TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 61

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CONFIDENTIAL #2.

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China's foreign exchange reserves amounted to US$18.0

billion, the same as three months earlier but 18.4% higher

than at the end of 1987. During most of 1988 China's

foreign exchange reserves were at an historic high; the previous peak at US$16.7 billion was recorded at the end

of September 1984.

13.

According to China's Ministry of Foreign Economic Relations and Trade (MOFERT), in the period 1979 to 1988 (10 years), China approved a total of 15,900 enterprises with a foreign investment content (mostly

equity and cooperative joint ventures). These involved a total realised direct foreign investment of US$10.9

billion. In 1988 alone, 5,890 enterprises with foreign investment content (+164% more than in 1987) were

approved. They involved a total contracted direct foreign. investment of US$5.2 billion, of which US$2.4 billion had been realised. Such rapid increases were reportedly attributable to the improvement in the economic environment for foreign investment. More recently, Chinese leaders have repeatedly emphasized that China's efforts at restoring control of the economic environment and re-establishing economic order will not affect China's economic cooperation (mainly trade and investment) with foreign enterprises

14.

(12)

A large proportion of the foreign investments in China were found in the coastal provinces, particularly Guangdong and Fujian. During the first nine months of

(12) But there have been reports suggesting that even

projects involving foreign interests, particularly those "non-productive" ones like hotels, have also been adversely affected because the Chinese partners might not be able to honour their financial commitments due to the domestic credit squeeze (paragraph 15).

CONFIDENTIAL

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