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Global players position for China growth

By
JOHN ZAROCOSTAS, UPI Business Correspondent

BURGENSTOCK, Switzerland, Sept. 15 (UPI) -- The global business community is strategically preparing the ground to tap the commercial opportunities likely to flow from the next growth wave of China's $6.4 trillion economy, international experts say.

The opportunities on the horizon range from lucrative market openings for exporters of primary commodities, and institutional investors with the privatization and liberalization of China's banking and insurance sectors, to the removal of capital restrictions, and the full convertibility of the Yuan, the national currency, at some point in the future.

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Indeed, during the annual Burgenstock international futures conference here, Chicago's CBOE Futures Exchange, or CFE announced it will list, beginning Oct. 18, 2004, its newly created CBOE China Index.

"We believe there is now an opportunity for a U.S. listed futures index targeted at China. This is a first," Patrick J. Fay, CFE Managing Director, told United Press International.

The index is designed to reflect the changes in top Chinese stocks in the rapidly growing Chinese economy, which in 2003 was estimated at $6.4 trillion dollars.

Fay said the index includes a lot of communications, insurance,

and power companies.

"It's nice, it covers a broad range of the economy which is the second

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largest and fastest growing economy. One of the things as well, is the

exposure."

The 16 companies that comprise the new index include a mix of leading

Chinese companies from the telecom sector along with the electronics, insurance and commodities sectors.

The Index list includes Aluminum Corp of China LTD, China Life Insurance

Co. LTD, China Telecom Corp LTD, Chinadotcom Corp, China Mobile (Hong Kong)

Ltd., China Unicom LTD, CNOOC Ltd.

CFE, which is a wholly owned subsidiary of the Chicago Board Options

Exchange, Inc. will be based on an equal-dollar weighed index composed of

sixteen American depository Receipts, New York registered shares or NYSE

Global shares traded on the New York Stock Exchange, NASDAQ, or the American

Exchange.

Mr. Wu. Vice-chairman of Shanghai Futures Exchange, said that for the Chinese government to get international competitive advantage, it must establish a sound financial system. So the target of China's financial reform, he said, is first to convert the current banks, into truly commercial banks, and the second to establish a sound capital market.

That's the reason the Chinese government wants to make the bank of China and China construction bank, public companies, he said. The reform, he said, aims to get rid bad (non-performing) bank loans and to introduce strategic international investors, Mr. Wu said.

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Roy Leighton, Chairman of the European Advisory Board of Calyon SA, the merged international bank of Credit Agricole SA and Credit Lyonnais SA, says he sees continuing growth in commodities boom -- from oil to copper to agricultural foodstuffs such -- with China the key factor in setting the world price.

Leighton, who is also chairman of the World Bank's international task force commodities, said as China becomes more and more prosperous to suck in more imports, and not only commodities, but high tech imports, high quality motor vehicles, etc, to cater for the country new middle class.

However, Leighton argued that while the Chinese are moving in the right direction of having a free floating currency, he paused and added that you can't change from a centrally planned economy to a complete market economy overnight.

"They've made dramatic steps over the last decade in the right direction but I still see it as three or four years away."

Meanwhile, Mr. Wu said the Chinese government is liberalizing the currency" step by step."

He noted current (account) items are already open, and even on the capital account there's a step by step process to liberalize, but "it will take some time to fully liberalize (the currency)."

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But Leighton said they still have to make a lot of progress on bank reform, and also noted "there is no corporate bond market in China at this juncture."

Rubens Ricupero, secretary general of the UN Conference for Trade and Development, in a farewell address in Geneva Tuesday told delegates there

is little comfort in witnessing the extraordinary rise of China.

Ricupero, a former Brazilian minister of finance, said in the absence of better distributed growth elsewhere, and in the face of resilient high

structural unemployment in many industrial counties "that rise may be

perceived by some as a threat, rather than as a reason for hope and

opportunity, which is what it really is."

The problem, Ricupero said, is not that there is too much growth in China, but that there is too little in most of the rest of the world.

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