went into relief and rehabilitation work following the severe flooding in the Yangtze Valley in 1991. The state-owned sector continues to be a burden on the rest of the economy requiring heavy subsidies. Vice-Premier Zhu Rongji has been given the task of reforming major State-owned enterprises but progress is slow and radical action such as closure is impossible until some kind of social security net (currently provided by the enterprise itself) can be put in place. In recent weeks, the Chinese have claimed that the problem of inter-enterprise or triangular debt, at one stage thought to account for anything from 8% to 20% of all debt in the economy, has been cleared up. However, it is too early to judge whether these claims are to be believed and whether the problem will recur. There are inevitably inflationary pressures in the economy and real inflation is probably somewhere over 10% although high growth rates and relatively stable commodity prices make this less serious than it might be in other circumstances.
14. The greatest current threat to China's successful foreign trade regime is the possibility of punitive action by the US and/or the EC over trade imbalances and market access. The US claims a trade deficit of US$12.7 billion with China in 1991. The EC claims a deficit of 9.4 billion ECU (US$11.6 billion). The Chinese dispute these figures, but admit there is a problem.
INTELLECTUAL PROPERTY/MARKET ACCESS/GATT
15.
Progress has been made on the question of intellectual property rights. In 1991, under threat of punitive tariffs on many of their major exports, the Chinese made a bilateral deal with the US, acceding to the Berne Convention and giving formal protection to the products in several areas not covered by Berne (notably computer software). These terms were extended to the EC in early 1992.
16. The question of market access remains problematic. The EC are pressing strongly on a number of issues and the US are again threatening punitive tariffs if China does not meet its demands
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