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11.
In view of the continued imbalance in the
visible trade account, it seems that the import controls
imposed in March 1985 have not yet been fully effective.
The October statistics released by the Customs Administration showed that imports of certain consumer items had still increased rapidly. For example, comparing October 1985 with October 1984, imports of television
sets, watches and automobiles rose by 260%, 233% and 218%
respectively.
12.
To remedy the situation, the Ministry of Foreign Economic Relations and Trade has announced several new
policies. First, the need to rationalize the use of
foreign exchange was reiterated. Restrictions over the
imports of high quality consumer goods and goods which
could be produced domestically were emphasized.
Second,
the foreign exchange earning power of exports was to be increased by improving their quality, variety and packaging. Third, China, has been paying increasing attention to the bilateral trade deficit with Japan and,
to a lesser extent, that with the United States.
Recently, China has been urging Japan to increase its purchase of oil, coal and other primary products from
China. Nevertheless, China announced on 4.2.86 that it
would not step up its oil exports in 1986 because of the
need to stabilize the world oil market.
13.
Despite the widening visible trade deficit, the
People's Bank of China announced that China's foreign
exchange reserves increased from US$10.85 billion at the
end of June 1985 to US$12.59 billion at the end of
September 1985. Such an improvement is not easy to explain in view of the fact that the visible trade deficit
in the third quarter of 1985 was as high as US$3.6 billion
CONFIDENTIAL $3