TNAG-1621-FCO40-2235-Relations-between-Hong-Kong-and-China-1987 — Page 119

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first time the free transfer of bonds and shares has been

allowed in the People's Republic of China. At present, the two capital markets are rather thin because the

People's Bank of China imposes strict criteria for the

listing of shares and bonds. In the case of the stock market, another constraint on its development is that only a small proportion of the shares of an enterprise can be

acquired by individuals. The major proportion are

reserved for other enterprises and collectives. This restriction is set because privatization of the means of production runs counter to socialist ideology. In the longer term, if the ideological issue were overcome and the capital market allowed greater freedom of development, it would have significant implications for China's economic system.

11.

As regards the external sector, according to the

Customs Statistics, China's exports grew by 14.8% in the

first three quarters of 1986 to US$21.4 billion. In the

same period, imports showed a more modest growth of 5.1% to US$30.4 billion. In consequence, there was still a

large trade deficit of US$9 billion. For 1985 as a whole,

the trade deficit was US$14.9 billion. Thus there are

signs that the trade deficit is being brought under control but it remains a problem.

12.

Against the background of shrinking earnings on oil exports (by 46% in the first half of this year), a growth of 14.8% in total exports was a remarkable

achievement. A breakdown by commodity shows that the

increases were mainly in traditional export items such as textiles and agricultural products. Several reasons may

have accounted for the increases. First, with tighter controls over parallel trade, goods formerly smuggled through may now be declared and thus recorded in the trade

statistics. Second, there is a clear determination on the

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