cautious in the two years following Tiananmen. Recent months have seen a return to the momentum of 1988.
9. Since 1991, the favourable investment environment originally confined to the SEZs has been spread to most areas of the country, export subsidies have been removed, many factories have been given greater control over their own affairs, a bankruptcy law has been passed (although implementation has been limited), and there have been pilot projects to pave the way for price, housing and social security reform.
10. The Chinese economy has performed strongly over the past two years. GNP grew 7% in 1991 and 10.6% in the first six months of 1992. Industrial performance improved all round, although the major state-owned enterprises continue to be outperformed by collective, individual or foreign-funded enterprises.
40%
Up to
of the Chinese economy is now reckoned to be outside the state
sector.
11. Foreign trade has also grown rapidly under the stimulus of the reforms. In 1991, total foreign trade US$135.7 billion, up nearly 18% on the previous year. Imports totalled US$63.8 billion, up 19.5%, and exports US$71.9 billion, up 16% leaving a surplus of US$8.1 billion (Chinese figures). China's foreign exchange reserves (not including gold) currently stand at approximately US$41.9 billion, as against a total foreign debt of US$52.5 billion. There is no foreseeable debt problem.
12. Over 10,000 new foreign investment projects were approved in 1991 with a total contracted investment value of US$11.1 billion. The inflow of foreign investment has rocketed in 1992 to US$14.6 billion in the period January-June, an increase of some 220%.
13. Despite its strong performance, certain aspects of the economy continue to give cause for concern. The budget deficit rose 33% in 1991 to US$3.7 billion, 52% higher than the government forecast although a substantial proportion of this
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