TNAG-2792-FCO40-4031-Relations-between-Hong-Kong-and-China-1993 — Page 118

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the first time.

Adjustments in the official rate were more

frequent since then(9)

36.

reduce

In January 1991, export subsidies were abolished

in line with reforms on the foreign trade system.

State-owned enterprises are encouraged to

their

and subsidies

to face more realistic

However, loss-making enterprises could still enjoy much support through direct fiscal subsidies or

concessionary loans.

state on

reliance

exchange rates.

37.

In early 1991, the foreign exchange retention

ratios for export enterprises were standardised and

raised.

For foreign exchange earnings from exports of general commodities, the export enterprise is required, under the current system, to submit 20%, 10% and 10% respectively of the earnings at the official exchange rate to the central government, the local government and the

enterprise production

the However,

central

government has the right to purchase at the swap market rate an additional 20% of the foreign exchange earnings

from the export enterprise as well as all the foreign exchange earnings which the production enterprise obtains the export enterprise. Thus, in broad terms, foreign

from

concerned.

(9)

Devaluations of the official Renminbi prior to April 1991:

exchange rate of the

Timing

Extent of devaluation

1985

1986

Dec 1989

Nov 1990

(%)

15

17

21

9.6

Adjustments in the official exchange rate thereafter have been much smaller but much more frequent, and without public announcement. On 8 September 1993, the official rate stood at Rmb 5.7868 to US$1.

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