cautious in the two years following Tiananmen. Recent months
have seen a return to the momentum of 1988.
9. Since 1991, the favourable investment environment originally confined to the SEZs has been spread to most areas of the
country, export subsidies have been removed, many factories have
been given greater control over their own affairs, a bankruptcy
law has been passed (although implementation has been limited),
and there have been pilot projects to pave the way for price,
housing and social security reform.
10. The Chinese economy has performed strongly over the past two
years. GNP grew 7% in 1991 and 10.6% in the first six months of
1992. Industrial performance improved all round, although the
major state-owned enterprises continue to be outperformed by
collective, individual or foreign-funded enterprises.
40%
Up to
of the Chinese economy is now reckoned to be outside the state
sector.
11. Foreign trade has also grown rapidly under the stimulus of
the reforms. In 1991, total foreign trade US$135.7 billion, up
nearly 18% on the previous year. Imports totalled US$63.8
billion, up 19.5%, and exports US$71.9 billion, up 16% leaving a
surplus of US$8.1 billion (Chinese figures). China's foreign
exchange reserves (not including gold) currently stand at
approximately US$41.9 billion, as against a total foreign debt of
US$52.5 billion. There is no foreseeable debt problem.
12. Over 10,000 new foreign investment projects were approved in
1991 with a total contracted investment value of US$11.1 billion.
The inflow of foreign investment has rocketed in 1992 to US$14.6
billion in the period January-June, an increase of some 220%.
13. Despite its strong performance, certain aspects of the
economy continue to give cause for concern. The budget deficit
rose 33% in 1991 to US$3.7 billion, 52% higher than the
government forecast - although a substantial proportion of this
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