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Asia Business: The Week Ahead - 2002-06-17

Chinese aviation officials plan to crackdown on unauthorized airline ticket discounting and Japan is disputing a recent drop in its credit rating.

Chinese airlines and ticket agencies could soon face criminal penalties if they cut prices without official permission. The Civil Aviation Administration of China is preparing new guidelines, but it is not yet clear if excess discounting will be treated as a misdemeanor or felony.

Beijing says it hopes to better protect the financial health of the country's struggling airlines, which are mostly government-owned. They have been coping with massive losses since 1997, when they took part in an experiment with uncontrolled price discounts.

Critics say the move shows the difficulties China faces in its transition to a freer, more market-driven economy. China, which joined the World Trade Organization last December, says that once its main carriers are stronger, it will deregulate airfares.

Meanwhile, China's overall economy is showing signs of strength. The country's retail sales surged 9.3 percent in May from one year ago, ahead of expectations. Economists say the improvement is due to consumer confidence and a strong boost in automobile purchases. Many Chinese see the car as an important symbol of social status and they are eager to own one.

In the mobile phone sector, Singapore Telecommunications has postponed awarding the contract to develop a new generation cellular telephone network. The company says caution is warranted as the technology for so-called third generation phones is still evolving and there is still no mass market. SingTel says it will rollout its 3G services sometime next year.

In Japan, the government is lashing out at Moody's Investors Service - which downgraded Japan's credit rating. Japanese Trade Minister Takeo Hiranuma says it is outrageous that Japan's credit rating is now lower than that of Botswana - where he says half the population is afflicted with the AIDS virus.

United Nations statistics show that 36 percent of Botswana's population between the ages of 15 and 49 are infected with HIV, the virus that causes AIDS.

Mr. Hiranuma also complains that Moody's has ranked Japan lower than the southern African nation, even though Tokyo is its largest aid donor.