Q: What does foreign investment mean to Shanghai or China?
A: I have witnessed the development of Pudong and taken part in many large projects for more than ten years. When I hosted the India Industry Union, a representative once said, I’m deeply impressed by the fact that no other countries can provide with as much service as China does.’ During Shanghai’ ‘s rapid development, the effects of foreign investment cannot be neglected.

China was the Planning Economy in the past. The use of foreign investment built a frame for the Marketing Economy. The most important thing is that people have changed their ideas and demand for improvement continuously. The stock companies and the directorates are brought by foreign companies, aren’t they? Therefore, the change of people’s’ ideas and the transformation from the Planning Economy to the Marketing Economy cannot depart from the use of foreign investment. Five years ago, when you saw a beautiful house, you would think that it must have been built by foreign investors. But now you may not be so sure. The change of Shanghai and the development of Pudong may go on without foreign investment, but need more time.

Q: What’s the developing process of the use of foreign investment in Shanghai?
A: During the end of the 80s and the beginning of the 90s, the use of foreign investment was mainly indirect in Shanghai. At that time, the range was rather wide, including government loans, World Bank loans, Asian Development Bank loans and commercial loans as well. Nowadays, the direct use of foreign investment accounts for more than 90%. So does the whole country.

It was very simple in the early days of using foreign investment: to have money is enough. Actually, there are four standards by which to judge a project: funds, management, technology and whether the products can get into the international market. But now the requirements are higher than before. When we absorb foreign investment, we hope to absorb the management, technology, talents and funds at the same time. The country attaches great importance to this point, which really has a good effect on economy. In Shanghai, one third of the working people are in foreign enterprises. The products from foreign-invested companies account for 57% of Shanghai exportation. Guangdong used foreign investment earlier than other areas and the percentage may be higher. So we say that foreign investment is an important part of the economy. The change of Shanghai city and the adjustment of industry structure cannot depart from using foreign investment.

Q: After China’s entry into WTO, what are the new acts on absorbing foreign investment in Shanghai?
A: The entry into WTO is an opportunity, a bigger opportunity to let China go into the world further. Our minds will be more open and the laws will be more complete. We cannot say the old laws were bad as they fitted for the country development. But they hindered the exchange with others. That’s the fact. If you play football within the country, that’ever, when you play football with foreign teams, the rules must be vulgate.

The next point is the opening. According to WTO’ frame agreement, the Chinese government promised to open some aspects. The Foreign Investment Industry Directory has been modified according to the Chinese government promise and had great echoes. In the past, the opening of service trade was rather limited and cautious. That’s not because we were not willing to open, but because the laws in this aspect were incomplete. The opening of this aspect was later than the whole processing industry. Now we have entered the WTO and promised to open. Therefore, the service trade will be more open in the future, stressing on banking, insurance, finance, trade, telecommunication, traveling, transportation, law, accounting, science and culture, etc. All of them have been put on the schedule and some may be tried out in Shanghai and Shenzhen. I think after entering the WTO, the promotion to service trade may come earlier in Shanghai.

Certainly, our investment environment needs to be improved after entering the WTO. Now our work is being carried out by the needs of ourselves and the needs of city development. And it should be compatible with international practices. Whatever we do, we will consider that we’ve already entered the WTO. One word or one notice doesn’t accord with the rules, especially the international rules.

Q:What is the biggest difficulty after entering the WTO?
That’s he change of government work. In the past, the government work was accustomed to the administrative orders of the Planning Economy. But now it is Marketing Economy. We should not use administrative orders any longer. In the past, the government would protect a small business, but now the rotection’ cannot be used. You should improve the service quality, enlarge the service scope and incarnate the fairness. No matter whether it’[s domestic investment or foreign investment, both are corporations. Government functions should be separated from enterprise management. Some things you should do, some things not. There are a lot of contents in this aspect, such as the simplification of approval procedures.

Q: Should the government approve the projects belonging to enterprise acts?
Even if they need to be approved, what’s the range? May I need your permission if I buy something? The problem is to simplify the approval, reduce the approval contents and improve the working efficiency. Our working methods will be greatly improved after entering the WTO.

Q: The new edition of Foreign Investment Industry Directory will be put in force since April 1, what does it differ from the old one?
A: The old Directory was enacted in 1995 and was modified in 1997. Many contents in the old edition were drawn before we enter the WTO. The background of the new Directory is the entry of WTO and that we have achieved a lot in the reform and opening, especially the good use of foreign investment.

Simply speaking, the standards will be lower and the opening will be wider in the future. This can be explained in some aspects: one is that more than 80 encouraging items have been added in one blow. The limiting items have been reduced as some were transferred to the encouraging items.

Another obvious change is the stock holding. In the past, there was a limitation on stock holding – the Chinese part must hold the majority. For example, the Chinese part must hold over 51% in the dock construction before, but now 50% is OK, not needed to hold 51%.

As for the specialties of the new Directory: the first is the further opening of the guiding thoughts; the second is the incarnation of our promise to the world; the third is the attention paid to the Western Development combined with the realities of our country. Another point is that the new Directory encourages some old industrial bases to use the advanced foreign technology to reconstruct some traditional industries. The textile, light industry, mechanics and electrics are all traditional industries in Shanghai. The country encourages the assets reorganization to enliven them by using the advanced technology management.

Q: What’s the meaning of the new Directory to Shanghai?
A: I think the specialties mentioned above have great promotion to the economy development in Shanghai. Why? Because the opening of foreign investment in the service trade was limited before, but with the opening gradual carryout, the service trade will become strong in Shanghai.

Shanghai’’s fast development cannot be separated from the reasonable adjustment of industry structure. In the 90s, the secondary industry in Shanghai accounted for 70%, which was very high. And the tertiary industry was around 30%. After 2% adjustment annually for ten years, the proportion of the tertiary industry in Shanghai had been over 50% by the end of last year, while the industry was around 45%. I believe Shanghai will be better with the further opening of the service trade in the tertiary industry.

The advantage of Shanghai’s development lies in the service trade, we do not exclude the development of the secondary industry, but keep certain proportion. Shanghai’s development is different from other cities around the world. Many cities are advanced in either the tertiary industry or the secondary industry, while Shanghai develops both industries. After the structure adjustment, the developing sequence is the tertiary, the secondary and the first. The proportion of the secondary industry always keeps at 45%, while the tertiary industry is around 50% or more. This kind of proportion can avoid too much economic bubble.

Q: From the statistics, China had actually used US$400bn foreign investment by the end of last year, and Shanghai used US$40bn, which almost accounted for 10%. So what was the main work done on absorbing the foreign investment during the past in Shanghai and what were the characteristics?
A: Shanghai Municipal Committee and Municipal Government have paid great attention to the work of using foreign investment. When Zhu Rongji was the mayor of Shanghai, the first thing he did was to establish the Shanghai Foreign Investment Working Committee, which was the first one in China. The approval should be gone through by the economy committee, the planning committee and the foreign trade committee before. After the committee came into existence in June 1988, all the approval was in this committee only. Why to do this? Mainly to improve the investment environment, as the first thing to change was the functions of governmental departments. The second thing was to complete the laws and rules. Shanghai Municipal Committee and Municipal Government attached great importance to the completion of the economic rule of law.

Certainly, Shanghai Municipal Government has put a large amount of money into the construction of infrastructure, the development of Pudong and the reconstruction of the old city in recent years. Especially in the recent five years, Shanghai has put RMB180bn. We constructed four bridges, two tunnels, two metro lines and the viaducts. The channel connecting Zhejiang and Jiangshu is under construction. And now the supply of water, electricity and gas are plenty in Shanghai.

Therefore, the government stressed on the improvement of two sides: one is the soft environment, which is the development of investment policy; the other is the hard environment, which is the development of the infrastructure.

Q: At present, the foreign enterprises are playing a more and more important role in the economic development in Shanghai. In which fields do they mainly spread?
A: The industrial enterprises take the larger part and are centralized in the six supporting industries developed during the ninth five-year period. They are automobile, mechanics, chemistry, mechanical electronics, light industry and home appliances. Shanghai will become the center of economy, finance, trade and shipping, which is the orientation made by the State Department in 2001. According to this orientation, we will do some adjustment, for example, the status of the real estate or the commercial trade will be improved.

In the future, Shanghai may focus on the four big bases in the east, west, north and south. Such as in Jiading, the main business is the automobile, and other related business are the automobile trade, the exhibition, the production of automobile parts and the whole car, etc. Caojing and Jinshan are two big bases to develop petrochemicals in the future. Pudong is to develop high-tech industry. Zhangjiang, Jinqiao and Waigaoqiao will be the industrial bases for microelectronics and biomedicine. Bao Steel is the base of high-quality steel and stainless steel. This is the so-called east, west, north and south. There is another middle’, which is mainly developing the city industries, such as the packaging, the dining, the bag and the costume, etc.

Q: What are the advantages of Shanghai to develop finance?
A: As far as I know, there are more than 3,000 financial organizations in Shanghai, including banks, offices and around 160 organizations of foreign investment banks. There were 66 branches of foreign banks in Shanghai in the past, while now the figure is close to 70, and half of the foreign banks can handle with the RMB business. Compared with Beijing, the headquarters may be fewer in Shanghai, but the number of Shanghai offices and foreign banks exceeds those in Beijing.

Q: What are the main problems for Shanghai to attract the settlement of the regional headquarters of multinational companies and the investment companies? And how can they be solved?
A: In order to attract the regional headquarters of multinational companies, there are many requirements to meet. From the report, the biggest obstacle is the system of foreign exchange. Because it is conditional exchange now, which cannot be accepted by a regional headquarter for the lack of funds controlling. Many companies have set up their regional headquarters in Shanghai, but their funds operation headquarters are in Hongkong. To speak strictly, there are no headquarters here.

Certainly, the leaders of our country advocates to attract the regional headquarters of multinational companies, but the following policies especially on the tax and the control of foreign exchange have not been drawn. At least we have not a whole and open rule of law up to now.

We can do well in other aspects, such as children’s’’education, medical treatment or entertainment.

Q: At present, the investment cost is rather high in Shanghai and tends to be higher. How will the government do to reduce the investment cost and attract more foreign investment to Shanghai?
A: Actually, all the large cities have the problem of over cost and we also found it in Shanghai. The labor cost, the land price and the energy consumption are higher in large cities than those in medium and small cities, so it is normal for the cost to be a little higher. But if the cost is too high, it will affect the development of the manufacturing in this region.

Shanghai Municipal Government has done the work several times in this aspect and has gone through some analyses. We also put forward such kind of slogan: hope the manufacturing cost in Shanghai is not higher than that in Suzhou and Kunshan, while the finance cost is not higher than that in Shenzhen. This is our expectation and what we want to do.

Q: What should we do for the domestic expenses?
What is the higher part in Shanghai, especially the higher part of the labor cost? The answer is the diversified social insurance. To the whole country, Shanghai is leading the way, as it is the trial city of social insurance. To the common people, it is a benefit because everything is insured. But to the enterprises, the cost rises. Why should the foreign enterprises bear the social insurance? They hope the salaries could be lower. I will give an analysis the social insurance in Shanghai is two times of that in Suzhou and Kunshan. And the downtown area in Shanghai may be a little higher, while the insurance in the suburb areas is almost the same as that in Kunshan. So the enterprises are not necessary to pay so much insurance. Sometimes we told the foreign investors that with the same factory of the same size, our working productivity is relatively higher than that of others. So after some analysis, we can know what to reduce and what to rise. As far as I know, it will be improved in this aspect in the second half of this year.

Q: You have said that the past ten years’ development in Shanghai only built a frame, and the development in the future would greatly exceed the past ten years’ development. From what did you draw such a conclusion? In the future ten years, how much will the foreign investment be absorbed?
A: We will have big development from 2001 to 2010, the speed and the quality will greatly exceed those in the past ten years. There is a figure indicating that the GDP in Shanghai will reach RMB650bn in 2005, while now it is RMB400bn. This is the comparison in quantity. Another is that the investment will largely increase. From 2001 to 2005, the set investment annually in Shanghai is no less than RMB200bn. It is great to invest 1,000 billion yuan within one five-year-plan. The second aspect is the opening degree. There were many places not opened in the past five years and will be opened by the timetable in the future.

Moreover, now the developing conditions are better than those in the past ten years. We have walked through the most difficult ten years. During the ten years’ reform, we should say that the Shanghai citizens have paid a huge price and can be concluded in two millions’. One million people have been laid off or transferred to other positions during the adjustment of industry structure. And one million people have been moved to the suburb areas for the construction of the Shanghai city. It is a large contribution, isn’t it? Without the two ‘ millions’, where are so many green lands? Where are so many high buildings? Where are so many viaducts? So the two millions’ are very critical, this is the contribution of Shanghai people.

Now the material base and the other factors are better than before in realizing the tenth five-year-plan.

As for the using amount of foreign investment in the future, we have a rough plan. From 2001 to 2005, it is around RMB5bn annually and total RMB25bn. It may be RMB20bn in the next ten years. In fact, it was RMB7.3bn last year and it will exceed RMB5bn this year. It may be considered from the quality in the future. There are a few changes in using the foreign investment: the first is the change from the quantity to the quality; the second is the change from the industrial items to the development of the clothing trade and the tertiary industry; the third is the change from the single state-owned enterprises to the coexistence of multiple economic elements and the multiuse of foreign investment.