Subject: China IMP/EXP News (CN940228)

From: [email-masked] (wangc)
Date: Tue, 1 Mar 94 23:38:51 CST

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  #           A WEEKLY NEWSLETTER FROM THE CHINA-LINK CLUB             #
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                    February 28, 1994 (CN940228)

CONTENTS                                                           LINES
========================================================================
A) BUSINESS SECTION INDEX.............................................11
B) CHINA MARKET WATCH
   1) MOFTEC MINISTER WU TOUTS TRADE REFORM, EFFORTS TO EXPAND TRADE,
      AND INVESTMENT.................................................134
   2) CHINESE STATE STATISTICAL BUREAU REPORT ON ECONOMY IN 1993.....182
========================================================================
               ****                                ****
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A) BUSINESS SECTION INDEX.............................................11 
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    1. SECOND-HAND VESSEL FOR SALE
    2. 4-YEAR-OLD CULTIVATED GINSENG FROM WISCONSIN
    3. NEW LOCATION OPENED FOR INVESTMENT IN THE PEARL RIVER DELTA
    4. TRADING COMPANY SEEKS CONTRACTS

Note: The business section can be automatically retrieved by sending
      e-mail request to [email-masked] with the subject line
      being BUSINESS.

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B) CHINA MARKET WATCH (2 ITEMS)......................................316
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1) MOFTEC MINISTER WU TOUTS TRADE REFORM,EFFORTS TO EXPAND TRADE,
   AND INVESTMENT....................................................134
------------------------------------------------------------------------
   Source: American Embassay in Beijing

1.  China would seek to balance its trade deficit by  expanding  exports
rather  than  limiting  imports and provided an outline of China's plans
for foreign trade reform.  The minister countered  claims  that  China's
draft  law  on investment from Taiwan would not provide adequate protec-
tion, cautioned that trade with the uk could be affected by  "unfriendly
and  uncooperative moves," and reiterated previous statements expressing
cautious optimism about  nafta.   She  also  briefly  noted  figures  on
China's 1993 trade and foreign investment and denied that secret regula-
tions restr1cted commodities trading with russia.  other  statements  on
China's  gatt  application  and  intellectual  property  issues  will be
covered.

2.  At a well-attended press conference on January 28, Minister Wu Yi of
the  Ministry of Foreign Trade and Economic Cooperation (MOFTEC) summar-
ized for Chinese and foreign press China's external trade  and  develop-
ment  cooperation  for 1993 and, with the assistance of several vice and
assistant ministers, fielded questions on  a  variety  of  trade-related
subjects.

3.  Minister Wu opened with an overview of 1993  trade  figures,  noting
that  China's overall merchandise trade had reached USD195.7 billion, up
18.2 percent.  Exports had increased 8 percent to  USD91.8  billion  and
imports  29 percent to USD104 billion, leaving China with an overall de-
ficit of USD 12.2 billion.  (See Reftel for  a  fuller  description  and
analysis of PRC 1993 trade statistics).

4.  The minister pointed out that foreign investment in  China  in  1993
had  doubled  that of 1992 and nearly equaled the combined investment of
the previous 14 years.  Investments approved in 1993 totaled 83,265 with
contractual  value  of USD110.9 billion and actual investment of USD25.8
billion.  In 1993, the size of individual investments  had  grown,  pro-
jects  involving  high technology increased, more multinational corpora-
tions invested in China, and the trend of investment began moving inland
from  the  coast.  According to MOFTEC figures, the cumulative number of
investment projects reached 174,056 at the end of 1993, with pledged in-
vestment  valued  at USD217.2 billion and actual investment reaching USD
60.0 billion.

5.  On trade reform, Minister Wu recalled that China had eliminated  the
import  regulatory tax (actually done in 1992), reduced tariffs in three
moves on 6000 categories resulting in an overall tariff decrease of  8.8
percent,  and eliminated China's import substitution list.  Returning to
the issue in response to a later question, she noted that reform in  the
area  of  foreign  trade  would move in tandem with fiscal, taxation and
banking reforms.  The objective was to create a system  best  suited  to
the  establishment  of  a  socialist  market economy and compatible with
international trade norms.  A state council decision to reform trade re-
gulations will be published soon, she said.

6.  According to Minister Wu, the key to trade reforms was reform of the
foreign  exchange  system,  including the unification of exchange rates,
end of the requirement to turn over foreign exchange, and creation of  a
foreign  exchange  settlement system.  A second area of reform would in-
volve the adoption of legal means to strengthen  macroeconomic  manageme
nt.   The  draft  foreign trade law and Taiwan investment protection law
had already been discussed by the State Council and submitted to the Na-
tional  People's Congress.  China also intended to formulate other laws,
including an antidumping law, anti-subsidy law, and safeguard  measures.
MOFTEC  was speeding up the preparation of laws that would reduce admin-
istrative intervention, make foreign trade enterprises independent,  and
rely  on  the  use  of  exchange  rate,  taxation and credit to regulate
foreign trade activities.  In its import regime, China would deliver  on
its uruguay round commitment to reduce the number of products subject to
licensing and other non-tariff barriers and improve on  transparency  of
its trading system.

7.  Without elaborating, the Minister said that another area  of  reform
would  involve the reorganization of Chinese trade enterprises into more
modernized forms.  China also planned to strengthen the functions of the
chambers of commerce of importers and exporters, reorganizing them along
the lines of particular trades and increasing the  coordination  of  the
services.   The final area of reform involved maintaining the uniformity
of laws throughout the country and improving  their  transparency.   She
noted  that  moftec  was authorized to promulgate foreign trade laws and
regulations and that it plans to use seminars  to  help  accomplish  the
goals of uniformity and transparency.

8.  Minister Wu pointed to several factors that could  account  for  the
trade deficit, including strong growth of the domestic economy resulting
in growing demand for imports, imports of  capital  goods  to  meet  the
needs of foreign investment, and the expanding potential and openness of
the Chinese market.  While the Chinese government wants balanced  trade,
it  hopes  to  accomplish  this by expanding exports rather than by res-
tricting imports.  China  earns  85  percent  of  its  foreign  exchange
through trade and needs exports to have the resources to import advanced
technology and equipment.  If China runs a deficit, it will  affect  its
ability  to  import, the minister cautioned, adding that she hoped other
countries will expand the import of Chinese goods.

9.  Minister Wu took issue with a question from a taiwan reporter imply-
ing  that a draft law to protect taiwan investment on the mainland would
provide inadequate protection.  Wu,  noting  that  contacts  across  the
straits and investment from taiwan had been growing, claimed that people
in taiwan were not satisfied with indirect trade, mail service and ship-
ping and had appealed to taiwan authorities to loosen exchange controls.
Taiwan investors had also appealed to the PRCG, and the  new  law  would
show  the  importance that the Chinese government attaches to the rights
of investors and to improvement of ties and exchanges with Taiwan.   Ac-
cording  to the minister, the level of protection offered by the new law
would be "most adequate."  As to the possibility of signing  an  invest-
ment protection agreement between the non-governmental organizations in-
volved in cross-straits talks,  she  believed  that  consultations  were
needed first to get beyond indirect trade and other indirect relations.

10.  Asked about the nafta trade accord, Minister Wu  repeated  previous
official  statements  to the effect that China hoped that nafta would be
open rather than closed and that the agreement should  promote  develop-
ment of the global economy and world trade.

11.  Asked by a Hong Kong TV reporter if China would  retaliate  in  the
trade  area over recent disagreements with the UK on Hong Kong, minister
wu noted that bilateral trade between China and the  UK  almost  reached
USD4.0  billion  in 1993, up 86 percent from the previous year.  (NB: in
1993 customs statistics, trade that was formerly credited to  Hong  Kong
began  to  show  up as trade with other partners, accounting for part of
the large increases in trade.)  Trade with the UK was growing  well  and
showed  great potential, she said, but recent "unfriendly and uncoopera-
tive moves will affect normal trade."  The minister  claimed  that  this
was not what China wanted to see happen, and that it was not the respon-
sibility of the Chinese side.

12.  In response to a question asking about quality  problems  and  res-
trictions  on  which commodities can be traded in border trade with Rus-
sia, Minister Wu said that trade with russia had grown by 31 percent  in
1993  to  USD7.7 billion.  Of this amount, Chinese imports accounted for
USD5 billion, up by 41 percent.  Wu claimed that the commodities  traded
were  those in demand, and that she was unaware of any internal document
barring Chinese trade companies from allowing russian traders to  choose
the  commodities they desired.  She added that economic cooperation with
russia took other forms than merchandise trade, including  project  con-
tracting,  labor exchanges, processing and leasing trade, and joint ven-
tures of various types.

------------------------------------------------------------------------
2) CHINESE STATE STATISTICAL BUREAU REPORT ON ECONOMY IN 1993........182
------------------------------------------------------------------------
   Source: Chinese State Statistical Bureau

1.  SUMMARY AND INTRODUCTION:  The Chinese economy grew an estimated  13
percent  in  1993,  according to preliminary figures from the State Sta-
tistical Bureau (SSB).  Despite the  macroeconomic  adjustment  measures
adopted  mid-year,  China  enjoyed  a second consecutive year of double-
digit economic growth.  China's 1993 gross domestic product exceeded RMB
3 trillion (about USD340 billion at the current exchange rate).  The SSB
report on the Chinese economy in 1993, released on january 20,  stresses
China's success in pushing forward with the policy of reform and opening
while maintaining rapid growth and strengthening macroeconomic  control.
But  it  also  concedes that China faces significant economic challenges
resulting from continued high inflation, excessive fixed investment, and
problems in the rural sector.

2.  The sections below provide an  overview  of  the  1993  results  for
China's  main  economic  indicators, drawing primarily on the SSB report
but also on other public Chinese sources.  Unless  otherwise  indicated,
the  analytical  comments  reflect  embassy rather than official Chinese
views.  A table following paragraph 15 summarizes 1993 figures  for  the
main economic indicators. End Summary And Introduction.

INDUSTRIAL OUTPUT

3.  The gross output of Chinese industry at or above the  village  level
increased  23.6 percent in 1993, with value-added in the industrial sec-
tor rising 19.5 percent (both measured in constant prices).   Growth  in
eastern  coastal  regions  accounted  for  more  than  75 percent of the
overall increase in industrial output.  Industrial production rose  more
than  30 percent in Zhejiang, Fujian, Shandong, and Guangdong provinces,
while industrial output growth in most inland provinces  remained  below
15 percent.

4.  The introduction of the "16 point" macroeconomic adjustment  program
in  July  caused the monthly increase in real gross industrial output to
slow from 30 percent in june to a low of 16.4 percent in october.   With
the easing of credit policy in september and october, however, growth in
industrial output accelerated again in the final two months of the year,
reaching 29.8 percent in december.

5.  The performance of state enterprises continued  to  lag  behind  the
rest  of the industrial sector, as their gross output increased just 8.9
percent.  State enterprises, however, still accounted for 58 percent  of
total  industrial output (above the village level) last year.  The gross
output of collective, township, and foreign-invested  firms  rose  39.8,
57.6 and 64.4 percent respectively.

INVESTMENT

6.  A record increase in investment demand was the driving force  behind
Chinese  economic growth in 1993.  Accomodated by loose credit and mone-
tary policies, total completed fixed investment rose 61 percent  in  the
first  half of 1993 (34 percent in real terms).  While the control meas-
ures included in the "16 point" plan slowed the rate of increase in  in-
vestment  during  the second half of 1993, total completed fixed invest-
ment still reached RMB 1,2 trillion in 1993, a nominal increase of  50.8
percent.   The share of fixed investment in gdp rose to about 33 percent
in 1993 -- 3 percentage points higher than in 1992.

7.  Fixed investment by state units was up 57.8  percent  to  RMB  832.1
billion, increasing the state sector's share in overall fixed investment
to 70 percent.  The fast-growing eastern coastal provinces accounted for
60  percent of the increase in fixed investment, with investment in five
southeastern provices -- Zhejiang, Fujian, Guangdong, Guangxi and Hainan
-- more than doubling.

INFLATION AND MONETARY POLICY

8.  As China's rapid growth continued in 1993, inflation  began  to  ac-
celerate  from the relatively low levels enjoyed in 1990-92.  The retail
price index rose an estimated 13 percent, while the cost of living index
for  the  35  largest  cities increased 19.6 percent (both calculated as
year-to-year averages).  These figures, however, understate the  current
inflation  rate.  In the year through december, prices in the 35 largest
cities were up 23.9 percent, and the broader national costing of  living
index (which includes services) was up 16.7 percent through November.

9.  The July stabilization program  achieved  some  initial  success  in
stemming  the  rise  in  inflation, as monetary and credit policies were
tightened.  Currency in circulation (MO) increased a staggering 54  per-
cent  through  June 1993 (versus jUne 1992).  But for 1993 as whole, the
rise in MO was held to 35 percent.  The PBOC reports  that  broad  money
(M2)  increased  23.7  percent  last  year  (December 1993 vs.  December
1992).

10.  Tighter credit controls, especially the recall of unauthorized  in-
terbank loans, led to a shortage of working capital in many state enter-
prises and the reemergence of inter-firm payments  arrears  ("triangular
debt").  To ease credit problems in the state enterprise and agricultur-
al sectors and to provide funding for priority investment projects,  the
pboc began to adjust its monetary policy stance in late august.  Accord-
ing to a report in the January issue of "ZHONGGUO WUJIA" (China Prices),
the  PBOC injected RMB 150 billion in base money into the banking system
between the end of August and the end of October.

11.  As of the end of 1993, the specialized  banks  were  still  holding
much  of  this  increase  in central bank funds as excess reserves.  But
there was renewed concern among some Chinese economists that  the  money
supply could expand rapidly in early 1994 as specialized banks drew down
their reserves to increase lending.  In an early January commentary, the
PBOC  acknowledged that these concerns had some merit, but stressed that
strict control by monetary authorities could keep this potential  credit
growth from being realized ("JINRONG SHIBAO", January 3).

PERSONAL INCOME AND RETAIL SALES

12.  The average disposable income of urban residents in 1993  increased
to  RMB 2,325, a real increase of 10 percent.  But rural incomes contin-
ued to stagnate, climbing just 2 percent in real terms to RMB 880.  Nom-
inal retail sales increased 23.6 percent in 1993, the highest rise since
1988.

13.  Inflation and the government's macroeconomic policy  stance  had  a
clear  impact  on the quarterly trend of retail sales last year.  During
the first quarter of 1993, when inflation was still relatively low,  re-
tail  sales  increased 16.2 percent versus the same period in 1992.  But
as the economy overheated in the second quarter,  retail  sales  climbed
rapidly,  reaching  a peak of 28.4 percent in june.  The July stabiliza-
tion program slowed growth in retail sales, and by October retail  sales
were up just 21.1 percent.  In the last two months of the year, however,
inflationary expectations rose sharply prompting, a resurgence of consu-
mer  confidence;  sales  were  up 35.3 percent in December, as consumers
sought to avoid the impact of the value-added tax introduced on  January
1.

AGRICULTURE

14.  The agricultural sector's value-added increased 3.7 percent in 1993
(at  constant prices).  Grain output reached a record high of 456.4 mil-
lion metric tons, up 3.1 percent over 1992.  Cotton production, however,
fell  9.5  percent  to  4.08 million tons due to continued problems with
boll worms.

15.  According to a report in the February 10 "ZHONGGUO SHANGBAO" (China
Business  Daily),  real retail sales of agricultural inputs such as fer-
tilizers and pesticides fell sharply last year.  But in december,  farm-
ers  began to horde production inputs in anticipation of price increases
in the new year.  Retail sales of fertilizer and  plastic  sheeting  in-
creased  48.3  and 42.9 percent respectively, while pesticide sales more
than doubled.

FOREIGN TRADE AND INVESTMENT

16.  China's trade with the world increased  18.2  percent  to  USD195.7
billion  in 1993.  exports increased 8 percent to USD91.8 billion, while
imports rose 29 percent to USD104 billion, leaving China with a  USD12.2
billion  merchandise  trade  deficit (versus a USD4.4 billion surplus in
1992).  Chinese experts note that financing a trade deficit of this size
posed  no major balance of payments problems for China, as gross capital
inflows came to an estimated USD33 billion last year.  The rise  in  im-
ports also buffered the inflationary impact of excess domestic aggregate
demand.

17.  Foreign direct investment in China totalled about USD20 billion  in
1993,  an  increase  of over 80 percent.  A number of Chinese economists
argue that the surge in foreign direct investment last year accounts for
much  of  the shift in China's trade balance.  According to Chinese cus-
toms statistics, foreign-invested firms imported USD16.6 billion in  ma-
terial  and  equipment  for investment purposes last year (a 107 percent
increase over 1992).

18.  While growth in overall Chinese exports slowed last year,  the  ex-
ports  of  foreign-invested  firms expanded 45.4 percent to USD25.2 bil-
lion.  The imports of foreign-invested firms grew even more rapidly, in-
creasing  58  percent to USD41.8 billion.  The share of foreign-invested
firms in overall Chinese exports and imports in 1993 was 27.5  and  40.2
percent  respectively,  striking evidence of their increasing importance
in China's foreign trade.

18.  Chinese customs estimates that China's year-end  foreign  debt  was
USD80 billion, up USD10.7 billion during 1993.  China's debt service ra-
tio was about 16 percent.  At the end of  1993,  China's  total  foreign
reserves  minus gold stood at about USD20 billion, essentially unchanged
from the previous year.

                Chinese Economy in 1993
                ------------------------
                Main Economic Indicators
                ------------------------

       (PCT change unless otherwise indicated)

                                       1st half
                             1993        1993       1992
                             ----        ----       ----
-- Real GDP                  13.0        13.9       13.2
-- Gross industrial          23.6        25.1       25.6
   output
-- Fixed investment(1)       50.7        70.7       36.8
-- Retail prices(2)          15.1        13.9        6.6
-- 35 city cost of           23.9        21.6       13.3
   living index(3)
-- Currency in cir-          35          54         36
   culation (mo)
-- Broad money (m2)          23.7        26         31
-- Trade balance(4)         -12.2        -3.5        4.4
   0 exports                 91.8        37.2       85
   0 imports                104          40.7       80.6

Comparisons; (3) Dec-Dec, Jun-Jun comparisons; (4) Chinese customs

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Notes:(1) State units, Current prices; (2) Nov-Nov; Jun-Jun
comparisons; (3) Dec-Dec, Jun-Jun comparisons; (4) Chinese customs
data, billions of USD. 
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