Compilation of the Legal Instruments on China’s Accession to the World Trade Organizations

Chapter Three: Market Access to Major Industries of shanghai

　　Part One Market Access to the
Service Industries
　　I. Insurance Services
　　All together there are now 36 insurance companies and 14 insurance intermediaries in Shanghai, including 16 property insurance companies, 18 life insurance companies, 1 reinsurance company, 1 group company, 3 insurance brokers, 7 insurance agencies, 4 insurance assessment companies. Shanghai's unique advantage in finance and investment is attracting a number of insurance companies to move their investment management departments to Shanghai.
　　In 2002, the premium income of these services totaled RMB23.934 billion, up by RMB5.92 billion over the same period last year, representing an increase of 32.86％. Premium income from property insurance amounted to RMB4.439 billion, up by RMB449 million, representing an increase of 11.25％; premium income from life insurance amounted to RMB19.330 billion, up by RMB5.305 billion, an increase of 37.83％; premium income from re－insurance amounted to RMB165 million. The proportion of domestic equity to foreign equity was 87≥13
　　Insurance density (per capita premium) increased again to RMB 1803 in 2002 after exceeding RMB 1000 for the first time in 2001, RMB 448 more and 33.03％ higher than the same period last year. Premium penetration stood at 4.43％, up 20.38％ over last year, 0.75 percentage point higher.
　　After China's accession to the WTO, more foreign insurance companies are choosing Shanghai as their gateway to the Chinese market. The advanced managerial know－how and technology brought by them will speed up the development of the insurance market in Shanghai to upgrade it to the international insurance market level and further improve management in Shanghai on the other. Currently, foreign companies, in an orderly manner, are entering the insurance market in Shanghai, which though is still dominated by Chinese insurance companies in terms of total assets. The growing competition from the foreign counterparts is compelling local insurance companies to enhance their services and competitiveness. Besides, the lack of insurance professionals is likely to continue.
　　II. Distribution Services
　　By the national schedule for opening up, foreign investment will enter the commercial sector in large scale with better quality, thus improving the investment structure. The large distributors of Carrefour (Shanghai) and Auchan were first approved as national pilot projects, with foreign investment equity ratio of 55％ and 49％ respectively. In jointげventure retailing, since 2002, one wholesale company Baihong and 6 retailing companies (the Metro, the Lotus Supermarket, B＆Q，OBI, Carrefour, Auchan) have been established in Shanghai. Including 4 companies that had previously entered Shanghai, there are now altogether 11 joint invested retailing companies.
　　III. Medical Care and Dental Services
　　Upon accession, foreign investors shall be permitted to establish Sinoげforeign cooperative hospitals and clinics, majority share holding allowed.
　　With regard to commercial presence within one year after the accession, altogether 27 Sinoげforeign medical care organizations have been submitted to the Ministry of Health for approval, 19 of which have been approved and 6 have been submitted to the Ministry of Foreign Trade and Economic Cooperation. After the accession, changes have occurred in the business scope of the Sinoげforeign medical organizations in Shanghai. Such hospitals or clinics now provide comprehensive medical care rather than just cosmetic and oral health services.
　　As to movement of natural persons, in the past two years, altogether 44 foreign doctors have visited Shanghai to provide medical service, with 13 in 2001, another 13 from January to July 31, 2002, all on a shortげterm basis of one year limit.
　　The above statistics show that the number of Sinoげforeign medical institutions in Shanghai and foreign doctors coming for shortげterm services is on the rise, though the increase is not significant. However, it is certain the trend is set that the investment scale and the business scope of Sinoげforeign medical institutions will continue to expand.
　　IV Audioげvisual Services
　　In audioげvisual services, China has made the following commitments regarding market access:
　　1. Distribution of video products: There is only one jointげventure approved by the Ministry of Culture to distribute video products in Shanghai, with little effect on the audioげvisual market in Shanghai so far. In addition, the authority to examine and approve the import of 20 foreign movies rests with the State General Administration of Radio, TV and Movie rather than with the Shanghai government.
　　2. Cinematic services: Now there are 6 joint venture cinemas in Shanghai with a total foreign investment of USD12 million, their box office income accounting for about 30％ to 40％ of the total in Shanghai. (The total box office income of joint venture cinemas in 2001 reached RMB50 million).
　　Foreignげinvested cinemas have produced certain impact on the Shanghai market where they have also served to spur the domestic market by stimulating local movie theatres to change their business concepts and management styles.
　　V Legal Services
　　After accession to the WTO, China's commitment to the opening of legal service market became guaranteed in the form of law. The “Provisional Regulations on the Establishment of Rep. Offices in China by Foreign Law Firms” promulgated by the Ministry of Justice on May 26, 1992 (No. 004, issued in 1992) has been abolished. “Administrative Regulations on the Representative Offices of Foreign Law Firms in China” published by the State Council as Ordinance No. 338 came into effect on Jan. 1, 2002. In addition, the Ministry of Justice published “Detailed Provisions of the Ministry of Justice Governing the Enforcement of ｀Administrative Regulations on the Representative Offices of Foreign Law Firms in China'”, which came into effect on September 1, 2002.
　　Meanwhile, in response to the rising market demands, the number of representative offices of foreign law firms has grown rapidly. Now there are altogether 45 such representative offices in Shanghai, among which 32 had been set up before China's WTO entry and 13 were newly approved. The “Detailed Provisions of the Ministry of Justice Governing the Enforcement of ｀Administrative Regulations on the Representative Offices of Foreign Law Firms in China'” specifies the conditions and procedures regarding the establishment of the representative offices. Accordingly, quantitative restriction has virtually been eliminated.
　　However, the accession to the WTO has brought about both positive and negative effects on legal services. On the positive side, it has contributed to the further development of legal services in Shanghai by creating a brand new international law practicing environment where the inflow of exemplary practices and upげtoげdate concepts will help to standardize the legal services in Shanghai. On the other hand, domestic legal service providers are being challenged to improve their standards in overall professional quality, competitive edge, modes of practice as well as the structure, scale and function.
　　VI． Securities
　　1．After accession, foreign securities institutions shall be permitted to engage directly (not through Chinese brokers) in Bげshare trading. Relevant stipulations are to be found in the Provisional Measures Governing the Applications of Foreign Securities Institutions for Trading Bげshares at the Shanghai Securities Exchange, published and effected on July 24, 2002.
　　2. Since accession, representative offices of foreign securities institutions shall be accepted as special members of all Chinese securities exchanges. Relevant stipulations can be found in the Provisional Measures Governing the Management of Special Foreign Members of the Shanghai Securities Exchange, published and effected on August 2, 2002.
　　3. Upon accession, foreign service providers shall be allowed to establish joint ventures engaged in the management of domestic securities investment funds, with a maximum ownership of 33％, which shall increase up to 49％ within three years after accession. Within three years after China's accession, foreign securities companies are permitted to set up joint ventures, with a maximum ownership of 1/3 in equity. They shall be allowed to underwrite Aげshares, underwrite and trade in Bげshares, Hげshares as well as government and corporate bonds, and the initial public offering of funds. Corresponding stipulations can be found in Regulations Governing the Establishment of Foreignげinvested Fund Management Companies and Regulations Governing the Establishment of Foreignげinvested Securities Companies.
　　VII. Educational Services
　　Upon accession, educational administrations at all levels in Shanghai and schools concerned have honored the commitments. As a result, there have been no disputes arising from deviation or negligence. Current situation in Shanghai is to be seen from the following aspects:
　　With regard to educational consumption abroad, according to rough statistics, the number of the students who went to study abroad from Shanghai on their own reached well over 10,000, 40％ more than that before China's WTO entry, among which 7,000 students went abroad through intermediary agencies.
　　Concerning commercial presence, the accession has promoted the development of Sinoげforeign joint educational programs. So far, there are 154 approved Sinoげforeign joint educational institutions and joint programs in Shanghai, which account for 20％ of the total in China. 41 of them are newly approved after accession. In addition, there are 19 international schools providing educational services to children of the expatriates in Shanghai.
　　With respect to the movement of natural persons, there has been an increase after accession in the number of foreign individual educational service providers who have been invited or employed by schools or other educational institutions in Shanghai. They are now serving a wider range of educational institutions including institutions of higher learning, primary and secondary schools and vocational schools and even some nonげgovernment sponsored educational institutions or programs.
　　　　VII.I Environmental Services
　　According to China's commitments, upon accession, foreign investors engaged in environmental services shall be permitted to set up joint venture or cooperative enterprises with majority ownership. In compliance with China's commitments, Shanghai has taken the following measures:
　　1) Drainage service (CPC 9401)
　　As Shanghai is thinking of drafting policies on multiげchannel financing and establishing professional operation market for environmental protection and municipal infrastructure construction, drainage service is becoming one of the most active areas through which foreign investors gain access to the local market. There have been completed cases as well as negotiations on waster water treatment through BOT or joint venture. 　　2) Solid waste disposal service (CPC 9402)
　　Such service is also one of the areas where foreign investors are seeking investment opportunities. There have been contracts signed with foreign investors.
　　3) Exhaust treatment service (CPC 9404)
　　Only a limited number of foreign investors provide such service by selling and installing exhaust treatment equipment.
　　4) Noise controlling service (CPC9405)
　　So far, no foreign investors have entered this area.
　　5) Other environmental protection services (CPC9409)
　　Some foreign companies have entered the Shanghai market to provide environmental protection consultation services.
　　In recent years, investment efforts have been intensified to protect the environment and conduct municipal construction. With an annual investment between RMB14げ15 billion, about 3％ of the GDP of Shanghai, the city presents a huge market for foreign investors. Meanwhile, the national reform on policies of environmental protection facilities and municipal construction and the promulgation of Notification of Pushing Forward Reform on Urban Water Supply Charges and Notification of Feeげcollecting System for Household Waste Disposal and Promoting Waste Disposal Industrialization have jointly made possible multiげchannel financing, commercialization of municipal utilities and industrialization of waste disposal. All these constitute overall changes conducive to foreign investment.
　　Generally speaking, the inflow of foreign investment helps to alleviate the lack of environmental protection input in Shanghai. On one hand, foreign investment helps to enhance environmental protection as capital and services often come together with advanced operational mechanism and technology. On the other hand, it brings competition into environmental services sector and compels the Chinese monopoly or semiげmonopoly service suppliers to improve their efficiency and performance through reforms on their systems and working mechanisms.
　　VIV. International Forwarding Service and Transportation Service
　　Shanghai has honored China's commitments in this regard. By far, no case of nonげcompliance has been reported.
　　Meanwhile, China has fully fulfilled its commitments in road, inland river and sea transport, particularly regarding market access. Foreign investment under the scope of these commitments is already in existence. Up till now, there are over 70 Sinoげforeign joint venture road transportation enterprises, 10 Sinoげforeign joint venture shipping enterprises, and over 40 Sinoげforeign joint venture container yards.
　　There is no Sinoげforeign joint venture in civil aviation and rail transportation in Shanghai so far. 　　On the whole, there has been no significant impact on the market when China fulfills its WTO obligations. This is because shipping and other related services had been opened early and fairly thoroughly.
　　　　X. Construction and Related Engineering Services
　　Since January this year, approximately 10 batches of governmental or nonげgovernmental factげfinding groups from Canada, U.S., Germany, Singapore and other countries have visited Shanghai to study policies and regulations governing construction and transportation industries. They came with clear objective and focus on investment opportunities by getting to know the degree of the construction market access in Shanghai.
　　The accession will certainly expand the construction market in China to some extent. The market share of foreign invested enterprises (including Sinoげforeign joint ventures) is expected to rise to 4％ while that of domestic enterprises accounts for 96％, among which private enterprises will assume more importance. However, foreignげinvested enterprises boast rich management experience in projects involving high risks, large investment and complicated engineering work. With their advanced management, strong financial and technological backing and financing capabilities, they have a competitive edge in largeげscale infrastructure and public projects, international engineering projects, and foreign financed projects.
　　XI. Real Estate Service
　　The opening of the real estate service sector mainly involves real estate development and real estate intermediary services, of which the real estate development had already been opened before China's accession to WTO (excluding highげend real estate projects) to foreign investment. After the WTO entry, what is of interest to foreign investors are mainly real estate intermediary services, including real estate assessment, property management and agent service. Foreign investors are allowed to establish joint ventures with majority ownership. This will inevitably exert impact on the current real estate intermediary services and the property management services, particularly on property management enterprises that were transformed from the previous housing management operated by the government. Nonetheless, the impact, if handled properly, can turn positive and contribute to the further standardization, readjustment and development of the real estate intermediary services.
　　XII. Financial Services
　　By the end of 2002, there are in Shanghai altogether 54 foreign financial institutions in operation, including 40 branches and 6 subげbranches of foreign banks, 4 exclusively foreignげowned or jointげventure banks and 1 JV bank branch, and 3 exclusively foreignげowned or jointげventure financial companies. Of these financial institutions, 30 foreign banks are permitted to run RMB business and 23 to run comprehensive foreign exchange business.
　　With regard to financial lease business, China has committed itself to granting foreign investors the right to apply for the establishment of solelyげowned or jointげventure financial leasing companies in accordance with the stipulations of Measures Governing the Administration of Financial Lease Companies issued by the People's Bank of China. Although the People's Bank of China, Shanghai Branch has received inquiries from foreign investors regarding the establishment of financial leasing companies, no applications have been submitted owing to fairly demanding requirements in market access.
　　XIII. Conference ＆ Exhibition
　　 The 1990s were a decade that witnessed rapid growth in conferences and exhibitions hosted in Shanghai. According to the statistics of the Shanghai Municipal Foreign Economic Relations and Trade Commission, the number of approved fairs and exhibitions were 37 in 1993, 50 in 1994, 68 in 1995, and 90 in 1996, representing an annual average growth rate of 25％. Since 1997, the number has increased by leaps and bounds with 115 in 1997 and 140 in 1998. The figure rose to 178 in 1999, among which 32 were organized by other provinces. In 2001, there were 238 fairs and exhibitions, and there are over 300 in 2002. In 2002,the Shanghai Conference ＆ Exhibition Trade Association was established to exercise selfげdiscipline and encourage orderly development of the industry in Shanghai. Conference ＆ Exhibition, as an emerging industry, has played an active role in improving the city's comprehensive competitiveness and fame, and promoting its economic and social development. 　　Part Two Market Access to Major
Industrial Sectors
　　I. Auto Industry
　　Since January 1, 2002, the import duties for cars have been considerably lowered in accordance with the commitments. Currently the import duty rate for cars with displacement lower than 3L stands at 43.58％, representing a drop by 26.2％, and that for cars with displacement higher than 3L is 50.57％, representing a drop by 29.3％. Meanwhile, as required by the commitment, import licensing control has been lifted for automobiles and key auto parts including airげconditionings on motor vehicles, trucks over 5 tons with ignition reciprocating internal combustion piston engine (not including road dumper) and motor vehicles for medical use. Meanwhile, the import quota for auto and key parts has been substantially increased with committed quota amounting to USD8 billion. Besides, in strict accordance with the commitment, China has rescinded and will no longer put in place favorable terms and subsidies such as tax refund granted to large stateげowned enterprises and favorable tariff rate granted in proportion to the automobiles' local content rate. At the same time, China has sought full compliance with WTO Agreements on Tradeげrelated Investment Measures by removing all compulsory requirements regarding the purchasing of materials for auto joint ventures, local content and balance of foreign exchange. There has been a positive change in the Industrial Catalogue for Guiding Foreign Investment, encouraging foreign investment in slab frame and key auto parts. As to the mode of access, mergers and acquisitions are allowed when investment is made in auto industry. Furthermore, China has gradually opened auto related service sectors, such as sales credit, logistics, leasing, insurance, transportation and maintenance.
　　The related commitments have exerted great pressure on the local automobile industry, but meanwhile, they have also become a positive driving force. Take the majority of automobile enterprises in Shanghai for example. The Shanghai Automotive Group has made new breakthrough in its output and sales volume through adding new features to its products, adjusting the prices, continuously launching new cars, and upgrading its brand image. From January through December in 2002, the output of cars totaled 390,000, and the car sales volume 410,000, showing an increase of 37.6％ over the same period last year.
　　The reasons behind the aboveげmentioned achievements are as follows: First, the sustained domestic macroげeconomic growth provides material support for the demand for automobiles. Second, after China's accession to the WTO, automobile price in the domestic market is getting increasingly in line with the international market. Besides, launching of new products is being accelerated. They both vigorously helped to produce the synchronous growth in the total demand and the effective supply. In addition, other factors such as banks' active involvement in car loans, the streamlining of required procedures for automobile purchase and use, and reduction in the interest rate have all effectively boosted automobile consumption. Third, moderate import quota increase implemented in the transitional period in accordance with the accession commitments has enabled the market share of imported cars to increase slightly by less than 1 percentage point over that of last year..
　　Another matter of interest during the first year after China's accession to the WTO is that the automobile service industry is developing fast in Shanghai. The Shanghai Automobile Trading Company and the TNT Logistics Holding Company of Holland jointly established the first automobile logistics joint venture in China げ Angel TNT Logistics Co., Ltd., whose business is now running smoothly. Its goal is to become the largest automobile logistics company in China.
　　II. Petroleum and Chemical Industries
　　The petroleum and chemical industries after China's accession have manifested smooth and sound development while Shanghai is fulfilling relevant WTO commitments. From January through December in 2002, the petroleum and chemical industries here achieved a total output of RMB82.469 billion, representing a growth of 17.1％. The increases were 22.6％ in rubber products, 19.4％ in organic chemicals,22.8％ in basic chemical raw material manufacturing, 8.2％ in pesticide, 11.0％ in chemical products for specific uses, 17.3％ in petroleum processing and coking, and 13.1％ in synthetic materials. During this period, Sino Petrochemical restructured its product composition, launched more high valueげadded products, and completed the 700,000げ tonげ ethylene facilities, which is the major part of Phase 4 Project. All these have directly led to a 20.4％ increase in its output value. The Gaoqiao Petrochemical completed the rebuilding of ＃ 3 distillation and delayed coking facilities in midげSeptember, while it further enhanced its production capacity and competitiveness. Benefiting from the climb in auto (tire) consumption and in the price of acrylic acid, Huayi Group, a leading chemical enterprise in Shanghai, managed to maintain a twoげdigit growth rate, achieving a 14.8％ cumulative growth from January to December.
　　Contrary to expectation, substantial reduction in tariffs has not caused considerable rise in the import of petrochemical products. There are two underlying factors. One, before accession, 50％ imported petroleum and chemical products had been exempted from tariffs. For example, the processing trade in bonded mode, equipment and machinery imported by foreignげfunded enterprises, and state technological reform projects and donations from foreign governments were all dutyげfree. Namely, only less than half of all the imported products were subject to tariffs. Two, although tariff cut leaves some leeway for suppliers and importers to lower their prices, the market has showed little response to that. Businesses in the manufacturing and circulation had once expected the tariff cut would encourage importers to replenish their stocks, but there has not been any sign of their doing so.
　　Much in contrast to the reduction of tariffs, the gradual elimination of nonげtariff barriers has produced a quite significant effect on import, which is gradually surfacing and becomes increasingly prominent. Before China's entry into WTO, it used to impose nonげtariff measures on 385 headings of imports, among which petroleum and chemical products totaled 196, accounting for 50.9％. The phaseげout of these nonげtariff measures will, on the one hand, further bring down the overall purchasing cost, enhance the level of core competence, and in turn, help to enhance competitiveness of local enterprises in both the domestic market and the global market. They will, on the other hand, push the petroleum and chemical enterprises in Shanghai to the front line of competition both in the home market and the international market. The pressure will inevitably become heavier as a result.
　　The Chinese government's strict implementation of the Agreement on Tradeげrelated Aspects of Intellectual Property Rights and the Agreement on Technical Barriers to Trade has brought positive changes to Shanghai's petroleum and chemical industries, and led to an enhanced awareness of intellectual property right protection and of the active use of foreign patents and development of their proprietary patents. A typical case is a chemical company of chloride alkali, Huayi Group. This company, on one hand, stepped up efforts to introduce such patented techniques as the suspension polyvinyl chloride technique from a Japanese company, polyvinyl chloride paste resin production technique from an American company and the carbon tetrachloride production technique from an Italian company TECNIMONT and made no attempt at illegally copying these techniques and products. On the other hand, it established a national enterprise technical center, and attached great importance to the development of new technology based on the assimilation of transferred technology. It eventually developed a series of advanced technology and applied for several patents. As a result, the technological level of the company and the local content rate of its equipment are greatly improved.
　　Technical barriers to trade exerted shortげterm pressure on the petroleum and chemical industries of Shanghai in the year 2002. Technical requirements on prohibited dyestuff and environmentげfriendly dyestuff as well as the related technical norms raised new barriers, at least in the short term, to the export of dyestuff made in Shanghai. The fact that enterprises in the fine chemical industry of Shanghai are small and scattered makes the improvement of product quality standards very difficult. In this sense, the market prospect is by no means optimistic.
　　　　III. Iron and Steel Metallurgical Industry
　　China has been actively fulfilling its commitments regarding iron and steel metallurgical products by carrying out tariff concessions, eliminating existing subsidies or not granting new subsidies to relevant industries or enterprises and taking trade remedy measures in line with WTO rules. From January through December in 2002, total output of the iron and steel metallurgical industry in Shanghai reached RMB58.263 billion, down 9.3％ from the same period last year.
　　Steel imports increased significantly in 2001, which has caused serious injury to the Chinese steel industry. On May 23, 2002, the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) decided to impose temporary safeguard measures for a period of 180 days against the import of certain iron and steel products. Starting from May 24, 2002, China imposed tariff quota on 9 items of iron and steel imports. In November 2002, MOFTEC issued the Announcement of the Ministry of Foreign Trade and Economic Cooperation to Impose Final Safeguard Measures against Certain Iron and Steel Imports, which stipulates that final safeguard measures are to be taken from November 20, 2002 against the import of 5 types of iron and steel products including hotげrolled ordinary sheet, coldげrolled ordinary sheet (strip), painted plate, non oriented electrical steel and coldげrolled stainless sheet (strip). It is the first time that Chinese enterprises resort to safeguard measures to protect the domestic industry.
　　IV. Machinery Manufacturing Industry
　　In accordance with its commitments to tariff concession, China reduced the arithmetic average tariff rate for machinery imports from 13.7％ to12.3％ in 2002. As a fairly large part of the products of Shanghai's machinery manufacturing industry are laborげintensive, the impact of tariff reduction is not obvious. Products that suffered relatively greater impact are mainly some key complete eqipment and new and highげtech products, including advanced highげefficiency power generation equipments such as supercritical thermal power unit, reげcirculating fluidized bed boiler, largeげsized gas turbine and pump storage aggregate set; highげpower civil engineering machinery such as hydraulic excavators of 7 cubic meters and above; bulldozer of 10 cubic meters and above; mining vehicles of 100 tons; basic machinery such as high and mediumげclass numerical control machine tools; industrial control systems such as digital instruments; and new types of machinery for environment protection. With regard to the lifting of nonげtariff protection measures, the impact is quite limited because only a very small number of products in Shanghai's machinery manufacturing system such as some refrigerators and airげconditioners in the category of home appliances were originally subject to import quota and licensing control.
　　The machinery manufacturing industry showed sound development from January through December 2002 with its industrial output amounting to RMB107.039 billion, representing a growth rate of 16.3％. A 18.1％ growth is achieved in metal products, 97.8％ in mechanical agricultural implements, 26.4％ in office machinery, 18.9％ in general machinery, 17.4％ in metallurgical and mining equipment, 24.5％ in general instruments and meters, and 7.7％ in electric machinery. The export of electrical and mechanical products reached USD16.834 billion, up by 18.5％. It can be said that after China's accession to the WTO, Shanghai's machinery manufacturing industry achieved vigorous growth rather than suffering a severe shrink.
　　There are two reasons underlying the above results. First, the similar impact of WTO accession on the domestic electrical and mechanical products had already appeared and been offset well in advance. The market for electrical and mechanical products in China is characterized by a high degree of openness and export orientation, and Shanghai's machinery products enjoy a fairly strong competitiveness both at home and abroad. The other reason is that the reduction of barriers to export has offered Shanghai's machinery manufacturing industry a good opportunity to expand its share in the international market. Owing to the low price and good performance of the products as well as tariff concessions and liberalized market access in some WTO member countries, major enterprises in Shanghai's machinery manufacturing industry are able to further consolidate their market shares in North America, Europe and Southeast Asia, and gradually expand their market in East Europe, Latin America and Central Asia.
　　In addition to the government's endeavors to fulfill its commitments, the enterprises' initiative to meet the challenge also played an active role. Take Shanghai Electric Group for example. Starting from early 2002, the Group has been making efforts to upgrade the technology and improve the international competitiveness of its core business through industrial automation. Vigorous efforts have been made to develop power station equipment, electricity transmitter and transformer, elevator, industrial automation equipment, urban rail transportation equipment, environment protection equipment, information equipment and modern farming equipment which are competitive both at home and abroad. The Group is planning to kick off 10 key industrial automation projects including digital intelligent electric relay and relay protection device, rail transportation traction system, application of special frequency transformer and embedded software controller in duckwork ultrasonic flaw detection and slitter controller, and automation integrated system in factories.
　　V. Electronic Information Industry
　　The Electronic Information Industry has maintained a growth rate of over 35％ for 5 consecutive years, achieving sales revenue of RMB101.867 billion in 2001, thus becoming a prime pillar industry of Shanghai. However, this industry also felt the chill prevailing in the world IT industry in 2002. From January through December, the Electronic Information Industry of Shanghai attained an industrial output value of RMB114.467 billion, with an increase of 12.7％. The revenue performance of major large groups was not very satisfactory. Many factors have led to the difficulty in 2002, of which the most prominent are the sluggish world economy, the distinctive characteristics of the industry itself, domestic competition from the surrounding areas, and the impact of China's WTO accession.
　　The impact of China's WTO commitments and obligations on Shanghai's electronic information industry is mainly manifested in the following three aspects:
　　1. China has implemented tariff concessions and eliminated import quota, licensing and bidding control on the import of electronic information products. In addition, it exempted chips and software from duties, reduced the tariff for complete sets to 0％げ3％, and lifted the nonげtariff barriers to imports except a few limited products in accordance with its commitments. As a result of the reduction in tariff rate and the lifting of nonげtariff measures, foreign products have found a much easier access to China, which has exerted even heavier pressure on locally made products.
　　2. As China gradually eases control on foreign investment in China, major multinationals in the electronic information industry have all readjusted their investment and business strategies. There is a growing tendency to transform joint ventures into solely foreignげfunded enterprises. In 2002, foreign parties in quite a few joint ventures asked for new capitalization to enlarge foreign ownership.
　　3. China has opened up the electronic information market in accordance with its commitments. This has accelerated the coming of international competition into China. As half of Shanghai's electronic information industry is now open to the outside world, it is more vulnerable to any fluctuation in the international market. In 2002, the economic recession suffered by major consumption countries of electronic information products led to a substantial drop in the number of orders obtained by related enterprises in Shanghai.
　　VI. Pharmaceutical Industry
　　As far as trade in goods is concerned, the domestic market was already open to imported medicine during the past ten years, and so further opening has brought only slight pressure on Shanghai's pharmaceutical companies. The pressure has mainly fallen on enterprises producing chemical reagents and large medical machinery and instruments. After accession, the international market, particularly of some advanced countries, has opened wider to raw materials and intermediate chemical reagents from China, which will be beneficial to the longげterm development.
　　As to trade in services, opportunities coexist with challenges. On the one hand, private hospitals and joint venture hospitals gradually emerged, which contributed to a considerable increase in the medicine demand domestically. On the other hand, after the liberalization of the right to trade in medicine, pharmaceutical distribution enterprises in Shanghai have already felt the impact, as they are not yet in a position to compete in business concept, business style, quality of capital, business scale and marketing network with multinationals that have global market strategy and global chain business.
　　As regards intellectual property right protection, there exist more challenges. After WTO accession, with the strengthening of enforcement of Patent Law, the lack of intellectual property rights has become even more serious. At present, there is still a big gap between the domestic and overseas pharmaceutical industries in the innovation mechanism, innovation ability and investment in innovation.
　　With regard to economic operation, the medical industry of Shanghai achieved RMB14.866 billion in its industrial output from January through December, representing an increase of 19.8％ over the same period last year, in which a 15.2％increase was reported in biological products, 26.9％ in raw material chemicals, 24.2％ in chemical reagents, and a drop of 22.4％ was reported in Chinese medicinal herbs and processed Chinese medicine.
　　Part Three Access to Agricultural Market
In the accession commitments by China, a fairly large part is related to agriculture and agricultural products, including reduction in the import duties for agricultural products, phasing out of nonげtariff restrictions on import, the change of domestic support policies, competition rules of the export of agricultural products, and the relaxation of control in investment in agriculture. The fulfillment of such commitments has brought some positive influences on the agriculture of Shanghai.
　　1. Agriculture in Shanghai is now better able to attract foreign investment. From January to December in 2002, 56 foreignげinvested agricultural projects in the suburban area of Shanghai have been approved with the contracted foreign investment totaling USD175 million, double that of the same period last year. Of the 56 projects, 32 are agricultural product processing projects. Foreign investment has helped increase agricultural input, the improvement of agricultural management and production, and the establishment of an agricultural product market system that is in line with international practice.
　　2. The support policies allowed in WTO rules after accession to the WTO become available. In 2002, the municipality invested about RMB1.73 billion to support agriculture expenditure, agricultural water conservancy and meteorological service as well as comprehensive agricultural development. They all fall in the category of “Green Box” policy allowed in WTO rules. As a matter of fact, total municipal financial support is well below the minimum exemption level allowed by WTO rules and the Protocol on the Accession of the People's Republic of China to the WTO.
　　3. The accession has promoted the readjustment of agricultural structure and enhanced the competitiveness of the agriculture products of Shanghai in the international market. Shanghai has made more efforts to develop agricultural products with high economic returns with the result that the proportion of grains to cash crops was reversed from 7≥3 three years ago to 4≥6. As the agricultural structure is becoming increasingly reasonable, agricultural efficiency has registered a yearげonげyear increase.
　　4. The accession to WTO has helped the agricultural sector of Shanghai to enhance its awareness of technical standards and to promote agricultural standardization. Technical standards, often in the form of “green barriers” in trade in agricultural products, have always existed and are not new challenges brought about by WTO accession. The accession to WTO has enhanced awareness of complying with green standards in international trade. In 2002, 45 kinds of agricultural products from 17 enterprises were authorized to use special indicators for excellence in safety and hygiene. Some production and processing enterprises were awarded IS09000 quality certification and HACCP production management certification, with ready acceptance in the international market.
　　The Shanghai municipal government will continue its strong support in attracting foreign investment, increasing legitimate input in agriculture and providing information on the international standards for various products.
　　