Introduction U.S. Policy The Shanghai communique, issued on February 28, 1972, at the conclusion of President Nixon's historic visit to the People's Republic of China (PRC) signified a dramatic shift in U.S.-China relations. It has had a significant impact on trade policy and potential. The joint U.S.-PRC announcement of February 22, 1973, creating Liaison Offices in the respective capitals and calling for expanded trade, was an additional step ensuring a major role for commerce in improving relations. The creation of a private organization, the National Council for U.S.-China Trade, in May 1973, was yet another positive event furthering commercial relations between the two nations. It is the policy of the U.S. Government to promote trade in non-strategic goods with the PRC. In a series of steps reflecting changes in policy, U.S. controls over American exports to and imports from the PRC have been substantially reduced during the past few years. The first important step, taken in December 1969, permitted U.S. subsidiaries and affiliates abroad to sell non-strategic goods to China and buy Chinese products for resale in foreign markets. In April 1970, the President authorized shipment of American-made components in non-strategic, foreign-manufactured goods. In June 1971, a significant list of commodities was removed from validated license control and placed under general license so they could be freely traded. Treasury's foreign assets control regulations on the PRC were removed at the same time allowing Chinese commodities (with the exception of seven embargoed furs) entry into the United States. At the time of the President's visit to China, the PRC was placed on the same level as the Soviet Union for export control purposes. The number of commodities requiring validated licenses for export to China and other destinations was sharply reduced. Other barriers to expanded trade have been removed or reduced. These changes in policy resulted in an expansion of total trade from $5 million in 1971 and $96 million in 1972, to $804 million in 1973 and $934 million in 1974. Major direct purchases of American equipment and agricultural products have been made by the PRC, although a sharp drop in agricultural purchases resulted in total trade dropping to $462.1 million in 1975 and an estimated $350 million in 1976. Increasing numbers of Americans are attending the Spring and Fall Kwangchow (Canton) Fairs. Existing U.S. policy should lead to further normalization of commerce with the PRC, but problems remain such as the linked issues of claims for U.S. private property taken in China and Chinese assets frozen by the U.S. Government at the time of the Korean War. Also, China does not receive Most Favorable Nation tariff treatment in the United States. OVERSEAS BUSINESS REPORTS; $36.50 a year ($9.15 additional for foreign mailing); 50 cents a copy. Order from any of the Department of Commerce district offices or from the Superintendent of Documents, U.S. Government Printing Office, Washington D.C. 20402. Single copies also available from the Publication Sales Branch, Room 1617, U.S. Department of Commerce, Washington, D.C. 20230. 2 PRC Foreign Trade Policy International trade is viewed as an important factor in transforming China into a modern industrial state as well as an instrument to foster the overall political and economic goals of making China a strong unified nation, capable of exercising leadership in Asia and the world. Import policy is directed at the acquisition of capital goods which embody modern technology for developing China's industry. Trade also is used to overcome serious shortcomings and bottlenecks in domestic production. A prevailing theme in PRC foreign trade policy is economic independence. China has avoided long-term foreign credit, preferring to scale imports to the amount of foreign exchange available from export earnings. Industrialization has reached the stage, however, where some reliance on financing has become necessary. The PRC attempts to become self-sufficient through development of its own production capabilities and through adoption of foreign technology. It seeks to avoid becoming dependent on one country as a source of imports or as a market for its exports. Development of foreign trade and economic relations with most nations of the world is an important part of China's present policy to maximize the potential contribution of foreign trade to economic development. China now has trading relations with over 150 countries. A desire to finance its imports with export earnings has resulted in an effort to balance trade with the rest of the world. However, China trades on a multilateral basis and does not insist on balancing its trade with individual countries. The international financial policy of China is conservative. The balance of payments has been favorable in most years with imports, foreign aid expenditures, and debt repayments compensated for by export earnings, overseas remittances, and receipts of foreign credits. The PRC has at no time incurred large financial obligations, and since the break with the U.S.S.R. has avoided long-term commercial credits. Short and medium-term commercial credits have been extended by non-Communist countries for purchases of grain, fertilizer, and complete plants. China liquidated its debt to the Soviet Union in 1965. Its commercial indebtedness to nonCommunist countries has been very low, but is now rising with the purchase of complete plants using medium-term credit (deferred payments) and in mid-1976 totalled $800-900 million. Reserves of gold and foreign exchange have been built up since the early 1960's so that at the end of 1975, they probably exceeded $1-2 billion (depending on the price of gold); foreign exchange holdings alone amounted to $300- 400 million. In view of the current volume of China's trade, these holdings are probably adequate. Details of the economy, foreign trade, financial practices, and other basic data on the PRC are in the companion Overseas Business Reports, OBR 74-21, June 1974, Basic Data on the Economy of the People's Republic of China and OBR 74-64, December 1974, Financial Practices in U.S.- China Trade. Details of U.S.-China trade for 1975 may be found in Appendix 1. Approaching the Market Researching the Market Prior to approaching the Chinese foreign trade corporations, many firms may want to assess the potential PRC market for their goods and services. This is a difficult process. The Chinese publish little or nothing of their Five Year Plans or otherwise provide information on equipment and technology of particular interest to them. It is somewhat presumptuous to project future demand in a centrally-planned economy with its arbitrary decision-making apparatus. For the potential exporter, it is important to understand that the Five Year Plan sets out general goals while the annual plan provides more specific targets, production levels, and the allocation of resources needed to achieve plan objectives. Chinese production goals are meshed with the availability of raw and semi-finished materials and projected new plant capacity. Great emphasis is placed on the supply of materials and equipment from domestic resources. The concept of "self-reliance" is a fact of life in China that no market survey or potential exporter can afford to ig nore. When the requirement can not be met from domestic resources, however, the Chinese foreign trade corporations are commissioned to turn to foreign sources of supply. In 1975, for example, the eight trade corporations probably bought nearly $7 billion in supplies abroad. Various groups in the United States attempt to survey Chinese industries to assess the potential for American goods and services. Some of these may be found as sectoral reports in the U.S.-China Business Review published by the National Council for U.S.China Trade. The Commerce Department also has published several studies (see Bibliography) and has an ongoing effort to develop further market information. Having researched the market, it is then time to approach the Chinese foreign trade corporations. Foreign Trade Corporations Foreign trade is a state monopoly controlled by the Ministry of Foreign Trade. It is conducted exclusively through a network of corporations in accordance with priorities established by the country's economic plan. The trade corporations are organized according to the commodities or services for which they are responsible. They have main offices in Peking with branch offices in various industrial centers. The following is a listing of Chinese Foreign Trade Corporations (FTC), commodities handled by each, with their street, cable, and telex addresses. China National Cereals, Oils and Food- Peking, People's Republic of China Cereals, edible vegetable and animal oils and fats, vegetable and animal oils and fats for industrial use, oil seeds, seeds, oil cakes, feedingstuffs, salt, edible livestock and poultry, meat and meat products, eggs and egg products, fresh fruit and fruit products, aquatic and marine products, canned goods of various kinds, sugar and sweets, wines, liquors and spirits of various kinds, dairy products, vegetables and condiments, bean flour noodles, grain products, nuts and dried vegetables (some nuts, dried fruits, and vegetables also carried by Native Produce). China National Chemicals Import and Export Corporation Erh Li Kou, Hsi Chiao Peking, People's Republic of China Cable: SINOCHEM PEKING Telex: 22043 CHEMICN PEKING Organic and inorganic chemicals, chemical raw materials, rubber, rubber tires, and other rubber products, crude petroleum and petroleum and petrochemical products (except aromatics), chemical fertilizers, insecticides, fungicides, antibiotics and pharmaceuticals, medical instruments, apparatus and supplies, dyestuffs, pigments, and paints. China National Light Industrial Products Import and Export Corporation 82 Tung An Men Street Peking, People's Republic of China Cable: INDUSTRY PEKING Telex: 22082 Light CN PEKING General merchandise of all kinds, paper, stationery, musical instruments, typewriters, cameras, film, radios, refrigerators, sporting goods, toys, building materials (plywood, insulation board, p.v.c. fittings and pipe, tiles, glass, sanitary ware, etc.) and electrical appliances, clocks and wristwatches, fishnets, net yarns, leather shoes, leather products, pottery and porcelain, human hair, pearls, precious stones and jewelry, ivory and jade carvings, lacquer ware, straw and other plaited articles, furniture, artistic handicrafts, and other handicrafts for daily use. China National Machinery Import and Export Corporation Erh Li Kou, Hsi Chiao Peking, People's Republic of China Machine tools, presses, hammers, shears, forging machines, diesel engines, gasoline engines, steam turbines, boilers, industrial and institutional refrigeration and air conditioning equipment, mining machinery, metallurgical machinery, compressors and pumps, hoists, winches and cranes, transport equipment (aircraft, railroad, automotive, ships and parts thereof), power and hand tools, agricultural machinery and implements, printing machines, knitting and other textile machines, building machinery, machinery for the chemical, rubber, plastics and other industries, ball and roller bearings, tungsten carbide, electric machinery and equipment, telecommunication equipment, electric and electronic measuring instruments, and scientific instruments (except medical instruments). 38-342 - 79 - 6 5 |