CONFIDENTIAL #
5
9.
Reflecting the tightening of controls over the
use of foreign exchange since March 1985, a shift in the import pattern was observed. For example, imports of most consumer durables registered significant declines, while imports of raw materials increased. In respect of exports, part of the increase in the first quarter could be attributed to China's success in controlling parallel goods, as a result of which price cutting among its export agents was reduced. China further enlarged the coverage of the export licensing scheme in February 1986 to include another 83 commodities, bringing the total number of controlled export commodities to 235. The restrictions on trade through unofficial channels have strengthened the monopolistic position of the foreign trade corporations. In the first quarter of 1986, the value of industrial products bought by these corporations (from various industrial enterprises) increased by 30.1% compared with the same quarter in 1985. Apart from the import restrictions and the control over parallel goods, the Chinese government has also taken positive measures to promote its exports. For example, preferential rates will now be offered to all export-oriented local enterprises for buying and selling foreign currencies. Despite these various measures, however, China's export prospects are not particularly bright. Soft commodity prices in general, and the drastic drop in crude oil prices in particular, imply that any increase in exports will be hard-won. The Ministry of Foreign Economic Relations and Trade (MOFERT) estimated that due to the fall in oil prices, foreign exchange earnings from oil exports would decline by US$2 billion this year
(3).
(3) In 1985, China exported 210 million barrels of oil and
earned an export revenue of about US$5 billion. Recently China has made public its intention to export no more oil in 1986 than in 1985 in order not to depress the world oil prices further.
}