TNAG-1624-FCO40-2238-Relations-between-Hong-Kong-and-China-1987 — Page 206

CONFIDENTIAL 機密

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19.

Short of a complete abolition of foreign

exchange controls, over the past years the Chinese

government has adopted, either overtly or covertly, a

number of measures to relax its controls and this trend is

likely to continue in the years to come. These measures are discussed in the following paragraphs.

20.

First, the Chinese government has not moved to dampen completely the growth in black market activity relating to foreign exchange transactions. While administrative incompetence is certainly relevant in this context, the realisation that black market activity can serve the positive function of by-passing some of the rigidities imposed by the foreign exchange controls is

apparently also a factor.

21.

Secondly, since 1980 the Chinese government has been issuing foreign exchange certificates (FECS) denominated in Renminbi for use by foreign visitors. But as time passes, this has evolved into a means of allocating imported goods and locally-produced goods and services of a higher quality among all consumers, locals and foreigners alike, in China. At present, there are about Rmb 0.4 billion worth of FECS in circulation and

they usually command a substantial premium above their face value in the black market. Dealings in FECS have, in effect, developed into a "grey market" in foreign exchange, by accommodating certain otherwise illegal

market activities. There were a lot of discussions in the

past few years about the abolition of FECS. But it now appears that, unless and until the Chinese government can find an acceptable alternative system, FECS will continue to be in use.

G.F. 326 ma

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