CONFIDENTIAL #2
10
Control on imports and foreign exchange spending imposed by China in 1985
22.
Disturbed by the sharp depletion of its foreign
exchange reserves since September 1984, China has hastily
adopted a number of remedial measures in 1985 aimed at
putting an end to this development. These measures include raising import duties and. introducing an import regulatory tax, holding back foreign exchange payments,
delaying expensive projects, promoting exports by resuming
its export-subsidy system for certain products, regulating
exports in order to minimise parallel trade and to ensure as far as possible that its exports will go through state authorized organizations, and more importantly, regaining
the power to control the spending of foreign exchange given to local authorities and individual organisations a
couple of years ago.
23.
Besides imposing higher duties on imported
goods, China has also ordered that, with only a few
exceptions, all Chinese trading enterprises freeze their
foreign exchange accounts for three months starting from 1 April 1985. This was considered a temporary expedient to stop further depletion of the foreign exchange reserves
and to allow time for examining the accounts of various
Chinese enterprises and for differentiating between
authorized foreign exchange allocations and those obtained
through the black market. At the same time, the Bank of
China also became more strict about foreign exchange
payments, taking months instead of weeks to process
letters of credit. Previously enterprises in the SEZS were allowed to retain as much as 70% of their foreign
exchange earnings, submitting only the remaining 30% to
the central Government. The ratio is now reversed; 70%
for Beijing and 30% for the enterprises.
CONFIDENTIAL * ☆A
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