TNAG-1457-FCO40-1981-Relations-between-Hong-Kong-and-China-1986 — Page 77

G F. 12%

(Customs statistics).

While the reliability of the data

is open to doubt, delayed payment for imports, an increase in invisible earnings and the return of foreign exchange

holdings from local authorities and enterprises to the

People's Bank of China may account for at least part of

this improvement.

14.

Also,

Apart from using export earnings to finance technology transfer, China has resorted to other sources

of funds. According to the Ministry of Foreign Economic Relations and Trade, foreign investment contracts totalled

US$5.85 billion in 1985, up 120.7% from 1984. of this

sum, US$1.57 billion has already been put into use. US$360 million was pledged by foreign partners in leasing and compensation trade agreements, of which US$300 million has already been put into use. Besides using direct foreign capital, China has increased its borrowing

overseas. In October 1985, the World Bank agreed to lend

China US$3 billion over the next 5 years. With a view to

strengthening its contacts with international financial organizations, China submitted a formal application for

membership to the Asian Development Bank. This

application has now been approved.

15.

Concerning the development of the Special

Economic Zones (SEZs), the Working Committee on China's

Special Economic Zones led by State Councillor, Gu Mu,

reiterated that these zones were to remain as windows for

receiving foreign technology, knowledge and management skills and for developing foreign economic relations.

Notwithstanding the more positive evaluation given to

these zones, infrastructural investment in the Shenzhen

Special Economic Zone (SSEZ), according to an informal

source, will be cut by about 21% in 1986, in response to

#3

COMFDENTIAL # 3