a
(iii)
Foreign Trade
CONFIDENTIAL
China wants to maximise the gains obtainable from trade
with the rest of the world. From 1979 until 1985, things
went well. For the three-year period from 1982 to 1984,
the value of exports (fob, excluding re-exports) was $65
billion and the value of imports (also fob) was $59.5
billion. Exports rose to account for 10.2% of national
income, as opposed to only 5.6% in 1978. Imports became
equal to 9.6% of national income, as opposed to 5.6%
(again) in 1978.
23. In 1985, however, the trade account went into
deficit.
The value of exports rose to $27.4 billion, but
the value of imports shot up to $42.3 billion. In spite
of the adoption of the deliberate depreciation of the
Renminbi and much exhortation about the need to promote
exports, the trade deficit for the first half of 1986 was
$6.4 billion (an annualised amount almost as great as
the amount for 1985). This trend, which has already
produced a large drop in China's "owned" (as opposed to
borrowed) reserves, clearly cannot continue indefinitely.
Given the fall in the international prices of many primary
products (including oil, which accounted for 24.5% of the
value of China's exports in 1985) and the low quality of
many of China's manufactures, it is hard to visualise the
value of China's exports growing by more than $4 billion
or $5 billion a year during the next few years. If this
turns out to be right, China will either have to restrain
imports more severely or to borrow a good deal from
CONFIDENTIAL
/ abroad