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China was attributable in part to outward processing
activities, it also reflects the re-emergence of a
substantial basic demand for imports, notwithstanding the
continuing import controls, as the Chinese economy
develops along its planned course. The rapid rebound in such exports may serve to illustrate the alertness of Hong Kong traders to the business climate in China, and their
ability to exploit opportunities as they arise.
32.
Besides controlling imports, the Chinese authorities have also devised measures to promote
exports. Among these measures, two were relevant to the
exchange rate of the Renminbi. The first measure was the
depreciation of the official exchange rate of the Renminbi
by 25% during the two years 1985 and 1986. This
depreciation has the effect of inducing China's
export-oriented enterprises to export more, as the export
earnings can then be converted into Renminbi at a more
favourable rate. Also, it provides them with more scope
for price cutting, if that is made necessary by
competition in overseas markets. Second, in some places,
surplus foreign exchange earned by enterprises can be sold
to the Bank of China at a rate which is one yuan per US
dollar higher than the official exchange rate of
Rmb 3.72/US$1.00. This tends to reinforce the positive
effect on the Renminbi price of China's exports brought about by the Renminbi depreciation.
33.
China's efforts to promote its exports have
achieved a fair degree of success within a rather short period. The total value of its exports rose in 1986,
despite a sharp drop in oil export earnings. Moreover, the year-on-year growth rate of the value of its total exports in the first half of 1987 was 24%. As a result,
its visible trade balance has improved markedly in recent
months. Hong Kong is able to benefit from this
development by serving as an entrepôt for Chinese
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