TNAG-1458-FCO40-1982-Relations-between-Hong-Kong-and-China-1986 — Page 48

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exports rose by 13.7% in the first half to US$12.8 billion while imports fell by 2.7% to US$14.0 billion, resulting

in a trade deficit of US$1.24 billion. In the first half

of 1985, the visible trade deficit (MOFERT statistics) was

US$3.16 billion. On the invisible trade account, a

surplus of US$2.2 billion was recorded in the first half

of 1986. This was sufficient to cover about 34% of the

visible trade deficit (at US$6.4 billion according to

China Customs Statistics).

9.

At the end of June 1986, China's foreign

exchange reserves stood at US$10.5 billion, compared with

US$10.3 billion at the end of March 1986. of the former,

US$2.2 billion were state reserves and US$8.2 billion were

the reserves of the Bank of China.

10.

With a view to correcting the external imbalance

and to improving the foreign exchange reserve position, the Chinese government has stepped up its efforts to boost

exports and to reduce imports. To increase export

earnings, fifty top factories producing consumer goods, including tableware, sewing machines, bicycles, and watches and clocks, have been designated as export bases. These factories are given special loans and priority treatment as regards the supply of raw materials and the importation of advanced technology, and are allowed to

retain a greater proportion of their foreign exchange

earnings than other factories.

11.

Increasing efforts have also been made to substitute imports by domestic production.

Apart from

economising foreign exchange expenditure, import substitution is also regarded as a means to provide

G.F. 326

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