CONFIDENTIAL ##
are also made in the regulations to allow foreign partners who are involved in more than one joint venture in China to pool the foreign exchange earnings of the different joint ventures in case one of them runs into a foreign exchange deficit. Foreign partners may also be allowed to re-invest their Renminbi earnings in other enterprises which are capable of earning foreign exchange.
13.
Legal protection has been extended to wholly foreign owned enterprises, with the recent introduction of the Law of the People's Republic of China on Enterprises operated exclusively with Foreign Capital. The law states, inter alia, that foreign interest enterprises should use advanced technology and equipment or have their products wholly or largely exported.
14.
On financial developments, the problems resulting from the use of more than one currency in the country has aroused great concern among the Chinese leaders. An earlier plan to issue a Special Economic Zone currency has now been shelved. More significantly, there is a proposal to withdraw foreign exchange certificates (FEC) from use. The primary aim of the FECS, which were. introduced in April 1980, was to provide a means of market segregation. High quality imported consumer goods were priced in FEC so as to discourage local consumption while making the goods available to those with access to foreign currencies, especially foreigners. The rigging of the market in this way has, however, created opportunities for the development of a black market where FECs are exchanged for Renminbi at a premium over their face value. It seems unlikely that the abolition of FECS will solve the problem of illegal currency transactions. Unless the official conversion rates of foreign currencies against Renminbi are quoted at or near to the market rates, it seems