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.