TNAG-1457-FCO40-1981-Relations-between-Hong-Kong-and-China-1986 — Page 76

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11.

In view of the continued imbalance in the

visible trade account, it seems that the import controls

imposed in March 1985 have not yet been fully effective.

The October statistics released by the Customs Administration showed that imports of certain consumer items had still increased rapidly. For example, comparing October 1985 with October 1984, imports of television

sets, watches and automobiles rose by 260%, 233% and 218%

respectively.

12.

To remedy the situation, the Ministry of Foreign Economic Relations and Trade has announced several new

policies. First, the need to rationalize the use of

foreign exchange was reiterated. Restrictions over the

imports of high quality consumer goods and goods which

could be produced domestically were emphasized.

Second,

the foreign exchange earning power of exports was to be increased by improving their quality, variety and packaging. Third, China, has been paying increasing attention to the bilateral trade deficit with Japan and,

to a lesser extent, that with the United States.

Recently, China has been urging Japan to increase its purchase of oil, coal and other primary products from

China. Nevertheless, China announced on 4.2.86 that it

would not step up its oil exports in 1986 because of the

need to stabilize the world oil market.

13.

Despite the widening visible trade deficit, the

People's Bank of China announced that China's foreign

exchange reserves increased from US$10.85 billion at the

end of June 1985 to US$12.59 billion at the end of

September 1985. Such an improvement is not easy to explain in view of the fact that the visible trade deficit

in the third quarter of 1985 was as high as US$3.6 billion

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