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part of this year. To increase its export earnings in the long run, China has little choice but to upgrade it
products. Its recent efforts to establish textile export
bases in 12 established cities can be interpreted as a
step in this direction.
13.
Another problem facing China's external sector
is that it is too reliant on state financial support in
the form of various kinds of subsidies. This is
evidenced by the strong resistence put up by state
trading corporations towards the responsibility system, under which they are required to be responsible for their
own profits and losses.
14.
These weaknesses in the export sector have
probably made the Chinese authorities uncomfortable about
relaxing controls over foreign exchange earnings, even
though the visible trade deficit has improved. In the
National Economic and Social Development Plan for 1987,
it was stated that control over imports, particularly
imports of consumer goods and less sophisticated machines
and electronic equipment, would be tightened.
15.
It should also be noted that another reason for
the cautious attitude towards the use of foreign exchange
is that China now has to start repayment of principal and interest on foreign loans. In 1986, repayments of state loans amounted to Rmb 3.4 billion (US$1 billion). This
sum is expected to increase considerably when the grace
periods on concessional loans expire after 1989. At the
end of March 1987, the state's outstanding debt amounted
to US$7.84 billion. Including utilized foreign
investment, China's total external debt (i.e. including
that raised by enterprises and provincial authorities) is estimated to be roughly US$20.6 billion.
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