CONFIDENTIAL # 3
8.
probable that foreign currencies would take the place of the FECS in the black market. Chinese officials have also talked about eliminating the use of foreign currencies in China. However, considering that the Hong Kong dollar notes circulating in China (Guangdong in particular) are believed to amount to HK$3 - 4 billion in value, there is apparently no easy way to tackle this problem.
15.
As regards the development of the Shenzhen Special Economic Zone (SSEZ), the control line which separates the SSEZ from the other parts of the Baoan County was officially brought into use on 1 April 1986. There are 6 customs offices and 29 check points along the control line. Tighter controls are now imposed on the entry into the SSEZ of people and of goods from other parts of China. On the other hand, tax exemptions are granted to raw materials and basic consumption items imported from foreign countries into the SSEZ, provided that these goods are not subsequently transferred out of the zone. It appears that a major aim in setting up this control line is to halt both the flow of parallel goods from other parts of China to the SSEZ for subsequent export and the flow of imported goods to other parts of China via the SSEZ. Greater supervision over the movements of goods into or out of the SSEZ also reduces the opportunities for the zone to make use of its special trading rights to operate as a regional trading centre. The Chinese government clearly hopes that the emphasis of the SSEZ will now move away from trading and back to industrial development, which was one of the original objectives in its establishment.
16.
Overall the emphasis in economic development in China seems to have shifted from the SEZs to building on the existing infrastructure and labour force in
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