Looking at the current business environment in China, there is lots of positive news for foreign investors to cheer about, AT&T (China) president Arthur Kobler said that the China Business Conference 2002.

China has continued strong growth in the midst of a sluggish world economy. Its robust exports are increasing. The government has raised the salaries of civil servants. A leadership transition promises continuity, and finally, U.S.-China relations are in the process of strengthening shared interests.

"All of this has resulted in a huge increase of foreign investment to record levels this year, behind which are several key trends," he said.

The first of these is the major upgrade in manufacturing investment to tap the domestic and foreign markets. This year, 15 per cent of all foreign investment in China has been in IT, which illustrates that companies no longer simply view China as a cheap assembly line, he said.

Second, is that more companies are developing research and development centres in China. A few years ago, foreign companies set up R&D centres mostly as a symbolic gesture to comply with the government's requests to do so. Now these companies are investing billions to set up core R&D centres to develop their businesses.

And thirdly, more companies are setting up their regional headquarters on the Mainland.

"I have not mentioned the World Trade Organisation yet, because I think the effects of WTO have not yet been felt in terms of investors' decisions; we have not seen the impact yet," Mr Kobler said

China's entry into the WTO was a watershed event, but implementation of its WTO commitments has just begun and it will take a generation for the country to be transformed from state capitalism into a private sector-led market economy, he said.

"In light of this long transition, I think it is reasonable to expect this next change will take a generation to complete. I think the first year of implementation of WTO has indicated how difficult this transition will be," he said.

The Mainland government has shown its strong commitment to compliance, and Mr Kobler concedes that concrete steps have been taken in that thousands of laws and regulations have been amended and that thousands of civil servants have been trained.

"But at the same time we have seen a number of concerns, like protection of intellectual property rights ... and the emergence of strong and entrenched interests that seem to be dragging their heels in certain sectors," he said.