Sino-Foreign Deals Pay Off, China Reports

From Associated Press

Most foreign-invested joint ventures are reporting profits despite skepticism and a cloudy business climate after the bloody crackdown on political dissent in June, a government news report said Friday.

About 85% of the 8,000 Sino-foreign joint ventures that have started operations have been profitable, Xinhua News Agency said.

"If nobody makes a profit in China, how can we explain the fact that the number of businesses with foreign capital is increasing year by year, and many of them are expanding?" Xinhua quoted Jing Shuping, president of China International Economic Consultants, as saying.

In the first nine months of this year, 4,281 joint ventures were launched with a total contracted value of $4 billion, Xinhua said.

Since market-oriented economic reforms were begun 10 years ago, China has approved 20,278 foreign-funded businesses, including 11,286 equity joint ventures, 7,712 contractual joint ventures and 1,230 firms wholly owned by foreign investors, the report said.

They accounted for pledges of $32.2 billion by foreign investors and paid-in foreign investment of $14.1 billion.

The report quoted unidentified analysts as noting that low monthly wages of $27, low taxes and a potential market of 1.1 billion people are the main incentives for foreign investment in China.

It cited the example of Yili-Nabisco Biscuit & Food Co., a Sino-U.S. joint venture that makes Ritz crackers, which has captured 70% of the biscuit market in Beijing and reached this year's profit target in only six months.

But uncertainties following the army's crackdown on the student-led democracy movement caused an exodus of foreigners in June, and sanctions imposed by Western governments have frozen loans, equipment and technical exports and certain kinds of insurance for firms doing business in China.

The government has launched a vigorous propaganda and financial aid campaign to reassure investors and lure new business.

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