TNAG-1621-FCO40-2235-Relations-between-Hong-Kong-and-China-1987 — Page 120

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part of the Chinese government to boost exports.

Preferential treatment such as easier access to loans and

guaranteed supply of raw materials and electricity, is

given to export enterprises. It is also reported that, in

some places, surplus foreign exchange earned by

enterprises can be sold to the Bank of China at a rate of

one yuan per US dollar higher than the official exchange

rate of 3.7 yuans per US dollar. At the same time, export quotas have been raised and are more strictly enforced.

The sharp devaluation of the Renminbi in July has also

helped to increase Chinese exports.

13.

On invisible trade, a surplus of about US$3

billion was recorded in the first nine months of 1986,

which was sufficient to cover roughly one third of the

visible trade deficit. According to reports, the

remaining two thirds of the trade gap was financed largely by trade credits and borrowings (5), so that China's

foreign exchange reserves shrank only slightly. At the

end of September 1986, China's foreign exchange reserves

stood at US$10.4 billion, compared with US$11.9 billion

and US$10.5 billion at the end of December 1985 and of

June 1986 respectively.

(5)

Outstanding foreign debt of the state amounted to

US$6.9 billion as at end September 1986.

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