Along with the ceaseless merger of the economy at home and abroad the international economic and financial environment will be a major factor exerting influence on the development of the Chinese economy.

Foreign Trade

From last January to June, China's import and export value totaled US$270.71 billion, an increase of 12.3 percent as against the same period of last year, of which the export valued US$142.06 billion in total, a rise of 14.1 percent, witnessing an increasing speed of 5.3 percentage points while the import was US$128.65 billion, an increase of 10.4 percent, the increasing speed being 3.6 percentage points on the decrease. The trade surplus is US$13.41 billion, a growth of 64.7 percent as compared to the same period of the previous year.

However, the export situation in the later half of the year is not to be sanguine of: first the slow recovery of the world economy leads to an opaqueness of market demands in the world and secondly, the drawback quota for the export would have probably run out in the first half of the year as the actual drawback in the first quarter of the year already came to 40.5 percent of the total and thirdly, the export speed of the foreign funded enterprises was getting slower along with China's slow moving in the introduction of foreign capitals. In view of the situation China's increase in export trade will see a big fallback in the later half of the year.

Solicitation of Foreign Capital

Last January to June saw China's use of contracted capital directly invested by overseas businessmen came to US$43.99 billion, an increase of 31.47 percent with a slowdown increase speed of 6.73 percentage points, the actual use of foreign capital being US$24.579 billion, a growth of 18.69 percent, an increase speed of 1.81 percentage points on the degradation.

As the global economic situation shows a slow recovery in the later half of the year China will probably see a further decrease in drawing in foreign capital. Nevertheless, as the end of last year laid down a big base it is quite possible for China to break through US$50 billion in the actual use of foreign capital, a year to be in which China draws in the biggest amount from the direct investment of foreign capital.

Foreign Exchange Reserve

Up to the end of last June the total amount of foreign exchange reserve reached US$242.76 billion in China, a rise of 34.2 percent in comparison with that of the same period of last year, an increasing speed of over 20 percentage points. The reason for a bigger increase in foreign exchange reserve lies in the bigger growth in China's foreign trade surplus and direct investment of foreign capital in the first half of the year.

In view of the relative stability in China's surplus of foreign trade and the solicitation of foreign capital in the later half of the year China is going to be on a balanced increase in foreign exchange reserve as expected.

Exchange Rate of the People's Currency

By the end of last June the RMB exchange rate showed US$100 to 827.71 yuan in the People's Currency, a relative balance as indicated at the end of last year. Whereas for Japanese Yen it was a rate of 100 Japanese yen to RMB 6.54 yuan, a drop of 0.84 percent than that by the end of last year.

And the exchange rate between the Euro-dollar and the Renminbi was Euro 100 to RMB 757.80, the People's Currency, showing a downturn of 1.78 percent than the end of last year. As the exchange rate of the People's Currency follows that of the US dollar so the rate went down as against the other currencies.

The Gold Market

Last May saw the first gold exchange get into formal operation and so the international fluctuation in gold price would exert a direct influence on the gold market in China. Recently we've witnessed a bigger fluctuation and instability in the international monetary market and the gold price began to play a bigger function and role in avoiding the risk and so the gold investors in China would have to face a bigger risk.

It is expected that greater efforts will be made to develop and introduce tools and measures for multiple investment in order to make full use of the gold market in stabilizing and promoting the economy and finance in China.

Competitiveness of Foreign Banking Corporation

This is the first year after China joined the World Trade Organization. In the four cities of Shenzhen, Shanghai, Dalian and Tianjin the business for the conversion of the People's Currency was opened to foreign banking corporations.

February 1, 2002 saw the Regulations Governing Overseas Financial Institutions enter into effect and followed with the publication of the Detailed Rules on Implementation of Regulations Governing Overseas Financial Institutions, hence the obvious speed-up of foreign banking corporations to land on China.

The competitive strategy: the popularly adopted is the regional one, i.e., to make the big city a strategic point to spread out into peripheral areas for development; secondly, to make an assault for new business market; thirdly, to rivet the business on the group of "bigger clients", a strategy held steadfast by overseas financial institutions and fourthly to become shareholders in Chinese banking business.

( August 14, 2002)