CONFIDENTIAL
DSR 11C
and logistical problems as well as rising domestic
demand in China will inhibit rapid growth in the
surplus available for export. The remainder of China's
export growth potential lies in the extractive
industries and those based on agriculture. Neither is
amenable to rapid increases in output.
29. While the Chinese are prepared to use deferred
payment and short-term inter-bank arrangements to
finance their imports, they have consistently refused
offers of long-term buyer credit from Western banks.
In spite of rumours in the press, officials continue
to stock forcefully to this line. In the near future
they will probably be prepared to increase their short-
term debt. Eventually, as their development plans for
the economy unroll, there is a good chance that they
will overcome their ideological objections to long-term
buyer credit. Such a decision would significantly
increase their import capacity, as their credit rating
is excellent and Western banks would be very ready to
lend them large sums. The Chinese may also increasingly
seek barter deals as a means of financing imports
the exchange of Western equipment for raw materials or
the produce of Western installed plant.
eg
30. China will never become one of Britain's major
trading partners (since 1970 she has taken on average
only about 0.4% of British exports), but, at a time when
world trade prospects are uncertain, she could offer a
steadily expanding market for British industrial goods.
/The
CONFIDENTIAL
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