TNAG-1836-FCO40-2611-Executive-Council-of-Hong-Kong-memoranda-and-minutes-of-meet-1989 — Page 144

CX (89) 3

CONFIDENTIAL

Page

5

China's external trade

Growth rate

(in US$ terms)

compared with

the same

Growth rate

(in US$ terms)

compared with

the same

Trade

1988

Exports period in 1987 (US$bn)

Imports period in 1987

balance

(%)

(US$ bn)

(%)

(US$ bn)

1st half

21.03

26

22.18

19

-1.15

3rd quarter 11.88

20

14.14

34

-2.26

Oct

4.24

19

4.60

36

-0.36

Nov

4.00

5

5.60

37

-1.60

Jan - Nov

41.15

21

46.51*

27

-5.36*

* The slight difference is due to rounding.

13

The cumulative trade deficit for the first eleven months of 1988 was US$5.36 billion. If exports and imports continue to follow the above trends for some months, it will not be long before China has a serious trade

serious trade deficit problem as well as an inflation problem. Past experience suggests that,

if the visible trade deficit becomes large and looks like increasing further, the Chinese Government will take measures to reduce the growth rate of imports into China.

China's visible trade deficits (US$ bn)

1985

1986

1987

1988 (Jan - Nov)

14.90

11.97

3.75

5.36

Implications for Hong Kong

14

Despite the high rate of inflation in China, the prices of imports from China remained fairly stable in the first nine months of 1988, as indicated in the table below.

CONFIDENTIAL