36730 Vol. 23 November 16 - December 31, 2004 Recent Business Highlights CPDF meets with donors in Beijing; CPDF participated APEC Workshop on SME Financing in AP Region; Focus groups on Credit Reporting system convened; Inter-city investment costs & conditions survey underway; CCCB Asset-Liability Management and Internal Controls Project concluded; Workshop on micro-lending and rural finance held; 3rd Business Edge Leaders' Dialogue held in Western China; Corporate Governance forum in Xi'an; and Focused groups with local consultants. Visitors To IFC-CPDF Jennifer Isern, Enjiang Cheng, Mark Nielsen, Lili Sisombat, Amitava Banerjee, Tim Krause, Karin Finkelston, Sung H.Chung, Eva Mennel and Shannon Wu. People Among Us Jessie Zhou, translator. News From The Region Sichuan government strives for 85% high school literacy rate; UK investment opportunities; IKEA comes to Chengdu; and Chengdu air quality deteriorates. Coming Up Soon Secured transactions seminar to be held in Beijing in Jan. 2005; Credit analysis seminars for CRCC will be held in Feb. 2005; BE China to deliver demonstration series for local SMEs; A rural development linkage project to be launched soon; FIAS will visit CPDF to discuss collaboration projects in Jan; and CIDA and OLGWRD will visit CPDF in Jan. for rural development project. Recent Business Highlights CPDF in the Region CPDF meets with donors... On December 6th 2004, CPDF met with its donors (DFID, SECO, AusAID) to discuss the strategy for "extension beyond Sichuan" and a potential CPDF II. Donors generally endorsed the new strategy and agreed with the main themes proposed: Access to Finance, Corporate Social Responsibly, Lagging regions. They also supported continued emphasis on Sichuan, making programs sustainable and widening reach there ahead of any major expansion, and inclusion of BEE as an embedded component across all programs (in collaboration with other parts of WBG, in particular FIAS). Recommendations made included the need for a more specific exit strategy for all programs; further efforts to reach least-developed regions; and more detailed stakeholder analysis and partnerships arrangements. Donors expect to be able to make decisions or future funding by end of June 2005.(news contributed by Cynthia Song, Communications Officer) CPDF participated in the APEC Workshop on SME Financing in Asia Pacific Region ... Mario Fischel, Jinchang Lai and Violaine Cousin participated in the Workshop on SME Financing in Asia Pacific Region from December 15 to 17, 2004 in Shanghai. The meeting was organized by the APEC Finance and Development Programme, the Ministry of Finance of Thailand and the Ministry of Finance of Korea. More than 50 representatives from a dozen countries and international organizations attended the meeting. CPDF and its client, Chengdu Small Enterprise Credit Guarantee Company, made presentations at the workshop to share experiences with other participants. APEC Finance and Development Programme is an initiative led by China and supported by Thailand and Korea while the World Bank Group is an official counterpart of the programme. (news contributed by Lai Jinchang, Head of FI & BEE) Business Enabling Environment (BEE) Focus groups on credit reporting development strategy conducted... Following the successful workshop on credit reporting system development in August 2004, CPDF and PBOC Credit Information System Bureau (CISB) jointly conducted 14 Focus Groups in Beijing, Lanzhou and Hangzhou in November 2004 to solicit the opinions of stakeholders about the appropriate strategic framework for developing a credit reporting system in China. The Chinese working group included representatives from CISB, State Council Policy Research Office, executives of commercial banks and research institutes. Government representatives, financial institutions, utility companies and credit information intermediaries participated in the Focus Groups and provided useful inputs and views. The mission's findings will be summarized in a strategy paper to be submitted to CISB. The establishment of a credit reporting system is crucial for strengthening the credit infrastructure, and will give market players a reliable and effective means to understand their business partners creditworthiness. (news contributed by the BEE team) Inter-city investment costs and conditions bench-marking survey underway... A firm-level survey on investment costs and conditions was launched in Sichuan in November 2004 under the joint MIGA-CPDF TA project to Sichuan Investment Promotion Bureau. The survey, conducted in 5 sectors and 10 major cities, is to collect objective data on investment costs and conditions from the perspectives of "outside investors" (both foreign investors and Chinese investors from other parts of China). These information will then be analyzed to distill policy insights and to provide a basis for investment promotion agencies to better target potential investors. By the end of December, 225 enterprises have been interviewed by the combined international and local survey teams, covering 5 sectors in electronics, machinery, chemicals, food processing and pharmaceuticals. More firms will be surveyed in Chengdu in January 2005. (news contributed by the BEE team) Financial Sector (FS) CCCB Asset-Liability Management and Internal Controls Project successfully concluded ... Following the assessment and training workshops in July 2004, CPDF and PWC Norway returned to Chengdu City Commercial Bank(CCCB) in December to work with CCCB's senior management to put the right asset- liability management framework in place. This is the last lap of assignment. The project has had a new significance as PBOC recently lifted the upper cap on lending rates. Commendably, the bank accepted to set up an Asset-Liability Management Committee (ALCO), and is already using several liquidity and interest rate risk analysis tools developed by the project. During the December mission, CPDF-PWC team helped the bank further fine-tune the tools and train its staff on how to prepare management reports. The project proved timely in view of the latest relaxation of interest rate regime. Asset-liability management and internal controls are weak areas of Chinese banks. CPDF will consider the second project for CCCB in future. (news contributed by the Financial Sector) CPDF organized a seminar on micro-finance best practice ... On November 18th, CPDF held a micro-finance seminar for local financial institutions. The aim of the half- day seminar was to introduce micro-finance concept and best practice to participants. Over 30 managers and officers of city commercial banks, rural credit cooperatives, credit guarantee companies as well as officials from local banking regulation authorities attended the session. Ms. Jennifer Isern, CGAP's Lead Micro- Finance Specialist, presented international best practices and Mr. Enjiang Cheng, a senior research fellow with the Victoria University of Australia presented some of the micro-finance experiences in China. Participants showed substantial interest in micro-finance as a profitable retail finance business.(news contributed by the Financial Sector) Workshop on micro-lending and rural finance held ... A workshop on micro-lending and rural finance was held in Chengdu from December 27 to 29, 2004, co- sponsored by PBOC Financial Stability Bureau, World Bank and CPDF. About 130 participants representing the central bank, regulatory authorities and financial institutions from all over the country attended the workshop. Jinchang Lai of CPDF made a presentation on "SME financing Difficulties in China". The participants discussed the policy and regulatory challenges of providing small lending to clients in rural areas, how to develop commercially sustainable micro-finance institutions, best practice knowledge in micro- lending, and the progress of RCC reforms in China. In view of the widening urban-rural gap in living standards, there has been a renewed interest on rural finance as a means of spurring rural development in the country. CPDF will be looking for opportunities to provide some support in this field. (news contributed by the Financial Sector) Capacity Building (CB) 3rd Business Edge Leaders' Dialogue held in Western China... CPDF's third Business Edge Leaders' Dialogue was held in Chengdu, Western China, on Dec. 2nd, 2004, and was jointly organized with the Sichuan Business Affairs Office. Leaders' Dialogue is a key part of CPDF's Management Training Program, and focuses on the transfer of practical business experience from top business leaders to local entrepreneurs. Mr. Liu Yonghao, founder and Chairman of New Hope Group [IFC investment], Mr.Jack Ma, founder and CEO of Alibaba.com, and Mr.Wolfgang Wagner from Volkswagen Shanghai spoke about building sustainable businesses in China. Their remarks were very well received by the more than 200 people in attendance. (news contributed by Qiu Min, Business Development Officer with CB team) New fund for environmental project... The Swedish Consultant Trust Fund approved a grant in the amount of US$189,160 to CPDF on December 1st, 2004 to support the development of the environmental enforcement and compliance program for the Sichuan Environmental Protection Bureau (SEPB). The 14-month Program will help SEPB increase their enforcement efficiency and effectiveness through a new mechanism that will create incentives for local SMEs to implement sustainable environmental practices. Ultimately, the Program seeks to help SMEs plan and optimize their environmental investments to ensure full compliance with China's environmental laws and regulations.(news contributed by Chen Rong, Business Development Officer with the CB team) Corporate Governance forum in Xi'an... CPDF was invited to make a presentation on "good corporate governance, the foundation for successful enterprise development," at a corporate governance forum organized by the European Union - China Enterprise Reform Project (Sha'anxi Province) and the Sha'anxi Province SME Promotion & Development Center and held in Xi'an, Sha'anxi Province, on Dec. 8th. Together with one CG expert from the EU and one local company CEO, Ms. Natalya Arabova and Mr. Chen Quan from CPDF delivered speeches on "Corporate governance from the institutional investor perspective" and "Case studies in corporate governance of private SMEs" to about 150 local SME senior officers and government officials. The speeches were well received. (news contributed by Chen Quan, Business Development Officer with the CB team) Access to Business Service (ABS) Focused groups with local consultants... Between October and December, CPDF held two workshops with 14 local consulting firms and two consulting industry associations. The first workshop gave an opportunity for these firms to discuss issues affecting the industry and for CPDF to understand some of the areas where we might be able to provide support. Following the first workshop, and a follow up questionnaire, CPDF identified those areas critical to the further development of a sustainable consulting industry. The second workshop set out and discussed a program which concentrates on assisting market development, through targeted seminars, and training in client management and project management. (news contributed by Will Beloe, Business Development Officer) Food Industry Association Forum... On November 25, CPDF hosted a forum for Sichuan's Food Industry Association. The forum's purpose was to introduce simple, practical tools to deal with some of the most common problems that fast-growing SMEs face, and to introduce such SMEs within the local food industry to the idea of hiring external specialist assistance to help resolve some of these issues. The material presented at the forum was very well received and initial feedback suggests that it should lead to a number of new projects for the local consulting industry. This event was also attended by the Vice Mayor of Sichuan, Mr. Zhu Zhihong, and the Head of Chengdu's Municipal SME Department, Mr. Xiang Shiyong. (news contributed by Will Beloe, Business Development Officer) CPDF assists two local consultants in signing contracts with local SMEs... On December 6 and 7, Sichuan Gold Bridge Economics Consultation Co., Ltd. and DQ Consulting respectively signed consulting projects with two local SMEs from the food industry. Prior to these consulting projects, CPDF had provided both Pioneer Foods and Huiji Foods with Internal Enhancement Plans ("IEPs"). These consulting projects are designed to implement the recommendations highlighted by CPDF's IEPs. The fees for these consulting projects are 100% financed by the local companies. (news contributed by Will Beloe, Business Development Officer) Sichuan Entrepreneurs Association Annual General Meeting... On December 21, CPDF's Cheng Ziqiang and Will Beloe will attend the Sichuan Entrepreneurs Association AGM. Cheng Ziqiang will use this event to introduce CPDF's core programs and highlight ways in which either CPDF or our partners could assist local SMEs build their businesses. We have also arranged for two of CPDF's partner consulting firms to market their services and present case studies at this event. (news contributed by Will Beloe, Business Development Officer) Visitors to IFC-CPDF Jennifer Isern, Lead Micro finance Specialist from the World Bank Group and Dr. Enjiang Cheng of Victoria University, Australia visited CPDF for a Micro finance Seminar on Nov. 18th Mark Nielsen and Lili Sisombat from MPDF visited CPDF on Dec 5th -10th to help set up the Business Edge China strategy for next 3-5 years. Amitava Banerjee, of the SME Dept. visited CPDF on Dec 7th - 9th for CPDF strategy meetings. Karin Finkelston of IFC Beijing & Tim Krause of IFC HK visited CPDF on Dec. 13th -14th for CPDF strategy meetings. Sung H. Chung, Chief Engineer from Washington, DC, visited CPDF for meetings with the forest plantation and paper industries from Dec.16th-20th. Eva Mennel, CEA HR Manager, and Shannon Wu, HR manager of CHACS, visited CPDF on Dec. 20th ­ 23rd for HR issues. People Among Us Jessie Zhou, translator Jessie Zhou joined CPDF at the beginning of its operation. She has served CPDF as translator for three years, during which she translated for most projects that involve international consultants. Before joining CPDF, she worked as a sales executive for Unilever Company for three years and as a tour guide for the China International Travel Service. She holds a bachelors degree in English language and has just completed an MBA program jointly offered by China's University of Electronic Science and Technology and Webster University in the U.S. Jessie has a four-year old son. She lives with her family in Chengdu. Jessie loves sports: she is a regular swimmer and badminton player. News From The Region Government ­ Strive for 85% high school literacy rate... Because 65% of entering high school students are from rural areas, the local government has allowed vocational schools at both the city and county levels to enlarge enrollment to enable rural students go to high school in cities during the second school year. The government will continue to grant financial aid to poorer students. Business ­ UK investment opportunities... A promotion conference, "Investing in UK," was held recently in Chengdu. The event attracted some 80 local enterprises. Speaking at the conference, Sir Robin Young said that the UK would welcome the investment of more Chinese enterprises. British companies are keen to do business or establish joint ventures with Sichuan enterprises. Business ­ IKEA enters Chengdu... IKEA will open its first store in Chengdu in 2005. In December, IKEA has established a branch in Chengdu, and made Chengdu its fifth purchasing site in China. Society ­ Chengdu air quality deteriorates... Due to persistent foggy weather in Chengdu, respiratory diseases have increased 20%. Experts say the acid and alkaline content in the air is more than 10 times the normal standard, and local residents will certainly be affected. Coming Up Soon A secured transactions seminar will be held in January 2005 in Beijing. At the end of February 2005, CPDF will hold two 5-day credit analysis seminars for managers and officers of Chengdu Rural Credit Cooperatives. Together with World Wildlife Foundation and Carrefour, CPDF will launch a rural development linkage project to help farmers in a nature reserve in a minority region of northern Sichuan starting from January 2005. Business Edge China will deliver a 7-day demonstration series course for local SMEs from Dec. 2004 ­ Jan. 2005. Thomas Davenport and Joseph Battat of FIAS will visit CPDF to discuss collaboration projects in Jan. CIDA and OLGWRD will visit CPDF in Jan. for rural development project. Comments and/or questions? Contact us at: Song Jianping Communications Officer Tel: 86 28 8676 6622 Fax: 86 28 8676 7362 Email: jsong@ifc.org