TNAG-1370-FCO40-1816-Relations-between-Hong-Kong-and-China-1985 — Page 16

CONFIDENTIAL # 2

11

Annex

24.

In early March 1985, a broad revision of China's import tariff schedule led to substantial increases in the customs duties for colour TVs, vehicles,

computers, video-tape recorders and other "undesirable"

products. Despite this increase in customs duties, the

visible trade deficit continued to widen - from US$1.1

billion in 1984 to US$6.41 billion in the first half of

1985. Thus, on 16 July 1985, a new "Import Regulatory Tax" was introduced by China's State Council as a further

step to slow down the flow of selected "undesirable"

products into China. Details of the tariffs and of the

import regulatory tax are given in the Annex.

25.

China's recent import boom was not confined to consumer goods. Imports of machinery and transport equipment like vehicles, computers and office equipment

have also more than doubled, to Rmb16.8 billion in 1984

from Rmb7.87 billion in 1983. The newly introduced import restrictions will also affect some capital spending, namely production-line equipment requiring continuing imports of components and sub-assemblies. Only imports of

those goods and equipment which can generate sufficient foreign exchange earnings to repay their costs are not

affected by these restrictions. Plans to import other items which require allocations of state-owned foreign

exchange funds will have to be screened by the regional offices of the State Planning Commission (SPC).

G.F. 326

CONFIDENTIAL #B