RESTRICTED
CHINA/HONG KONG WORKING GROUP MEETING 30 JANUARY 1981
DISCUSSION PAPER
CHINA : UK PROSPECTS FOR EXPORTS IN THE 1980'S AND IMPLICATIONS FOR GOVERNMENT
SUPPORT
The Chinese Economy (see MOD paper for detailed assessment)
1.
Chinese re-adjustment is likely to last until at least 1983 or even 1985
and there is a savage cut-back in capital investment. Prospects for significant
exports of capital equipment and technology will therefore be minimal until the
second half of the 1980s, and in some cases perhaps until the 90s.
which are already established in the market are continuing to do steady small-scale
business (value about £100,000 per order) in priority sectors for China such as
specialised instruments.
China's Attitude to Foreign Trade
2.
Because of a perceived shortage of foreign exchange, China is reluctant to
pay cash or credit for necessary imports of equipment and technology.
She continues
to seek countertrade, compensation trade or Joint Venture arrangements, although
the difficulties of these methods are becoming increasingly apparent. Companies
will have to be willing at least to consider such arrangements, though if they are
lucky, at this end of the day the Chinese may pay cash or credit if the alternatives
prove too difficult.
Advice to Companies
3. HMG should advise companies to stick with the market if the long term pros-
pects for them look good and if they are prepared to wait until the Chinese economy
opens up again. But we should continue to warn other companies that if they are
looking for shorter term returns, there are better markets for them.