G.F. 326
CONFIDENTIAL # 3
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Of even greater concern is that the rate of inflation is still accelerating as the year-on-year increase for June was 19% (for more details, please refer to paragraphs 2 to 5 of CEC 7/88 "Inflation in China and its implications for
the economies of China and Hong Kong").
10.
(b) External sector
The growth momentum of China's external trade continued in the second quarter of 1988. According to China's Customs Statistics, the US$ value of its exports rose by 30% to US$12.11 billion in the second quarter of 1988 compared with the same quarter last year. On the same comparison, the US$ value of imports rose by 23% to
US$12.63 billion. For the first half of 1988 as a whole, exports grew by 26% to US$21.03 billion, while imports grew by 19% to US$22.18 billion. In consequence, there was only a small visible trade deficit of US$1.15 billion, which compares favourably with US$2 billion in the first half of 1987. On the other hand, figures released by China's Ministry of Foreign Economic Relations and Trade
(which are considered less reliable for macroeconomic analysis) indicate that a large trade surplus of US$4.6 billion was achieved during the same period. According to this source, China's exports rose by 16.1% to US$20.22 billion, while imports rose by 24.3% to US$15.63 billion (7).
11.
At the end of June 1988, China's foreign
exchange reserves increased further to US$18.1 billion.
from US$17.1 billion three months ago. Both were
(7)
For details about the major reasons for such discrepancy, please refer to CEC 6/85 "A note on China's national income, trade and balance of payment".
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