Under the new measures, forex account management is relaxed in the following three ways:

1. All enterprises, including domestic and foreign-invested, operating in bonded zones should apply for the Foreign Exchange Registration Certificate for Bonded Zones. Meanwhile, SAFE will stop issuing the Registration Certificate for Foreign-invested Enterprises in the zones.
   
   
2. Forex purchases by enterprises in bonded zones will be standardised. During the Asian financial crisis of 1998, SAFE had temporarily suspended forex purchases by enterprises in bonded zones in a bid to prevent illegal elements from abusing the forex purchase system in bonded zones. Under the new measures, three types of forex purchase are now relaxed for enterprises in bonded zones. First, processing enterprises and distribution enterprises may purchase forex with renminbi income from domestic sales. Second, enterprises capitalised in renminbi may purchase forex with renminbi that has been injected as part of its registered capital. Third, the profit, dividend and bonus attributable to foreign shareholders of FIEs may be used to purchase forex for repatriation.
   
   
3. Management of forex accounts of enterprises will be relaxed in the bonded zones. When the old measures were first introduced in 1995, some of the bonded zones had yet to practise the closed supervision model. In order to prevent illegal capital movements, enterprises were only allowed to open forex accounts with financial institutions within the zones. To facilitate the capital flow of enterprises, the new measures have lifted this restriction and enterprises may now open both current and capital forex accounts with banks located where the enterprise is registered and, upon approval, open capital accounts with banks located elsewhere.
   
   

Foreign Currency Pricing Mandatory

China prohibits the use of foreign currency in pricing within its territory. However, bonded zones are an exception because they are special economic regions subject to Customs supervision.

The flow of goods between bonded zones and offshore (non-mainland) territories (Line 1) only requires the filing of records with Customs and is tariff-free. However, customs declaration is required for the flow of goods between bonded zones and other mainland territories (Line 2). In terms of foreign trade management, licensing and quotas are only required for certain special items and do not apply to general goods

In compliance with the management model of Customs and MOFTEC, the new measures require all economic activities conducted across Line 1 be denominated in foreign currency. Bonded goods transactions across Line 2 must be priced in foreign currency while non-bonded goods may either use foreign currency or renminbi. Processing fees charged by various administrative departments within bonded zones should be in renminbi. Other economic activities between different organisations in bonded zones as well as between different bonded zones may either be priced in foreign currency or renminbi.

Tight Control to Stay for Line 2

As foreign currency is used for transaction between enterprises in bonded zones and parties outside the zones, in order to streamline procedures, reduce conversion cost and speed up capital flow, enterprises in bonded zones have long been allowed by SAFE to open forex accounts with no limit on the number of accounts.

However, under the new measures, forex accounts are classified into current and capital accounts for enterprises in bonded zones and SAFE approval is required for opening forex accounts. In principle, each enterprise can only have one forex current account, which should be opened at banks located where the enterprise is registered. Enterprises may also open capital forex accounts with banks located where they are registered, and may open such accounts with banks located elsewhere upon SAFE approval.

The new measures also stipulate that enterprises in bonded zones must make payments with their own forex and should only purchase forex in case of shortage. Whether the payments concerned are under the current or capital account, relevant proofs and commercial documents must be presented when purchasing forex at designated banks.

In regard to forex management under the current account, tight supervision will be maintained at Line 2 whereas Line 1 will be relaxed. Under this principle, enterprises in bonded zones should deposit their current forex income into the current account, while forex payment can be made direct through the bank where the current account is opened. For forex payment under the current account to parties outside the bonded zones or outside China, enterprises should use their own forex first and could purchase forex in case of shortage.

Mores Drug Store in Shanghai

China recently put into effect regulations for the implementation of its new Drug Administration Law.

150 New Drug Stores in 2002

Drug stores are a hot spot for investment in Shanghai this year, and the latest regulations clearly spell out the procedures and time limit for the approval of applications for the opening of drug stores. There are currently 1,450 drug stores in Shanghai, averaging one for every 10,000 people as compared with one for every 4,000-5,000 people in developed countries. Thus, the opening of more drug stores is the way of the future. Shanghai expects to see 150 new drug stores opened this year. By 2005, there should be one drug store for every 7,000 people in the city. New residential estates and commercial districts will be targeted as prime sites. Retail chains will be encouraged. And by the end of 2004, all drug enterprises must have obtained GSP certification.

New Definition for New Drugs

Some medicines still highlight their "new medicine" certificate in their advertisements even though they have been in the market for many years. The reason for this phenomenon is that "new medicine" was previously defined as "medicine manufactured for the first time in China". The definition is now changed to "medicine never marketed in China". Before, medicine bearing a new medicine certificate was entitled to a protection period of six to 12 years. This protection period has now been replaced by a monitoring period of not more than five years. These changes will ensure that new drugs are genuinely new.

Regulations for Packaging and Labelling of Chinese Medicine

Many people in Shanghai prefer to be treated by traditional Chinese medicine, but there have never been any standardised packaging and labelling for Chinese patent drugs. Under the new regulations, Chinese medicine must indicate its product name, specifications, place of origin, manufacturer, production serial number and production date on the labelling. These new regulations can help to ensure the quality of Chinese medicine.

Heavy Punishment for Fakes

According to the new regulations, the following six types of acts are subject to severe punishment: passing off anesthetics, psychotropic drugs, toxic drugs for medical use and radioactive drugs as ordinary drugs (or vice versa); producing and selling fake and shoddy drugs for use by pregnant women and children; producing and selling fake and shoddy biological and blood products; producing, selling and using fake and shoddy drugs which cause harm to people; repeating the offence of producing, selling and using fake and shoddy drugs; refusing or avoiding the supervision and inspection of drugs.