of the measures to adjust trade structure and promote trade balance, and will the situation continue in the following months? Will monthly trade deficit reappear as was the case last year, and what is your take on trade surplus in 2011? The second question is that the General Office of the State Council recently issued a Notice on the Security Review for Mergers and Acquisitions (M&A) of Domestic Enterprises by Foreign Investors, and the Ministry of Commerce and National Development and Reform Commission will take the lead in the implementation of the security review. Is it contrary to the policies of encouraging foreign investment issued in May 2010? And is it an encouragement or regulation of M&A by Foreign Investors？What role will MOFOCM play in the inter-ministerial working mechanism？ The last question: Has the recent unrest in Egypt caused any impact on Chinese companies and their investments in Africa, and, if so, what measures will MOFCOM take to help those companies? Thank you. (2011-02-17 10:45:26.0)

Yao Jian: The statistics I just mentioned are to provide you with some general information on China’s import. Import growth soared by 51% in January, which was indeed faster than export growth. Price rise was a main factor in this. Consumer goods only account for about 10% of China’s import, while 40% of the imports were farm produce, raw materials and mineral resources. The total value of import was pushed up because the prices of the latter items I mentioned had risen recently.

In addition, a series of measures are being implemented to promote China’s foreign trade and trade balance. China’s global market share and trading position have been rising year by year. In 2006, China’s import and export accounted for only 6%-7% of global market share. China’s export has been growing rapidly and accounted for about 10% of the world total in 2010. In 2008, there was a big trade surplus, and China took a good number of measures to promote trade balance in 2008, 2009 and 2010. In 2011, we will give priority to the implementation of the import promoting policy, and as the policy is implemented, further highlight the importance of import to driving China’s economic growth and transforming China’s economic structure. It is traditionally believed that export is the driving force of economic growth. In fact, import also has a significant role in the transformation of economic structure and in long-term development. In 2011, the policy of promoting imports will be further strengthened with unified understanding on it, and trade balance will be further enhanced. If I remember correctly, trade surplus accounted for only around 3% of the GDP in 2010, which was a decline, though apparent, still falls in a reasonable range. Such is our policy orientation that with the implementation of the policy to promote import in 2011, trade surplus will be improved visibly on a balanced basis. Expanding import depends on enterprises, as it is a result of business activities. Therefore, we shall promote trade balance on the basis of market forces. (2011-02-17 10:45:52.0)

Yao Jian: As for the security review, the Chinese government issued the Notice on the Establishment of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the Notice) on February 3. As we know, China’s reform and opening-up began with greenfield investment and investment in the manufacturing industry. China attracted in 2010 $105 billion of foreign investment, of which only 3% was through M&As by foreign investors. However, what is the trend in global market? I’ve read some information about global investment, which says that in 2010 global FDI was US$ 1.12 trillion, over 70% of which was in the form of M&As. This indicates that the pattern of China's absorption of foreign capital is very different from that of the world, and that M&As will be the future trend as far as the development direction of China’s absorption of foreign investment is concerned. Absorbing investment through M&As has its up side in that it promotes industrial restructuring and makes effective use of existing resources rather than setting up new projects from scratch. This positive side of foreign M&As is apparent when it comes to the progress of China’s industrial development, and economic development and opening-up going forward. The share of M&As in total FDI was 3% at present, and it may well become 8% or even 10% in the future, as the scale of foreign M&As grows bigger. Therefore, it is necessary now to establish a security review system according to international norms. In 2006, MOFCOM issued relevant provisions on M&As by foreign investors, and it was also specified in Article 31 of the Anti-monopoly Law enacted on August 1, 2008. In April 2010, in response to the debates amongst the public over FDI, the State Council issued Several Opinions on Further Utilizing Foreign Capital, and one of the articles was related to the establishment of a security review system. (2011-02-17 10:53:43.0)

Yao Jian: I would like to add that: First, establishing the security review system indicates the improvement of China’s laws and regulations, as well as enhancing industrial safety mechanism for China’s opening-up. In fact, many countries in the world have security review systems. As far as the establishment of legal system and building of law-based government is concerned, a security review system is conductive to China’s opening-up endeavors, policy transparency and law-based administration of government departments going forward. Second, the Notice clearly specifies the scope, content and mechanisms for the security review on M&As by foreign investors. We have listened and will listen to the opinions of the business community, of which foreign investment enterprises are a part, in the course of conceiving the system and in the making of future implementation plans. According to the requirements of the Notice, MOFCOM’s job is to handle petitions for security review on M&As of domestic enterprises by foreign investors, and, upon accepting these petitions, submit the cases to inter-ministerial committee for deliberations, and execute relevant review decisions. At present, MOFCOM is formulating detailed rules and procedures for the implementation according to the requirements of the Notice issued on February 3, in order to improve work efficiency and transparency. In my opinion, the policy is to promote the development of FIEs in China, and let them share the fruits of China’s opening-up. I would like to stress that the establishment of the security review system is an international practice and a further illustration of China’s unswerving commitment to the opening-up policy. It will also help improve the quality and structure of China’s FDI absorption and create favorable conditions for FDI attraction going forward. (2011-02-17 10:57:17.0)

Yao Jian: On China-Egypt trade and economic cooperation, here is what I would like to share with you. For other matters, the Ministry of Foreign Affairs has already offered their comments. In recent years, the trade and economic relations of the two countries developed rapidly. In 2010, bilateral trade reached $7 billion dollars. At present, China has invested more than $0.6 billion dollars in Egypt. Egypt is China’s 5th largest trading partner in Africa. It is particularly worth mentioning that China has established a Suez Trade and Economic Cooperation Zone in Egypt, and 30 clustering Chinese enterprises are engaging in investment and development in the zone. Besides, China has also invested and participated in the construction of some infrastructure and major projects in Egypt, including the construction of container terminals, cement production lines, large international convention centers and distance learning systems. All of these are a form of contribution to local infrastructure development. Recently, the political situation of Egypt went through some turbulence, which has affected the progress of some projects. As the situation stabilizes and comes back to normal, the operation and production of Chinese enterprises will gradually recover and improve. We hope that the wellbeing of Chinese business personnel and normal operation of the Chinese businesses in Egypt could be guaranteed. We will also further enhance the trade and economic cooperation with Egypt so as to promote the development of bilateral trade and economic relations and benefit the two peoples. (2011-02-17 10:59:11.0)

Xinhua News Agency: I have two questions about foreign capital. The first one, MOFCOM has provided us with the data about the services industry in January. Do you have the detailed data by sectors, especially the data on foreign investment in the real estate sector? The second one, I found that the foreign investment in Central China decreased compared with the same period of last year, what’s the reason? Is it because of changes in investment pattern of foreign-funded enterprises? Thank you. (2011-02-17 11:08:24.0)

Yao Jian: There is always fluctuation on statistics of foreign capital and trade in January due to the Chinese Spring Festival. Overall, the growth rate of FDI in the services industry is growing relatively fast. FDI in services in January took up around 47% of nation’s total FDI absorption. FDI in the services sector will be further increasing in the future. As China’s services industry further develops and China’s economic structure continues to transform, the services industry will be further developed especially in large- and medium-sized cities like Beijing, Shenzhen and Shanghai. For example, the size of the services sector in Beijing already accounts for 70% of the city’s economy, compared to a 43% national average. We will provide relevant information about the regional layout for you after the conference. Overall, FDI in eastern China takes up about 85% of the total inward foreign direct investment, while the rest 15% of FDI goes to the central and western regions of China. As far as the advantages of the central and western regions are concerned, it is an inevitable trend that manufacturing will shift from Eastern China to Central and Western China due to the improvement of China’s infrastructure such college education in core cities in the central and western regions, the development of human resources, especially the increase of university graduates in Chengdu, Xi’an and Wuhan, and the price hikes of raw materials and rising labor cost in coastal areas of the East. Particularly, the structure of China’s inward FDI, which was much export-oriented, has undergone major changes in past 5 years. Now about 60% FIEs sell to Chinese domestic market. 60% or even more of the production and manufacturing by FIEs aim at serving the Chinese market. Such a ratio will continue to rise. In other words, it is an inevitable trend that foreign investment will shift from coastal areas to Central and Western China. (2011-02-17 11:08:48.0)

CCTV: I have two questions. The first one, the fact that Carrefour charged entrance fees from its suppliers raised great concerns amongst the public around the Spring Festival. This to some extent has pushed up the price too. According with our survey, it may be partly due to the lack of regulation including laws. As the competent authority for this matter, what measures will MOFCOM take? The second one, the dispute between China’s UnionPay and the American company VISA has been taken to the WTO, what’s the comment of MOFCOM on this? (2011-02-17 11:13:11.0)

Before I answer your first question, I want to share some information about foreign investment with you. Firstly, foreign investment in China’s retail sector took up about 1% of the country’s total FDI inflow in 2010. Also in 2010, the number of newly-founded retail enterprises with foreign investment reached 318, up by 13% year on year. The actualized foreign capital of those enterprises stood at US$1.09 billion, up by 9.1%, accounting for about 1% of the nation’s total US$100 billion of the whole year. China committed to further open the service sector on its accession to the WTO. In order to fulfill the commitments, China has since 2004 phased out the restrictions on regions, equity ratio and quantity for commercial enterprises with foreign investment. Foreign investment in various sectors including manufacturing and services has vigorously promoted the economic development and brought new marketing modes to China. The spillover effects are obvious: The foreign investors have set good examples for Chinese retail enterprises to learn from, and have also helped them foster a lot of talents. Now, problems reflected by the Carrefour event, including slotting allowances and contradiction between retailers and suppliers, are heating up. But the problems are not occurring just in foreign enterprises. Foreign enterprises in China are regarded as Chinese enterprises. As long as they pay taxes in China, they have to deal with the relationship between retailers and suppliers.. In China manufacturing is quite developed while services are lagging behind. As a result, suppliers always have to count on large retailers. That is the crux of the contradiction.

MOFCOM has kept an eye on the problem since 2006. Since commercial enterprises represent the highest level of privatization and marketization, government intervention needs to be better regulated. In 2006, MOFCOM, together with National Development and Reform Commission, the Ministry of Public Security and State Administration for Industry and Commerce, launched the Measures for Administration on Fair Dealing of Suppliers and Retailers and the Measures for Administration on Promotion Activities of Retailers. In holidays, we always find various promotions and discount activities by retailers. However, such activities, to some extent, will squeeze the benefits of suppliers and producers. As customers, we like to see more promotions, but few international brands are found on sale in the mainland. As a result, many people choose to go shopping in Hong Kong. Besides, we will further leverage the role of industrial associations. Given the enormous number of retail enterprises, MOFCOM and the China Chain Store & Franchise Association will use the industrial associations as the platform to establish a mechanism for coordination and arbitration of complaints and appeals from suppliers and retailers. Recently, together with industrial associations of commercial enterprises, we are drafting the regulations on purchase and sales contracts of retailers and suppliers, which, we hope, could be helpful for solving contradiction between retailers and suppliers including the slotting allowances you mentioned. The problem is really conspicuous and has negative impacts on the price hike. We hope that these efforts could play a role in solving these problems. Of course, the settlement of these problems depends on the regulations and laws of the government, standards of industrial associations as well as the development and maturity of China’s retail sector. (2011-02-17 11:13:22.0)

The dispute between the US VISA and China’s UnionPay is longstanding. On February 11, 2011, the US asked the Dispute Settlement Body (DSB) of the WTO to set up an expert panel to probe into China’s e-payment and anti-dumping and anti-subsidy measures on electric steel imports from the US. In October and November 2010, the working groups of MOFCOM and the US Department of Commerce conducted negotiations on the two issues to find a solution in Geneva. The e-payment issue comes down to the services of credit cards, which involves foreign-funded enterprises’ accession into Chinese market of e-payment service sector. China’s attitude on this issue is crystal-clear. In 2008, China fulfilled its commitments on opening its service sector made upon its accession to the WTO. In April 2010, China launched an anti-dumping and anti-subsidy investigation into electric steel imports from the US and Russia, and made final ruling that imposed duties on such products imported from the two countries. As we all know, WTO litigation is normal .China has become the largest exporter in the world, accounting for around 10% of global trade. It is no surprise to see disputes involving 1% or less than 1% of China’s trade volume At present in the WTO, China is filing five cases against the US and the latter are filing 11 cases against China, including the above two cases. China and the US are large trading partners to each other, so there always exist some trade disputes due to the misunderstanding of relevant rules. China’s attitude is as follows: China will obey the WTO rules and is ready to solve disputes by consultations and negotiations according to the WTO rules. In fact, the move that we dispatched the working groups in October and November to negotiate with the US side has demonstrated our attitude. However, we feel regret that the US insisted on setting up an expert panel under the WTO DSB as the first step to solve the two disputes instead of conducting bilateral negotiations. We will carefully study the US complaints on the two cases and strive to solve the cases in accordance with the WTO DSB rules so as to practically protect the interests of Chinese enterprises.

Japan reporter: At present, the Northern Territories dispute is wide concern. It is said that some Chinese enterprises will invest in the Northern Territories, and the Japanese side is worried and paying attention to this information. What is the opinion of MOFCOM toward this? Thank you.

Yao Jian: China’s outbound investment of last year surged by about 36% to $59 billion, and it still increased fast in January this year In the foreseeable future, the overseas operation of Chinese enterprises will expand, which reflects the trend of China’s participation into economic globalization. The future trend will be China’s shift from export to local manufacturing, local tax payment and local recruitment The Chinese government will continue to support the overseas operations of Chinese enterprises. As for the matter you mentioned, I do not have any special information. Thank you.

AFP reporter: Recent statistics show China’s economic aggregate has surpassed that of Japan last year, coming to the second place in the world. Does it mean that China should play a more important part and shoulder more responsibilities in international affairs, even the same share of responsibilities and duties as developed countries? Thank you.

Yao Jian: Recently, I also noticed the figure, and I shared the opinion of MOFCOM last September here in terms of economic aggregate. Last year China’s GDP reached 39.8 trillion RMB, and the per capita GDP also increased. I want to say several points as follows:

First, China, with a large population of 1.3 billion, has always put economic development as the core task, and stuck to the socialist road with Chinese characteristics. China’s economy has been developing rapidly, especially over the past five years. It has not only genuinely benefited the people, but also raised China’s position in the international community. China’s per capita GDP has jumped to the current $4,000 from $1,700 in 2006. Despite the financial crisis, the average growth rate of GDP during the 11th Five-Year Plan period (2006-2010) surpassed 10%, which shows China can achieve self development even during the crisis and it can make new progress by adhering to the Scientific Outlook on Development. On MOFCOM’s part, foreign trade has also achieved fast growth over the past five years, and its share in the global foreign trade has increased to 10% from 7.3% in 2006, which is a new development, showing the substantial change brought by sticking to the China Road, and by reform and opening up. Actually, when seeing this figure and relevant comments, I always have a picture lingering in my mind. The picture shows Deng Xiaoping taking the bullet train in October of 1978, at the beginning of the reform and opening up. I checked the caption of the picture, which is as follows: He said to the accompanying correspondent, “I feel the bullet train is indeed fast. Now it is suitable for us to take this kind of train, as someone is hurrying us to run.” During his visit to Japan, Vice Premier Deng Xiaoping proposed to utilize Japanese capital and technologies, which ushered in China’s reform and opening up and attraction of foreign capital. Now 32 years have passed and his words are still resonating, He reminded us to further adhere to reform and opening up and to keep the attitude of learning, learning from neighboring countries and from countries with good management and social governance. In fact, China’s GDP only reflects part of the picture as the country’s per capita level is still very low. The most important thing is the gradual increase of people’s living standards, which is the substantial result of our work.

Second, we notice China’s current economic development is still imbalanced, uncoordinated and unsustainable, with mounting pressure of resources and the environment. Our large enterprises have fostered few well-known brands. Though we export a lot, there are many substandard products and the recall rate is rather high in the US, Canadian and Japanese markets, which demands our closer attention. We need to continue to follow the China Road and make full use of its advantages to further improve our social governance and address resource and environmental restraints, so as to enable us to shoulder more responsibilities and be more competent to do it. Only when our economy grows, more harmonious our society becomes, more coordinated and sustainable our development is, can we assume more responsibilities in the international community. In the past, China made enormous efforts suitable to our national conditions in taking international responsibilities, including reducing and exempting debts and giving preferable tariff treatment and zero tariff treatment to many less developed countries. In terms of China’s aid to African countries, I can give you the following information: The aid to Africa has increased substantially, and more focus has been given to fields related to people’s livelihood. Those are the measures we have taken to shoulder more international responsibilities. For instance, at the beginning of the reform and opening up, China’s drive for global economic growth was only 3%, while in 2009 and 2010, China drove over 50% of global economic growth, which demonstrates China’s efforts in assuming more international responsibilities. China has not only developed its economy, but also stimulated the development of other countries. It is also reflected by China’s imports, Over the past decade, China’s average annual imports registered nearly $670 billion, which has spurred economic growth and employment of related countries. It also shows China’s endeavor in shouldering international responsibilities. As China’s economy and its soft power grow further, it will play a more and more important role in the international community.

Fujian Straits TV: The Cross-Straits Economic Cooperation Framework Agreement has been initiated, especially the product list under the Early Harvest for Trade and the certification of rules of origin. I would like to know how the Rules of Origin certification and the import and export trade across the Straits were in the past month. How is tariff reduction and exemption going?

Yao Jian: My colleague told me that the Taiwan Affairs Office of the State Council will hold press conference concerning this issue, and this question will be left to them.

Global Times: What is your comment on the setback of Huawei’s attempt of investing in the US? Thank you.

Yao Jian: Can you specify the investment case of Huawei? If no, I will continue with the earlier mentioned issue of security review mechanism. The Committee on Foreign Investment in the United States is responsible for national security review of foreign investments in U.S. However, several cases of Chinese investments in the US show that CFIUS blocked those investments in the excuse of national security. The cases include Huawei’s acquisition of 3Com, Northwest Nonferrous International Investment Company's investment in Firstgold Corporation, and an Anshan Iron and Steel Group’s project in the US. All these cases had been interfered and blocked, and to some extent influenced the cooperation between China and the US. We hope that the US side can improve the transparency of the approval process and provide Chinese investors with fair treatment. Overseas investment by Chinese companies will accelerate in the future, and therefore it is hoped such security reviews can be conducted in a transparent and fair way.

Speaking of Huawei, a recent case of the company is that it sued a subsidiary company of Motorola for infringing intellectual property and stealing business secrets. Chinese companies now protect their intellectual property rights and business secrets according to law when investing abroad, and this indicates that Chinese companies are getting mature and follow international norms in their business. This case is after all a business case between two companies. We hope Huawei and Motorola can observe the agreements between the countries on IPR and business secret protection, and properly settle the dispute through consultation. We will also keep a close watch on this case. Meanwhile, we hope that American laws and regulations concerning security review can provide equal treatment for public listed, state-owned, and private Chinese companies as well as for Chinese companies and companies from other companies, and practice transparent and predictable procedures.

Yao Jian: One of the disputes in China-US economic and trade relations is around drywall. In 2009, some American customers complained that China-made drywall used in their interior decoration released unpleasant smell, and that smell and residue had affected their health, a case widely reported by the press. Requested by the US Consumer Association, the CDC did a technical appraisal recently and claimed in the report released on January 31 that there was no correlation between China-made drywall and the 11 death incidents. This statement provides a science-based conclusion of this a-year-long drywall dispute between China and US. With regard to this case, I want to reiterate a few points. First, the Chinese government pays great attention to the quality and security of export products. In fact, during the investigation in the drywall product, China’s quality inspection authority and relevant US departments visited their own labs experiments and the Chinese drywall factories. At last, the investigation result showed that Chinese companies followed international techniques and standards when producing drywall products. Those problems occurred because neither country has formulated regulations concerning amount ceiling of chemicals contained in drywall and environment and conditions for the use of drywall are different in the two countries, We hope to solve these problems based on scientific research and through discussions and negotiations. Second, only 0.5% of total drywall consumption in the US is made in China, and hence the drywall case will not affect the overall cooperation between the two countries. The Chinese government, including the Ministry of Commerce, takes export quality issue very seriously. China is now the world’s biggest exporter and .it is possible to find some quality problems in its exports. For instance, , US Consumer Safety Commission (CPSC) released in January 34 recall reports, among which 20 reports were about China, taking a substantial proportion of the total. That reminds us of the quality issue as well as the improvement and efforts needed. Third, China remains a developing country that undergoes market-oriented reform, and therefore lags behind developed countries in terms of inspection standards and quality standards. Therefore, we will take a responsible attitude to improve the quality standards of exports, not only for export growth but also for the Chinese people. Besides, we will make greater efforts to exchange and share information with other countries, improve export quality, and better the export supervision mechanism. We will strengthen the cooperation between Chinese commerce, customs, and quality inspection departments and their foreign counterpart to guarantee a higher level of export quality, and pursue the quality-first goal while increasing export trade.

In addition, the Ministry of Commerce is planning a campaign, Year of Export Quality, for 2011. Starting from domestic market, we will take measures to raise the quality standards of products made in China and strengthen international cooperation with both developed markets and developing markets like Africa. One of the special operations organized by MOFCOM is to deal with fake and shoddy goods exported to African market. We hope to constantly raise the quality of Chinese products in the next five years. When products in domestic market have higher quality and credibility, the quality of export products will surely be much improved.

CRI: My question is still about the establishment of security review system regarding mergers and acquisitions of domestic enterprises by foreign investors. Any timeframe of implementation? Secondly, is it contradictory to the policy of encouraging foreign participation in reorganization and restructuring of state-owned enterprises? Thank you.

Yao Jian: The policy of encouraging foreign participation in reorganization and restructuring of state-owned enterprises has already been promulgated. The Ministry of Commerce is responsible for handling applications as an important member in joint conference. Foreign Investment Department, the MOFCOM department in charge of these affairs is formulating specific and workable rules and will issue the regulations at an early date after drafting and soliciting suggestions of industries. Green field investment accounts for 97% of total foreign investment while mergers and acquisitions only 3%. It is estimated that M&A involving foreign capital will be the trend and there will be more foreign-participating M&A cases in China. That policy is designed to balance the two aspects below. On the one hand, we reemphasize that China will further the opening-up drive, establish a more transparent, responsible, and rule-of-law government, and provide more convenient services for foreign investors. On the other hand, many countries have similar mechanism such as French review system in national defense, education and traditional culture. Likewise, we will establish our own review system according to international practice and Chinese reality, which will help FDI attraction.

I am optimistic about the development of foreign investment attraction as well as mergers and acquisitions in China. As I mentioned earlier, M&A is the trend of international direct investment and is regarded as an important mode in accelerating assets reorganization, improving efficiency and profits, promoting structural transformation and eliminating outdated capacity. In short, we take a positive attitude toward the prospect.

Xinhua: Although China has always placed a lot of attention on attracting foreign investment, some foreign-invested enterprises have clear intention and plan to control and monopolize the industry while blocking advanced technologies. Even worse, in some cases what China got from market share tradeoff was merely second-rate and third-rate technologies. My question is how to solve that problem in the next several years? How to increase the quality of foreign capital? Thank you.

Yao Jian: FDI has helped China develop economy and enhance technological capabilities in the past three decades. Ten years have passed since China joined the World Trade Organization in 2001. The most important concept has been that we have been attracting FDI by observing international standards and norms as well as China’s commitments in the WTO, and utilizing FDI to facilitate economic development through optimizing FDI policies. Under such framework, China’s technological capability has been strengthened through absorbing and utilizing foreign capital. Our next focus is to genuinely render national treatments for foreign-invested companies in China, and to create better environment and conditions to attract high-tech investments in China, including the establishment of R&D centers in China. That is our objective.

Thank you. I wish all of you Happy Lantern Festival and all the best in your work and your family!


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