I . Survey

(i) Geographic Location

Located in the s o uth of Ch in a’s mainland, Guangdong is surrounded by Fujian on the east, Jiangxi and Hunan on the north, Guangxi on the west, Hainan off the southwest. Adjacent to Hong Kong and Macao, Guangdong is in the central zone of Southeast China and Southeast Asian Economic Circle.

Guangdong covers a land area of 179,800 km2, accounting for 1.85% of China. It has a coastline of 3,368.1 km, 759 islands and a sea area of over 400,000 km2.

(ii) Climate

Located in the subtropical zone, Guangdong is one of the areas in China with the richest light, heat and water resources. The annual average temperature is 22.3 ℃ , with ample rainfall of 1,300-2,500mm per year.

(iii) Population and Ethnic Groups

At the end of 2005, the population of the permanent residents in Guangdong was 91.94 million, of which 37.9232 million were peasants. The population density was 511 persons /km2. Guangdong is inhabited by all 56 ethnic groups of China. The Han has a population of more than 81 million, making up 98.5% of the Province’s total. The minority ethnic groups have a population of 1.27 million, five of which have been residing here for centuries, i.e. the Zhuang, Yao, She, Hui and Manchuria.

(iv) Natural Resources

With ample rainfall and advanced water systems, Guangdong is rich in water resources. The main rivers include the Pearl River water system consisting of the Xijiang, the Dongjiang, the Beijiang and the Delta water system, the Hanjiang River water system, and rivers that directly flow to the sea, i.e. the Rongjiang, the Lianjiang, the Luojiang and the Huangganghe rivers in east Guangdong, and the Moyangjiang, the Jianjiang, the Jiuzhoujiang and the Nanduhe rivers in west Guangdong.

At the juncture of the European plate and the Pacific plate, Guangdong is among the provinces that have the richest mineral resources, and is known as“ the home of rare metals and non-ferrous metals”. 116 types of minerals have been discovered in Guangdong, 88 of which with proven reserves. The reserves of kaolin, turf, gangue for refi nery, rough rock for cement, germanium and tellurium all rank first in China. The large-scale oil and natural gas field discovered off shore the Pearl River and in the Beibuwan Bay has a reserve of over 4 billion tons of crude oil and 1 trillion m3 of natural gas, with bright prospect of exploitation.

With a long coastline and vast sea areas, Guangdong has rich marine resources. Marine biological resources include flora and fauna, of which there are 406 species of phytoplankton, 416 species of zooplankton, 828 species of benthic biology and 1,297 species of swimming biology.

(v) Infrastructure and Transportation

With the capital city of Guangzhou as the center, Guangdong has an advanced water, road and air transportation network. With direct shipping and flights with over 1,100 ports in over 130 countries and regions, it is one of the areas with the most complete infrastructure and the most convenient transportation in China.

Guangdong is one of the provinces with the most advanced expressways in China. The construction of the Pearl River Delta intercity railway transportation has been in full swing, thus forming the “three-hour life circle” in Guangdong and the“ one-hour life circle” between cities

in the Pearl River Delta. Connected with Fujian, Guangxi, Hunan and Hainan by expressways and railways, Guangdong has become the transportation hub of South China.

A transportation pattern has taken shape with the major ports of Guangzhou, Shenzhen, Zhuhai, Shantou and Zhanjiang as the hubs and small and medium-sized ports such as Foshan, Dongguan as lateral or

replenishing ports. In 2005, the total annual goods handling capacity of its main coastal ports was 608.87 million tons, of which the container handling capacity was 26.45 million TEU.

Guangdong boasts 7 airports including one of the air hubs of China, namely the New Guangzhou Baiyun International Airport, and 6 other airports located respectively in Shenzhen, Shantou, Zhuhai, Foshan, Zhanjiang and Meizhou, making it the area with the most densely distributed airports. The relocation of Baiyun Airport is one of the key projects of the“ Tenth- Five Year Plan” of the country and China Civil Aviation Administration. It is an infrastructure with the largest investment in China’s civil aviation history. It is also the first airport in China which has been designed and built on the concept of a hub airport.

In the past 20-odd years since the reforms and opening up, the development of Guangdong’s financial sector has been eye-catching, whose major aggregate indicators ranking fi rst in China’s mainland. Guangdong is one of the earliest regions to open the financial sector to the world. Therefore, it enjoys a high degree of opening-up, abundant talents, flexible

and convenient services, plentiful nong o v e r n m e n t a l c a p i t a l a n d f a v o r a b l e supply-demand basis to develop capital market.

At present, the numbers of variousf i n a n c i a l i n s t i t u t i o n s a n d f i n a n c i a l employees, the financing aggregate of the securities markets and the total number of securities institutions in Guangdong all rank first in China’s mainland. By the end of 2005, there were 54 operating institutions of foreign-funded banks from 18 countries and regions in Guangdong. A pluralist financial system has taken shape with state-owned commercial banks as the mainstay and including policy banks, other commercial banks, non-bank fi nancial institutions, and foreign-funded financial institutions.

Major Banking Institutions

Telecommunications

On February 18th, 2006, telephone users of Guangdong exceeded 100 million to 100.006 million. Since then, the figure has kept increasing at a daily rate of over 40,000 users. At present Guangdong has built a communications network at the world’s advanced level, with extensive a p p l i c a t i o n o f o p t i c a l f i b e r a n d I P communications technologies. The capacity of long-distance switches is over 2.08 million lines, that of soft switches over 127 million gates, and the optical cable resources are 7.2 million core km.

The Internet

The development of the Internet broadband access technology and operation has accelerated the substitution of dial access users by broadband access users. In 2005, the number of Internet dial access users decreased by 15.563 million, while that of broadband access users increased by 12.629 million, reaching 37.504 million nationwide.

(vi) Foreign Exchanges

China High-Tech Fair

Approved by the State Council of the People’s Republic of China, C h i n a H i g h - T e c h F a i r （C H T F for short）is a state-level, grand international fair, jointly hosted by the Ministry of Commerce, the Ministry of Science and Technology, the Ministry of Information Industry, t h e N a t i o n a l D e v e l o p m e n t a n d Reform Commission, the Ministry of Education, the Chinese Academy o f S c i e n c e s a n d t h e S h e n z h e n Municipal People’s Government, and cohosted by the Ministry of Agriculture and the Chinese Academy of Engineering. It is held annually in autumn in Shenzhen. The CHTF consists of four primary activities: the commercialization of technological innovations, specialized shows, the China Hi-tech Forum and year-round business matching services. The first session of CHTF was held in October 1999. The general objectives of the CHTF are: serving as a platform, providing support and service for the development of hitech industries; exploring the one-stop scitech innovation model of“ hi-tech fair— technology property rights transfer –growth enterprises markets”; forming new-style capital market with technology property rights transfer and innovative investment as the core; constructing the commercialization system of technological innovations in line with China’s conditions and with Chinese characteristics; and promoting the import and export of hi-tech and its products.

China Export Commodities Fair

Also called the Canton Fair, China Export Commodities Fair was established in spring 1957. Held in spring and autumn each year in Guangzhou, the Canton Fair has a history of more than 4 decades. It is a comprehensive international fair, which has the longest history, is of the highest level and the largest scale, provides the most diverse commodities, attracts the most buyers and achieves the best transaction results in China.

The 97th and 98th sessions w e r e h e l d i n 2 0 0 5 . T h e 9 7 t h sessions registered a total trade volume of 29.23 billion US dollars, and the 98th session 29.43 billion US dollars. The two sessions add up to 58.66 billion US dollars.

The Canton Fair has also made good use of“ the Internet Canton Fair”,“ On-line Canton Fair” and“ On-line Machinery and Electronics Canton Fair” to conduct e-commerce. With mushroomed new columns and enhanced information services, innovation of transaction model has been realized and has achieved remarkable effects, thus promoting transactions of the Canton Fair. The total number of visits to the websites of the Canton Fair exceeds 200 million persontimes, of which the number of overseas visits accounts for 26.2%. According to incomplete statistics, during the two sessions of the 2005 Canton Fair, the total trade volume of intent transactions of“ the Internet Canton Fair” reached 720 million US dollars.

China Dongguan International Computer Communication & Consumer Electronics Products Exposition

China Dongguan International Computer Communication & Consumer Electronics Products Exposition was held every year at Dongguan International Exhibition Center. Professional audience from nearly 30 countries and regions such as the US, France, the UK, Germany, Australia, Canada, Turkey,Spain, India, Pakistan, Singapore, Thailand, Hong Kong, Macao and Taiwan, as well as from Guangdong and other provinces visited the exposition. The exposition orients itself as a state-level international exposition. Operating in a specialized, market-oriented and international mode, it is devoted to constructing and perfecting platforms for exhibition, information, trade and cooperation for international computer industry. It is a feast which integrates products exhibition, order of goods, academic seminars, investment negotiations and technological cooperation.

 (vii) Higher Education and Sci-Tech Research

Guangdong boasts an educational system characterized by optimal structure and complete facilities, continuously providing high quality talents for the social and economic development. Guangdong has more than 100 institutions of higher learning, including universities that are renowned at home and abroad, such as Sun Yat- Sen University, South China University of Technology and Jinan University. In 2005, there were 874,700 students in institutions of higher learning in Guangdong.

By the end of 2005, there were 362 state-owned institutions at the county or above level in Guangdong that were i n d e p e n d e n t l y e n g a g e d i n r e s e a r c h a n d d e v e l o p m e n t , and sci-tech information and documents. Guangdong has established 227 provinciall e v e l e n g i n e e r i n g r e s e a r c h (technology) centers, and has 7,316 non-governmental sci-tech enterprises, employing 870,000 people.

(viii) Tourism

Guangdong now has jurisdiction over 21 prefecture-level cities, 33 countylevel cities, 43 counties and 3 autonomous counties. Nearly 30 cities and counties are open to the outside world. Guangdong covers an area of over 180,000 km2, with Guangzhou as the capital. With the Tropic of Cancer running through the center, Guangdong has sub-tropical maritime monsoon climate, characterized by long summer and warm winter, and evergreen seasons. It is suitable for tourism all the year round.

Guangdong has wide areas of hills and mountains, with narrow plains along the river valleys and sea coast. The Nanling Mountains lie across the northern border, so Guangdong is high in the north and low in the south. The four famous mountains of Guangdong are Danxia Mountains in Renhua County, Xiqiao Mountains in Nanhai County, Luofu Mountains in Boluo County and Dinghu Mountains in Zhaoqing City. The Lingyang Gorge on the Xijiang River (near Zhaoqing), the Feilai Gorge on the Beijiang River (Qingyuan County) and the Zhaoqing Seven Star Crags, which has been praised to have“ Guilin’s mountains and West Lake’s water”, are all famous scenic spots.

The Seven Star Crags Scenic Spot, located in the central north of Duanzhou District of Zhaoqing City, faces the city proper in the south and reclines on the Beiling Mountains in the north. It covers an area of about 10 km2, 6.5 km2 of which is lake water. It is among the first key scenic spots at the state level . Integrating“ Guilin’s mountains and West Lake’s water”, it is known for its“ steep peaks, grotesque stones, exotic caves and ancient temples”, offering over 80 sights.

Dinghu Mountains Scenic Spot is a state-level key scenic spot. Located in Dinghu District, it is about 18km from the city proper of Zhaoqing and 90km from Guangzhou.

Wanluhu Lake, located in the west of Heyuan City and 9km from the city proper, is the largest manmade lake and fresh water lake in Southeast China. Wanluhu covers a rain-collecting area of 5,734km2 and a lake water area of 363.8km2. With more than 360 green islands interspersed on the lake, Wanluhu is known as“ Heavenly Lake in South China”. Wanluhu Scenic Spot is centered around Guishan Mountains, the national forest park. The main sights are scattered on the northwestern slopes of the Mountains, covering an area of about 800 hectares. These sights include S h i b a l i h u a x i ( 1 8 - l i F l o w e r R i v e r ) , Diepuqujing (Waterfalls along the Winding Paths),Dujjuanyingri (Azalea under the S u n ) , S h u i y u e w a n (Wa t e r a n d Mo o n Bay), Sanlichangxia (3-li Long Gorge), Jinghualing (Jinghua Mountain), Dayelinhai (Broad-leafed Forest).

Special Local Product

Produces of Guangdong include black tea, the four famous fruits of“ banana, sugarcane, lychee and pineapple”, Canton embroidery, ivory carving, Duanzhou ink slab and pottery and porcelain.

II . Economy

(i) GDP Statistics

In 2005, Guangdong’s economic operation was further accelerated and the national economy maintained steady and fast growth. Its GDP registered 2.236654 trillion yuan, accounting for 11.9% of the total in China’s mainland. Of the figure, the value added of the primary industry was 139.523 billion yuan, the secondary industry 1,133.993 billion yuan and the tertiary industry 963.137 billion yuan.

GDP Growth Status of Guangdong Province From 2000 to 2005

Proportion of the Primary􀉺Secondary and Tertiary Industries in Guangdong

(ii) Statistics of Resources, Industries and Agriculture

Resources

Guangdong has rich mineral and marine resources. The rich land mineral resources are distributed extensively. Among the over 150 minerals that can be utilized, 116 have been discovered in Guangdong. The diversifi ed marine resources are mainly tropical warm water marine biology.

Guangdong provides land for industrial use with full facilities and services, and reasonable prices. The three Special Economic Zones, namely, Shenzhen, Zhuhai and Shantou, 21 state-level development zones and a large number of provinciallevel development zones all have favorable matching environment.

The industrial structure of Guangdong is sound and complete, the manufacturing industry especially advanced. At present nine pillar industries have taken shape, i.e. garment and textile, food and beverage, construction material, electronics and information, electrical appliances, machinery and specialized equipment, petrochemicals, forestry and papermaking, pharmaceuticals, and automobiles. The industries have strong production, processing and matching capacities, forming one of the manufacturing bases in China or even the world at large.

At present, Guangdong is accelerating the new industrialization and the development of hi-tech industries that focus on information technology, biotechnology, optical-electronic-machinery integration and new materials. Emphasis will be given to constructing the“ Guangdong IT Industry Corridor” of Guangzhou, Huizhou, Dongguan and Foshan, and the

petrochemical industrial belt of Guangzhou, Huizhou, Maoming and Zhanjiang. As a result, a large number of matching industries will take shape, which will provide investors with favorable conditions to develop their businesses in Guangdong.

G u a n g d o n g a l s o e n c o u r a g e s t h e development of three matching productive services, i.e. commerce, logistics and exhibition to facilitate the investors. Intermediary commercial institutions have developed rapidly, overall service capability has been upgraded substantially, and commercial intermediary service products have kept innovating. The logistics market is more open and a logistics information platform has been established. Centering on the central cities of Guangzhou and Shenzhen, logistics resources have been readjusted and logistics enterprises have e n h a n c e d t h e i r c o o p e r a t i o n s o a s t o raise efficiency. Exhibition industry that features internationalization, specialization and trade-orientation has gained key development. New international exhibition brands with Chinese charac-teristics have been cultivated, and cooperation between Guangdong and Hong Kong has been enhanced, so the industry develops soundly and orderly.

The following is a brief review of the characteristics of Guangdong’s industries:

Manufacturing

Guangdong is one of the leading industrial provinces of China. In recent years, the Guangdong Provincial Committee of Communist Party of China and Guangdong Provincial People’s Government have promulgated a series of documentations on the readjustment of the industrial structure, the enhancement of the industrial competitiveness, and the development plan of the nine pillar industries. All of these documentations have accelerated the support to the pillar industries and gradually optimized Guangdong’s industrial structure.

T h e s e d a y s , t h e l e a d i n g role of the nine pillar industries, namely, electronics and information, electrical appliances and machinery, petrochemicals, garment and textile, food and beverage, construction material, papermaking, pharmaceuticals, and automobiles has kept enhancing. The three new pillar industries, i.e. electronics and information, electrical appliances, machinery and specialized equipment and petrochemicals maintain strong development momentum. The three traditional industries, i.e. garment and textile, food and beverage, a n d c o n s t r u c t i o n m a t e r i a l d e v e l o p steadily. The three potential industries, i.e. papermaking, pharmaceuticals and automobiles develop tremendously. The structures of these industries are being optimized. In 2005, the nine industries completed a total industrial added value of 620.307 billion yuan, accounting for 73.7% of the added value of large-scale industries.

1) Electronics and Information Industry

The scale of Guangdong’s electronics and information industry ranks first in China’s mainland and Guangdong has become one of the most important IT p r o d u c t i o n b a s e s i n C h i n a a n d e v e n the world at large. In 2005 Guangdong electronics and information industry maintained its position as the No. 1 pillar industry, an importance force in pushing Guangdong’ s economic growth. Now over 20 enterprises in Guangdong have been listed among the Top 100 Electronics Enterprises in China.

A batch of competitive products have been produced in Guangdong’s key electronics and information industries. In communications equipment manufacturing, programmed controlled exchanges, optical communications products have relatively high advantage in performance-price ratio. In electronic appliances manufacturing, products such as color-tubes, discrete devices lead China in competitiveness. In electronic components manufacturing, products such as PCB and SMT occupy very important positions in China. In software industry, imbedded software accounts for more than half of the mainland’s total.

Guangdong’s IT industry mainly concentrates in the Pearl River Delta. The famous electronic and IT corridor has been formed, the mainstay of which includes Shenzhen, Guangzhou, Dongguan, Huizhou, Foshan and Zhongshan.

2) Electrical Appliances and Machinery Industry

Guangdong has formed the electrical appliances and machinery industrial clusters that are centered on cities with favorable basis in equipment manufacturing, such as Guangzhou, Shenzhen and Foshan, and which radiate towards the Pearl River Delta and spur the east and west regions to develop together. The industry has a number of advantageous products that have large market shares in China.

The production growth efficiency of Guangdong’s machinery industry has been improved. The overseas market has been further expanded. Development of new products has been accelerated. The economic benefits of a group of key enterprises have been remarkably improved. the industrial aggregate has ranked among the top in China’s mainland.

Guangdong’s electrical household appliances industry holds a very important position in China’s electrical household a p p l i a n c e s i n d u s t r y . G u a n g d o n g i s an important export base of electrical household appliances in China and the whole world. The electrical household appliances industry in Guangdong is characterized by a wide and complete range of products, advanced matching production and excellent product quality, and active involvement in developing new products. The production, export and competitiveness have constantly taken the lead in China. In household audio-video equipment manufacturing, the competitiveness of color TV sets, laser disk players and Hi-Fi all ranks fi rst in China.

With mature industrial clusters of electrical household appliances, Guangdong has nurtured a batch of core enterprises and famous brands, such as Gree and Media in air-conditioning industry, Kelon in refrigerator industry, Glanz in microwave industry, TCL and Konka in color TV sets industry. In the Pearl River Delta area, electrical household appliances industrial clusters and export processing zones with distinct features have taken shape.

3) Petrochemical Industry

The aggregate scale of Guangdong’s petrochemical industry ranks among the top in China. The main products, such as crude oil, petrol, kerosene and diesel oil, ethylene, synthesis resin, paints, and rubber shoes all rank among the top three in China. In 2005, the petrochemical industry continued to maintain steady growth.

Guangdong’s petrochemical industry mainly concentrates in Maoming, Guangzhou, Huizhou and Zhanjiang. Maoming Petrochemicals, Guangzhou PetroChemicals and Zhanjiang Dongxing are the three backbone oil refinery enterprises of Guangdong. The former two are also famous ethylene production enterprises of Guangdong. In 2005, after the 12 million tons/year oil refinery project and 800,000 tons/year ethylene project in Huizhou finished construction and were put into production, Huizhou has become the 3^rd largest oil refinery and chemicals center in Guangdong after Maoming and Guangzhou.

4) Garment and Textile Industry

Guangdong is a major textile producer and exporter in China, and the third largest garments export base in the world. All the main indicators of Guangdong’s textile industry, including major products, varieties, quality, brands, industrial output value, and sales volumes all lead the country. In 2005 the growth rate of Guangdong’s garment and textile industry hit 24.8%. The export of clothing and textiles registered 22.01 billion US dollars.

The cluster development of the textile industry has become a unique feature of development and an important source of competitiveness of the textile industry in Guangdong. The development advantages of Guangdong’s garment and textile industry are embodied in specialized production that has led to the formation of“ chunk” industry. Specialized production is small but exquisite, small but professional, matching and coordinating with each other. Casual wear of Zhongshan, clothing and knitwear of Dongguan, materials, knitting, children’s wear, and underwear of Foshan and shirts and blouses of Jieyang (Puning) all enjoy great reputation at home and abroad.

The key clusters of Guangdong’s garment and textile industry are concentrated in over 40 towns (districts) in Guangzhou, Shenzhen, Foshan, Zhongshan, Dongguan and Jiangmen.

5) Food and Beverage Industry

Guangdong is a leading province in China in the production and export of food and beverage. The food and beverage industry in Guangdong has attached high importance to technical renovation and the introduction, adaptation and absorption of advanced foreign technologies, which provides a reliable foundation for the upgrade of the industry and the guarantee of quality. Guangdong’s product series such as beverage, baked goods, health products and seasonings have maintained a leading position in China, with significant advantages and a large number of famous brands, such as Pearl River Beer and Kingway Beer. Through integration and adjustment, the food and beverage industry becomes one of the pillar industries of Guangdong Province.

6) Construction Material Industry

Guangdong is a major producer of construction materials, ranking the first in China in terms of total amount of production.

A number of product clusters have been formed in Guangdong’s construction material industry, with their respective characteristics and positive influence both home and abroad. These include ceramics in Foshan, coatings in Shunde of Foshan, aluminum profiles in Dali of Foshan, sanitary wares in Chaozhou, stone materials in Yunfu, and plumbing, heating and bathroom products in Kaiping of Jiangmen. Guangdong’s construction materials feature a rich variety and rapid development of new products, especially in decorating materials, where it holds a leading position in China. The construction material industry in Guangdong boasts a high degree of

privatization and marketization, further developed foreign-oriented economy

and active export, with its export volume accounting for 30% of the total of the Chinese Mainland, ranking the fi rst in China. The export volume of architectural ceramics, advantageous products of Guangdong, has been increasing by an average annual rate of over 70% for the recent years. Of China’s 12 famous ceramics producers, 8 are stationed in Guangdong.

7) Papermaking Industry

Guangdong is now a key province with a decisive role in papermaking and paper products in China. The province now hosts the State Key Laboratory of Pulp and Paper Engineering and the National Engineering Research Center of Papermaking and Pollution Control, both of which are the only institutes of their kind in the papermaking industry in China, while the latter of which involves integrated operations in production, scholarly study, research, science, industry and trade.

Guangdong has an advantageous geographic location for the development of the papermaking industry. Influenced by the warm and wet subtropical monsoon climate which brings abundant rainfall, the major areas of the province are suitable for fast-growing and high-yield plantation, which practically guarantees both fiber and water resources for the development of the papermaking industry. This significant advantage in geographic location has attracted a large number of foreign investors in wood and pulp production in Guangdong in recent years.

A cluster of papermaking enterprises has primarily been formed around the Pearl River Delta in Guangdong. These enterprises are mainly located in the municipalities of Guangzhou, Foshan, Jiangmen, Zhuhai, Shenzhen and Zhanjiang, which are also the location of near 80% of enterprises in Guangdong. At present the papermaking industry in Guangdong is on the track of scale-up, with the plan to achieve an annual output of 11 million tons of paper and cardboard and 850 thousand tons of commodity pulp in 2010.

8) Pharmaceutical Industry

Guangdong has strong power as a province in terms of its pharmaceutical industry, which ranks among the first in China in comprehensive strength. Specifically, the province maintains a leading position in the fields of traditional Chinese medicine, chemico-pharmaceutical preparations, and bio-pharmaceutical products. A remarkable advantage has also taken shape in medical instruments with higher technical content. The year 2005 witnessed a considerable output growth rate of 14.8% in Guangdong’s pharmaceutical industry.

The concentration of Guangdong’s pharmaceutical industry is above average in China. A comparatively complete system of pharmaceutical enterprises has been basically formulated, including chemical medicine, traditional Chinese medicine, biomedicine, medical instruments, and pharmaceutical commerce. A number of large comprehensive pharmaceutical enterprises have been established.

T h e p r o v i n c e h a s a l s o a c h i e v e d remarkable development in chemicopharmaceutical preparations. Biopharmaceutical enterprises such as Shenzhen Kexing, Kangtai, and Guangdong Techpool, and medical instrument manufacturers such as Anke and Mindray all have strong competitiveness in their respective arenas.

9) Automobile Industry

The automobile industry of Guangdong ranks among the top in China in terms of comprehensive economic indices related to the industry, such as the industrial valueadded, industrial profi ts and sales revenue of whole vehicles. In recent years, Guangdong has been committed to the creation of favorable investment environment and increased absorption of foreign investment in the adjustment of industrial structure, to the effect of an ever-expanding scale of automobile manufacturing and effective promotion of manufacturing capacity. Famous foreign automobile manufacturers such as Honda, Isuzu, Nissan, and Toyota have built their workshops in Guangdong successively.

Guangdong has become the largest automobile manufacturing base in South C h i n a . A u t o m o b i l e m a n u f a c t u r i n g enterprises have formed a distributive pattern with Guangzhou as the manufacturing center, sedan cars as key products, accessories as the foundation, and buses and special purpose vehicles as supportive sectors. This distribution is further enhanced by motorcycle enterprises with strong product development capacity and export competitiveness. Luxury sedan cars produced in Guangdong have cultivated strong competitiveness in the market. In 2005, the value-added of Guangdong’s automobile industry increased by 40.5%, ranking the fi rst among the nine pillar industries. In the same year, a number of 413,583 vehicles were produced in Guangdong.

With the development of the automobile industry, a large number of accessory suppliers have aggregated in Guangdong. The Pearl River Delta region has become the cluster of automobile industries and largescale accessory bases have been formed in Guangzhou Economic and Technological Development Zone, Guangzhou Nansha Economic and Technological Development Zone and Huadu District of Guangzhou.

The Service Industry

By the end of 2005, an accumulative number of 20,908 projects with foreign direct investment in the service industry had been approved in Guangdong, involving a contracted amount of 75.91 billion USD in foreign capital, of which 39.46 billion USD were actually absorbed. These fi gures accounted respectively for 17.5% of the total number of the projects with foreign direct investment approved in Guangdong, 30.0% of the total contracted amount of foreign capital, and 24.3% of the total amount of foreign capital actually absorbed.

Within the service industry in Guangdong, the range of fields absorbing foreign capitals has been expanding, from real estate, wholesale and retail, hotels and restaurants, transport, storage and post, to financial, leasing and commercial service, scientific research, technical service, information transmission, computer service and software, as well as education, culture and sports.

Constant optimization has been evident in the structure of foreign investment in the service industry, with a tendency of development from the conventional fields of real estate, commerce, restaurants and transport to the rising fields with higher technical content, such as commercial service, scientific research, technical service, information transmission, computer service and software.

Famous multinational corporations have actively invested in the service industry of Guangdong. To name a few, among Fortune 500 corporations, Wal-Mart and McDonald’s from the US, Carrefour from France, Metro from Germany, BP from the UK and Shell from the Netherlands have invested in the commercial circulation and restaurants; Citibank and AIG from the US have invested in banking and insurance; Marubeni from Japan has invested in circulation.

G u a n g d o n g h a s t a k e n a n a c t i v e part in tendering for service outsourcing contracts. By the end of 2005, 2,787 service outsourcing enterprises had been established in the province with foreign investment, involving a total investment of 8.3 billion USD, achieving a turnover of 13.03 billion RMB and a service export volume of 2.77 billion USD. Service outsourcing enterprises invested by multinational corporations have served as the mainstream of service vendors for their large scales. Currently service provided by Guangdong mainly involves software and information technology outsourcing, while commercial procedure outsourcing has displayed a promising prospect, including various operations, such as office support, data input and processing, software coding and testing, IT support, call center, financial management, human resource management, and R & D center. Tendering for service transferred and outsourced from Hong Kong is a major characteristic of Guangdong, and cooperation between Guangdong and Hong Kong in tendering for overseas service outsourcing has a promising future.

Agriculture

In 2005, Guangdong achieved a gross agricultural output of 242.28 billion RMB, with a value-added of 142.18 billion RMB, an annual per c a p i t a i n c o m e o f 4 , 6 9 0 . 5 RMB for rural residents, an import/export volume of 7.456 billion USD for agricultural products (including agricultural products according to WTO categorization and aquatic p r o d u c t s ) , o f w h i c h 3 . 5 7 4 billion USD was attributed to export.

Output of Main Agricultural Product in Guangdong Province in 2005

(iii) Commercial Statistics

Foreign Trade

Import and export has maintained a rapid growth in Guangdong. In 2005, the import/export volume of Guangdong totaled 427.98 billion USD, an increase of 19.8% over the preceding year, accounting for over 30% of the total import/export volume of the Chinese Mainland. The total volume of import and export were 238.16 billion USD and 189.82 billion USD respectively.

The structure of export commodities in Guangdong has undergone constant optimization. In 2005, the export volume of mechanical and electrical products reached 164.42 billion USD, that of new and high-tech products 83.58 billion USD, and that of garment and textile 22.01 billion USD. The structure of export market has also been further optimized. While rapid growth has been sustained in trade between Guangdong and its major trade partners, including Hong Kong, the US, Japan, the EU and the ASEAN nations, there is now rapid expansion of export to new markets such as Africa, Latin America and Russia, where a growth rate of over 40% were achieved in 2005.

In terms of import, a rapid growth in major categories of commodities has been registered, while prices of resource-intensive products have been on the rise. Mechanical and electrical products and new and high-tech products account respectively for 60.4% and 37.1% of the total import volume of Guangdong.

Percentage of mechanical and electrical products in the total export volume in 2005

Percentage of new & high-tech products in the total export volume in 2005

Absorption of Foreign Capital

With constant development in economy and society in recent years, the soft and hard environment for investment in Guangdong has undergone constant improvement, providing favorable conditions for foreign i n v e s t m e n t a n d s p e e d i n g u p f o r e i g n investment in Guangdong. In 2005, foreign capital actually absorbed by Guangdong totaled 12.364 billion USD, an increase of 23.5% over the same period of the preceding year, ranking the first in the Chinese Mainland. By then, Guangdong had actually absorbed an accumulative amount of 162.9 billion USD in foreign capital, accounting for 1/4 of the total of the Chinese Mainland.

The structure of industries with foreign investment has continually been optimized. In 2005, foreign direct investment actually absorbed by the primary, secondary and tertiary sectors was 77 million USD, 9,675 million USD and 2,612 million USD respectively. Investment in manufacturing industries continued to grow to a large extent. The whole year witnessed the approval of 2,478 service projects with foreign investment, increasing by 18.8%. Six industries in the service sector absorbed greater amounts of foreign investment, including real estate, leasing and commercial s e r v i c e , t r a n s p o r t , s t o r a g e a n d p o s t , information transmission, computer service and software, and wholesale and retail.

Investment from developed countries has grown at a faster speed, with contracted foreign capital from Australia, France, Canada and Denmark growing at rates over 150%. Investment from foreign-funded large enterprises and large projects has been sped up; R & D centers with independent foreign legal persons have also picked up speed of development in such industries as electronics and information, pharmaceutical research, and automobile technology; the service industry as represented by logistics, convention and exhibition, advertising, and consultation has also displayed a strong tendency for development; while foreign investment to development zones, mountainous areas and the eastern and western wings of the province has been growing in activity.

Percentages of foreign capital absorbed by the Primary􀉺Secondary and Tertiary industries

Overseas Investment and Cooperation

Overseas investment and cooperation of Guangdong has been developing in a favorable manner, with large enterprises picking up speed in international operations and private enterprises actively investing in projects overseas. By the end of 2005, Guangdong had set up 1,527 enterprises overseas or in Hong Kong and Macao, with an accumulative amount of 4,725 million USD in contracted investment, covering 45 countries and regions, mainly in Hong Kong and Macao, Southeast Asia, Africa and South America. The year 2005 witnessed the approval of 123 new overseas enterprises, with an investment of 442 million USD, of which 328 million USD was from Chinese investors. Development of energy resources has become a new focus in overseas investment and cooperation, while Guangdong enterprises have become increasingly active in investing to Hong Kong and Macao. By the end of 2005, Guangdong has approved the establishment of 836 enterprises in Hong Kong and Macao, involving a contracted amount of 2,931 million USD in investment.

O v e r s e a s e n g i n e e r i n g c o n t r a c t s and labor service cooperation involvingGuangdong have also gained a rapid growth rate. As of 2005, the number of newlysigned engineering and labor service contracts totaled 16,069, growing by 30.7% over the same period of the preceding year, involving a contracted amount of over 3.6 billion USD, with an 83.6% growth, of which completed amount totaled near 2.8 billion USD, an increase of 46.5% and a new high in history. Of this amount, 80% was attributed to communication systems engineering and complete sets of mechanical and electrical equipment.

Technology Introduction

The year 2005 witnessed the signing of 537 agreements on technology introduction in Guangdong, an increase of 71 in number a t a g r o w t h r a t e o f 1 5 . 2 4% o v e r t h e same period of the preceding year. These agreements involved a total contracted amount of 847 million USD, of which 645 million USD was entered as technical fees, on a par with the same period of the preceding year, accounting for 76.15% of the contracted total; while 202 million USD was entered as equipment costs, with a growth rate of 3,270.74% over the same period of the preceding year, accounting for 23.90% of the contracted total. Technology introduction has concentrated in Guangzhou, Shenzhen and other economically developed areas in the Pearl River Delta, while the contracted amount of Guangzhou and Shenzhen account for 73.86% of the provincial sum.

Commodity Circulation

In 2005, Guangdong achieved an amount of 788.264 billion RMB in total retail sales of consumer goods, of which 595.062 billion RMB was attributed to retail sales at and above county-level, while 193.201 billion RMB to retail sales below county-level. In terms of industries, the retail sales of wholesale and retail trades amounted to 657.534 billion RMB, those of the catering services amounted to 117.434 billion RMB, while other industries achieved 13.296 billion RMB in retail sales. Modern modes of circulation represented by chain operation and logistics distribution have been promoted, while new trades and new business modes have boomed to satisfy consumer needs and meet market competition and are now spreading from the Pearl River Delta to the whole province. By the end of 2005, the number of chain businesses has grown to 183, with 11,076 branch stores, achieving a sales volume of 163.588 billion RMB. Modern logistics has also gained fast development in Guangdong, with a value-added of 376.527 billion RMB.

III . Investment

(i)Policy and Administrative Rules

Catalogue of Related Laws

Foreign Trade Law of the People’s Republic of China

Customs Law of the People’s Republic of China

Law of the People’s Republic of China on Import and Export Commodity Inspection

Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures

Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures

Law of the People’s Republic of China on Foreign-Capital Enterprises

Company Law of the People’s Republic of China　

Law of the People’s Republic of China on the Entry and Exit Animal and Plant Quarantine

Law of the People’s Republic of China on Control of the Entry and Exit of Aliens

Law of the People’s Republic of China on the Control of the Exit and Entry of Citizens

Securities Law of the People’s Republic of China

Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises

Individual Income Tax Law of the People’s Republic of China

Law of the People’s Republic of China on the Administration of Tax Collection

Environmental Protection Law of the People’s Republic of China

Law of the People’s Republic of China on Evaluation of Environmental Effects

Law of the People’s Republic of China on Promotion of Cleaner Production

Law of the People’s Republic of China on Prevention and Control of Desertification

Marine Environment Protection Law of the People’s Republic of China

Law of the People’s Republic of China on the Prevention and Control of Atmospheric Pollution

Law of the People’s Republic of China on Prevention and Control of Environmental Pollution by Solid Waste

Law of the People’s Republic of China on Prevention and Control of Water Pollution

Law of the People’s Republic of China on Prevention and Control of Environmental Noise Pollution

Law of the People’s Republic of China on Prevention and Control of Radioactive Pollution

Frontier Health and Quarantine Law of the People’s Republic of China

Labour Law of the People’s Republic of China

T r a d e U n i o n L a w o f t h e P e o p l e’s Republic of China

Searching Website for the Related Laws

1 . S e a r c h i n g S y s t e m o f L a w s a n d Regulations of China (website of National People’s Congress of China)

http://law.npc.gov.cn:87/home/begin1.cbs

2. China Legislative Information Network System

http://www.chinalaw.gov.cn/jsp/jalor/index.jsp

3. Ministry of Commerce

http://www.mofcom.gov.cn

The above-mentioned websites are for reference only.

(ii) Advantageous Industries of Priority Development in Guangdong

1.Electronics and Information

2.Electrical Appliances and Machinery

3.Petrochemicals

4.Garment and Textile

5.Food and Beverage

6.Construction Material

7.Papermaking

8.Pharmaceuticals

9.Automobile

(iii) Procedures for establishing an enterprise

Notes:

1. The flowchart above displays the general procedures for application for the establishment of enterprises with foreign investment;

2. Applicants for encouraged and permitted projects (exclusive of infrastructure and excavation projects) with foreign investment of below 100 million USD may submit their feasibility study report, contract and articles of association directly to prefecture-level authorities of foreign trade and economic cooperation for approval;

3. Projects beyond the provincial right of approval and products involving special permits or quota management or within the uniform administration of the central government should be submitted by the Provincial Development and Reform Commission, the Provincial Economic and Trade Commission or the Provincial Department of Foreign Trade and Economic Cooperation to relevant authorities authorized by the State Council for approval;

4. Technical renovation projects should be approved by the Economic and Trade Commission of the county, the municipality, the province or the Ministry of Commerce within their right of approval, followed by the approval of contracts and articles of association by the authorities of foreign trade and economic cooperation within their right of approval;

5. For detailed procedures for application, please refer to relevant authorities;

6. Application for projects located in state-level development zones, bonded zones or export processing zones may be submitted to the administrative committee of the corresponding zone.

(iv) Residence Environment

Forestation

Over two decades of efforts in Guangdong have been rewarded with significant achievements in urban gardening and ecological construction. The current forest coverage of Guangdong is 60%, providing a favorable ecological environment and making Guangdong a forestry ecological province with harmonious coexistence between man and nature.

Air quality

The majority of cities in Guangdong boast fi ne air quality and agreeable climate. All 21 cities at or above prefecture level live up to National Air Quality Standard for living quarters (Grade II).

Cultural, sports and recreational facilities

A number of key cultural facilities of modern design and high standards have been built in Guangdong, including 1,014 cinemas, 121 public libraries at or above county level, 128 museum, and 1,913 cultural stations. The province also boasts 6 state-level famous historic and cultural cities, 16 province-level famous historic and cultural cities, 30 key cultural relics units under state protection and 158 key cultural relics units under provincial protection.

Exchange

E a c h y e a r v a r i o u s i n t e r n a t i o n a l activities in the themes of commerce and trade, culture, and tourism are organized in Guangdong, to the effect of more frequent and deeper exchanges with our friends from various nations, as well as more harmonious cultural blending.

Living conditions

Guangdong provides superior living conditions. International cities such as Guangzhou, Shenzhen, Foshan, Zhuhai and Zhongshan all have high living standards to cater for the needs of friends from various nations. International schools have been set up for foreign children, while special schools have been set up for Taiwanese children, helping to solve the practical problem of children’s education for overseas investors.

Health and medical care

Health and medical care has developed well in Guangdong, with ever-improving standards of health care. At the end of 2005 the number of health institutions totaled 16,054, including 2,397 hospitals and health centers, 287 health prevention and antiepidemic institutions, 123 health supervision institutions, 125 maternal and child health institutions, with 289.8 thousand medical workers.

(v) Reference Prices of Basic Elements

Water prices in major cities in Guangdong

Unit: RMB/Cubic Meter

Notes:

1. The price in Zhanjiang includes a sewage fee of 0.25 RMB absent elsewhere.

2. The above information is for reference only. Please refer to the relevant departments for exact prices.

3. Source: http://www.gdpi.gov.cn (website of the Guangdong Provincial Price Bureau)

Electricity prices in major cities in the Pearl River Delta

Unit: in fen/kwh (including tax)

Notes:

1. City development sub-charge is collected by the power supply department on behalf of the government;

2. The above information is for reference only. Please refer to the relevant departments for exact prices.

Electricity prices in major cities in the mountainous areas

Unit: in fen/kwh (including tax)

Notes:

1. City development sub-charge is collected by the power supply department on behalf of the government;

2. The above information is for reference only. Please refer to the relevant departments for exact prices.

IV . Development Zones

(i) State-level Development

Zones

Up to the present, 22 state-level economic development zones have been e s t a b l i s h e d i n G u a n g d o n g P r o v i n c e , including 4 economic and technological development zones, 4 export processing

zones, 6 bonded zones, 1 bonded logistics park, 6 new and high-tech development zones and 1 cross-border industrial zone.

Guangzhou Economic and Technological Development Zone

Guangzhou Economic and Technological Development Zone is located in the east of Guangzhou in the middle of the golden triangle of Guangdong, Hong Kong and Macao. The zone was set up in December 1984 with the approval of the State Council, with a planned area of 38.58 square kilometers. A shared administrative system has been formed to cover the quartet of this zone and three other zones, namely Guangzhou New and High-Tech Industrial Development Zone, Guangzhou Bonded Zone and Guangzhou Export Processing Zone. The superior investment environment of the zone has attracted 83 of the Fortune 500 enterprises to set up their factories here. Industries of priority development include optoelectronics, biopharmaceuticals, fine chemicals, automobile, modern logistics, and steel. The harmonious development of industry with ecological environment has received great attention.

Nansha Economic and Technological Development Zone

Guangzhou Nansha Economic and Technological Development Zone was established in May 1993 with the approval of the State Council. Located in the southeast of Guangzhou, the zone has a planned area of 27.6 square kilometers, within 100 kilometers in distance from any city of the Pearl River Delta. Industries of focused development i n c l u d e p o r t l o g i s t i c s , a u t o m o b i l e , mechanical equipment, shipbuilding, steel, petrochemicals, foodstuff logistics and processing, and electronics and information.

Huizhou Daya Bay Economic and Technological Development Zone

Huizhou Daya Bay Economic and Technological Development Zone was established in May 1993 with the approval of the State Council, with a planned area of 23.6 square kilometers in the south of Huizhou City. The unique natural conditions at the bay and favorable investment environment of the zone have attracted investors from more than 10 countries and regions, including Fortune 500 enterprises such as Shell, Honda, Sanyo, Sumitomo, and Bridgestone. A chain of petrochemical industries have taken basic shape in the zone and bases for automobile accessories, electronics and information have been built, providing favorable opportunities and conditions for the development of the industries of petrochemicals, logistics, automobile accessories, electronics and information.

Zhanjiang Economic and Technological Development Zone

Zhanjiang Economic and Technological development zone was established in the center of Zhanjiang City in November 1984 with the approval of the State Council, with a planned area of 19.2 square kilometers. An export-oriented pattern of economy has taken basic shape with the pillar industries of special papermaking, biopharmaceuticals, chemical materials, mechanical and electrical equipment, automobile manufacturing, garment and textile, office supplies, and seafood processing. In a new round of development, the zone will focus on the development of coastal petrochemicals, resource processing, farm and aquatic products, pharmaceutical industries, new and high-tech industries, as well as modern tertiary industries such as logistics, culture and education.

 (ii) Province-level Development Zones

A total of 69 province-level development zones are distributed around the province.

Major Province-level Development Zones of Guangdong Province

(iii) Related Organizations

(iv) Related Websites

Appendix

Main Hotels in Guangdong

Common Telephone Numbers for Inquiry