TO THE POINT: The final week of March was extremely buoyant in many senses. The benchmark Shanghai Composite Index climbed to record highs continually throughout the week, a seldom seen occurrence. The booming stock market was buoyed by the robust economy and the Shanghai Futures Exchange launched zinc futures trade on March 26. In retrospect, Chinese processing trade in 2006 comprised 48.6 percent, the largest share of the total foreign trade volume. Among total processing trade, 75 percent are made up of mechanical and electrical products and the Intel Corp.'s new chip factory in Chinese Dalian City will certainly help boost this figure. In the first two months, the actual paid-in foreign capital grew 13.01 percent compared with the same period last year despite the corporate income tax law readjustment. Intel plans to invest $2.5 billion into the Dalian project and expects the factory to be completed by 2008. Moves within the automobile industry are worth noting as Japanese cars topped domestic carmakers as the first choice for Chinese consumers in 2006. Whether Japan will maintain its dominance in the Chinese market this year is still anyone's guess. And finally, real estate sales revenue in China was estimated to reach a record high $9 billion, and the Chinese real estate market has become an arena for cross-border investors.

Record Highs Becoming Cliché

The benchmark Shanghai Composite Index of the Chinese stock market has been greeted with a number of "record highs" since March 26. Stock traders said that for the first time in history, they can actually be comfortable with the news of yet another "record high." Every day seems to be a new high. Ho hum.

From March 26 to 29, the Shanghai Composite Index closed at 3122, 3138, 3173, and 3197. Though stock bubble theory still haunts some, more investors prefer to believe that the Chinese stock market was in effect undervalued in the past few bearish years. The "record highs" are spurred by the return of blue chips, the almost finished split share reform of state-owned enterprises, and above all, the robust domestic economy driven by the Beijing 2008 Olympics and the World Expo 2010 Shanghai.

Up to March 28, 513 A share listed companies had published their 2006 annual reports, demonstrating a total net profit of 123.267 billion yuan, a 56.01 percent climb compared with the previous year.

According to statistics from China Securities Regulatory Commission (CSRC), in the first two months of this year, the number of new investors soared to 4.692 million. This comes on news that the total number of investors reached nearly 82 million by the end of February this year.

The "get rich overnight" fairy tales of stock markets last year have raised Chinese citizens' awareness of the existence of the stock market. When trading stocks becomes a part of life, the stock market might rejuvenate.

Intel Sweeps In

The world's biggest chip manufacturer Intel Corp. decided to cash in its chips by investing in a 160,000 square meter manufacturing plant in Dalian worth $2.5 billion.

"This project confirms and further enhances the strategic importance of China in our global strategy and in the IT industry around the world," said Intel Corp.'s Chief Executive Paul Otellini. Construction of the factory will commence before the end of this year.

The northeast port city of Dalian succeeded in a fierce bidding brawl between several candidate cities worldwide, winning the favor of Intel. It will be Intel's first wafer fabrication factory in Asia, which will help boost Intel's presence in Asian markets just as the company faces challenges from upstarts like Advanced Micro Devices (AMD).

According to Intel's annual report, sales revenue from the Chinese mainland and Taiwan surpassed $12.1 billion, accounting for over 34 percent of its global sales.

The 12-inch (300-millimeter) integrated wafer plant in Dalian will have a monthly capacity of 52,000 chips. Intel now operates similar factories in the United States, Ireland and Israel.

Otellini said Intel's decision to build a factory in China hasn't confronted any difficulties or pressures from the U.S. government, and many officials believed the cooperation would become a new milestone of technology cooperation between the United States and China.

Auto Makers Hit the Road

The booming automobile trade has triggered fierce competition in China, with Japanese cars taking the lead by a hair.

According to a report from the China Association of Automobile Manufacturers (CAAM), Japan sold over 983,600 cars in China, making up 25.69 percent of the car market, followed closely by Chinese cars at 25.67 percent. The best of the rest include Germany, the United States, South Korea, France and Italy.

For a long time cars were generally associated with luxury and social status. But now they have become a necessity for many, an everyday mode of transportation. Another report from CAAM shows that private cars accounted for 74 percent of all cars sold in China by the end of 2006.

Cheng Meiwei, Chairman and CEO of Ford Motor (China) Ltd., said China is the fastest growing emerging market and half of the new cars of the world will be sold in China in the next 20 years.

Industry observers warn that too many lines of cars may not be a good idea. For one thing, each new line takes substantial research and development expenses. For another, the production of too many models retards large-scale development and sales of each model will be small. Rather, automakers should work on select models and build customer loyalty. For instance, the car 300C manufactured by German-U.S. DaimlerChrysler is selling well in China in spite of the fact that Chrysler is actually suffering an operational conundrum and is rumored to be on merger block soon.

Processing Trade Blossoming

Chinese processing trade has taken off since the 1980s and has emerged to be one of the most important pieces of the trade puzzle in recent years.

Last year, the import and export value of processing industries totaled $831.9 billion, about 333 times what it was in 1981. The volume accounted for 48.6 percent of the country's foreign trade, while the figure was a mere 5.7 percent 25 years ago.

According to the Ministry of Commerce, the rapid growth in recent years attracts more overseas advanced assembling lines and encourages domestic manufacturers to update their technologies.

To upgrade processing trade, the country will stop trading high-polluting items, those with high consumption of natural resources and low added-value products, like sulfur and clay, according to the Ministry of Commerce.

FDI Shows Robust Growth

Amid the possible negative impact of the readjusted corporate income tax on foreign-invested companies, China still saw $9.71 billion paid-in foreign capital from January to February, a 13.04 percent rise from the same period last year, according to the Ministry of Commerce.

The proposed unified company income tax structure, which will take effect on January 1, 2008, will have little effect on foreign investment, Bert Hofman, World Bank chief economist for China, said. Hofman added that China's rate remains attractive for foreign investment, while the country remains competitive in other factors such as infrastructure, government efficiency and labor costs.

Zinc Futures Traded

The Shanghai Futures Exchange started trading zinc futures from March 26, the first new product added this year.

At the opening bell, zinc for delivery in July stood at 28,600 yuan per ton and closed at 29,220 yuan per ton with a total of 83,930 tons traded.

"It helps increase China's influence on zinc prices in global markets and enhances related industries' capability to avoid risks caused by changing world prices," said Shang Fulin, Chairman of the CSRC.

China is the world's largest producer and consumer of zinc, a metal used in galvanized sheets and lead-zinc batteries. However, zinc futures and options have only been traded on the London Metals Exchange, where prices climbed over 120 percent last year.

"The trading in zinc futures will generate far-reaching influence in the non-ferrous and futures markets as domestic enterprises are offered an effective platform to hedge against risks brought about by fluctuating prices," commented Wang Gongmin, Vice Chairman of the China Non-ferrous Metals Industry Association.

No Respite for Real Estate

China's real estate markets recorded transactions totaling $9 billion, an increase of 69 percent, despite government measures to cool down the real estate market. This news comes from the latest report entitled Global Real Estate Capital-Moving Further and Faster by Jones Lang LaSalle, a multinational real estate service and money management firm.

The report forecast 9.5 percent growth in the Chinese real estate market in 2007, making the economy a magnet for cross-border investors. Cross-border investment represented 60 percent of the total volume with Singaporean and global funds dominating.

The report shows that recent yield compression in the U.S. market has encouraged global and U.S. investors to seek higher returns in Europe and Asia Pacific (particularly China and Thailand), where yields are up to 300 basis points above North American levels.