^1. Lardy, Nicholas R., Foreign Trade and Economic Reform in China, 1978–1990 (Cambridge: Cambridge University Press, 1992), p. 5Google Scholar. See also pp. 1–15 for a more detailed discussion of the different foreign trade regimes in relation to the emerging Chinese situation.

^2. See Zhongguo tongji nianjian (Chinese Statistical Yearbook 1991) (hereinafter ZGTJNJ 1991), p. 40Google Scholar for the accumulation ratio, and p. 150 for investment fund allocation among the major economic sectors.

^3. For an elaboration on the implications of the Stalinist legacy on economic reforms in foreign trade and Chinese industry at large, see Kueh, Y. Y., “Growth imperatives, economic recentralization, and China's open-door policy” in Australian Journal of Chinese Affairs, No. 24 (07 1990), pp. 93–119Google Scholar; and “The Maoist legacy and China's new industrialization strategy,” The China Quarterly, No. 119 (09 1989), pp. 441–44.Google Scholar

^4. Good examples of FDI ventures being allowed wholly or partly to target output for domestic sales include Schindler Elevators (Switzerland), Pilkington Glass (England), Bell Telephone (Belgium), and Volkswagen Santana (Germany). For an earlier survey of representative joint ventures in China see Ho, Samuel P. S. and Huenemann, Ralph, China's Open-Door Policy: The Quest for Foreign Technology and Capital (Vancouver: University of British Columbia Press, 1984)Google Scholar. The Trade Development Council of Hong Kong has recently become highly optimistic that the vast Chinese market is poised to open up to its wide variety of consumer goods; see South China Morning Post (hereafter SCMP), 20 03 1992 (Business Post, p. 5)Google Scholar, and Ta-kungpao (Hong Kong) (hereafter TKP), 17 06 1992, p. 15.Google Scholar

^5. The American government successfully negotiated with the Chinese to sign an agreement on 16 January 1992 relating to protection of intellectual property rights, and moved swiftly afterwards to press for the lifting of essential import barriers by October 1992, under Section 301 of the American Trade Act.

^6. Reference is to the summary terms “Yanhai jingji kaifanqu” as used by the State Statistical Bureau for its 1988 survey (see notes and sources to Table 1). The econocoas areas cover, in the order that they were declared open for foreign investment (and as in Table 1): (1) the four Special Economic Zones (SEZs) set up in 1979/1980 in Guangdong and Fujian provinces, (2) the 14 opened coastal cities (OCCs), from Dalian in Liaoning province in the North to Beihai in Guangxi province in the South, made available in 1984, and (3) the opened coastal provinces (OCPs), from Liaoning to Guangxi and Hainan provinces, comprising a total of 288 xian (counties), which were all covered by a single government decree for opening up in early 1988. Between 1984 and 1988 smaller pockets of coastal areas (notably the Pearl River Delta, the Yangzi River Delta, and the Liaoning peninsula) were similarly opened, and earlier both Guangdong and Fujian were given special privileges to shape their own external economic relations. Likewise, Hainan Island was converted into an independent province in 1988 and made a Special Economic Zone at the same time. Both the centrally-controlled municipalities of Tianjin and Shanghai were included in the list of the 14 OCCs, but they also form part of the 11 OCPs, with all their subordinated municipals and xians. For simplicity, this study merely distinguishes between the three major categories of area, i.e. SEZs, OCCs and OCPs, ignoring, for example, distinctions within the major opened cities between the city proper and the districts designated as economic-technological development areas (jingji jishu kaifaqu). However, while initially the different areas represented different schemes of tax and money incentive, the distinction has become increasingly blurred over the years amidst increased Chinese effort to court foreign capital.

^7. The disparity can indeed be easily confirmed if one probes into the detailed xian data for the 11 OCPs as given in KFQTJZL (cited under Table 1).

^8. FDI pledged declined sharply from US$5, 931 million in 1985 to US$2, 834 million in 1986, and the growth rate of FDI realized was also reduced substantially in 1986. See ZGTJNJ 1991, p. 629Google Scholar. Lardy, Nicholas, in his China's Entry into the World Economy (Lanham: University Press of America, 1987)Google Scholar attributed the decline to the Chinese “requirement that each joint-venture project be self sufficient in terms of foreign exchange” (p. 36) and rising office rental and labour costs (pp. 36–37). The World Bank's China: External Trade and Capital (Washington, D.C.: The World Bank, 1988)Google Scholar has similar explanations (pp. 256–57). But these problems have always been encountered by foreign investors, and cannot fully explain the abrupt downturn in 1986.

^9. Essentially, Zhao's theory is that by requesting FDI ventures to “[place] two heads outside” (see Introduction), China could follow the path of South Korea, Taiwan, Hong Kong and Singapore in order to benefit from the international investment and commodity flows and generate extra foreign earnings for domestic finances, without exposing the centralized industrial core to the outside world.

^10. For the Eighth Five-Year Plan (1991–95), the Shanghai government plans to inject 20 billion yuan into Pudong, at an estimated total of 50 billion yuan needed for infrastructure investment. See TKP, 24 03 1992, p. 3Google Scholar. The 40% share is equal to Shanghai's total fixed asset investment for 1991. For a comprehensive report on the Pudong project against the background of Greater Shanghai, see CERD Consultants Ltd., Shanghai-Pudong baogao (Report), Hong Kong, 09 1991.Google Scholar

^11. TKP, 18 06 1992, p. 2.Google Scholar

^12. This is quite different from earlier observations when most of the FDI went to contractual joint ventures as a safeguard against possible investment risks. See Kueh, Y. Y. and Howe, Christopher, “China's international trade: policy and organizational change and their place in the ‘Economic Readjustment’,” The China Quarterly, No. 100, (12 1984), pp. 813–848.Google Scholar

^13. The figure can be obtained from Appendix Table A2.

^14. See notes to Table 3 and Appendix Table A1.

^15. This is revealed in Appendix Table A1.

^16. The figures for the intervening years 1986–89 for the 11 OCPs and Guangdong are respectively 94, 91, 86 and 84, and 54, 47, 46 and 44%. These figures refer to the changes in the cumulative total, but they are not exactly comparable to those given in Table 3, because for the base years 1979–84, the categories FDI and foreign borrowings have different missing figures. See Appendix Tables A1 and A2.

^17. Because of exorbitant property prices in Hong Kong in 1991/1992 many real estate developers from Hong Kong have recently turned to Guangdong province across; the border, aimed both at commuting Hong Kong residents and foreign investors in China. Hong Kong newspapers contain advertisements for sales of such properties; almost on a daily basis, although it is difficult to estimate the possible volume of FDI; made by this.

^18. This is confirmed by a recent comprehensive survey conducted by the Federation of Hong Kong Industries, entitled Hong Kong's Industrial Investment in the Pearl River Delta, Hong Kong, 1992.Google Scholar

^19. Seen. 4, above.

^20. See Hennart, Jean-Francois, A Theory of Multinational Enterprise (Ann Arbor: The University of Michigan Press, 1982), pp. 19–20Google Scholar, for an elaboration of the product fcyck model initially developed by Raymond Vernon in 1966, to explain the expansion of FDI by American overseas multinationals.

^21. A United States government report maintains, however, that after adjusting for China-U.S. inflation differentials, the RMB exchange rate against the U.S. dollar has depreciated in real terms since 1989, although “from 1984 through 1988, nominal devaluation of the yuan against the dollar was not sufficient to offset the impact of rising prices in China,” resulting in a real appreciation of RMB. See U.S. Information Services, EPF413, 16 05 1991, p. 40Google Scholar. The discrepancy evidently depends on what inflation rates are used for the estimates.

^22. The foreign capital shares as estimated in Table 5 are not exactly comparable to those shown in Figure 1. It is not known how the lower ZGTJNJ 1991 figures (for Figure 1) are calculated, especially with respect to the possible U.S. dollar conversion rate used. But the slightly higher shares obtained here (for Table 5) may be partly because these figures relate the whole of any FDI to the fixed assets investment base, although part of the FDI may not have constituted such investment.

^23. Zhenkun, Wu and Zihe, Song (eds.), Duiwai kaifang jingji fazhan zhanlu bijiao yanjiu (A Comparative Study of the Development Strategies of Opening up the Economy) (Beijing: Zhonggong zhongyang dangxiao chubanshe, 1991), p. 45Google Scholar. The estimate seems to cover both FDI and foreign borrowing.

^24. The estimated average 1985–90 share was obtained by applying the same ratio separately to each of the years concerned. This therefore ignores the possible bearing of changes in the RMB's exchange rate.

^25. The shares would be 24.44% for 1985–90 combined and 27.40% for 1990, based on fixed assets investment of the state sector alone.

^26. The Chinese GNP/GDP measures as adopted since the mid-1980s are still not exactly comparable to the familiar western counterparts because of incomplete coverage of the service sector, but the discrepancy has been very much narrowed from the conventional measure of “net material product” (guomin shouru) which excludes a large part of the tertiary sector.

^27. Related value-added data are rarely available, with the notable exception of Shenzhen: see Shenzhenshi guomin jingji tongji ziliao 1989 (National Economic-Statistical Material for Shenzhen Municipality) (hereafter SZGMJJTJZL 1989).Google Scholar

^28. See TKP, 16 03 1982Google Scholar for the 70% rule. Nevertheless, it appears that many Sino-foreign joint ventures cannot meet this requirement for export. The average for Shenzhen is 65% in 1987–88 (in 1980 prices) and 58% for 1988 (in current prices), but 73.4% for 1989 (current prices): see SZGMJJTJZL 1989, pp. 44, 50, 68, 74, 76 and 120Google Scholar. The last percentage should not however be taken as an accurate measure, because it is obtained by relating total sanzi export to GVIO of those sanzi enterprises with “independent accounting” only. But as virtually all sanzi GVIO is produced by enterprises operating as independent economic entities the discrepancy should be minimal.

^29. One of the representative FDI ventures in Shanghai is the Yaohua-Pilkington Glass Corporation which had a total sales volume of 270 million yuan, including 160 million yuan (i.e. 59%) in 1991 for export sales; see TKP, 22 05 1992, p. 4Google Scholar, and Zhongguo duiwai maoyi (China's Foreign Trade), No. 3 (1992), p. 18Google Scholar for a more comprehensive survey of the joint venture.

^30. As a means to mitigate the strict requirements for foreign exchange balance, a number of new policy provisions were given in 1986, including “Guanyu waishang touzi qiye goumai guonei chanpin chukou jiejue waihui shouzhi pingheng de banfa” (“Measures concerning the purchases of domestic products by foreign-funded enterprises for export for balancing foreign exchange requirements), 20 January 1990.

^31. See Appendix Table A8.

^32. Ibid.

^33. This can be shown by relating for example the given share of the SEZs to that of Shanghai. The ratio declines over the years.

^34. For details about the various components of sanzi enterprises' foreign exchange expenditure and receipts see Xunpin, Huang, “Shilun Zhongwai heyin qiye de waihui pinheng wenti,” in Guangdong shehui kexue (Guangdong Social Sciences), No. 2 ( 1987), pp. 85–88.Google Scholar

^35. Other factors accounting for the continued imbalances may include illicit sales of imported sanzi machinery and equipment to domestic buyers, “over-invoicing” of import bills, and depressed export quotations for tax evasion purposes. This seems to be a real and widespread practice among the sanzi enterprises, but it is impossible to estimate to what extent it accounts for the estimated sanzi deficit.

^36. These are the figures given by Li Guixian at a press interview during the 25th Annual Meeting of Asian Development Bank, held in Hong Kong; see TKP, 6 05 1992 p. 2.Google Scholar

^37. Li Guixian (ibid.) gives a debt service ratio of 8%. TKP, 24 04 1992Google Scholar cited a MOFERT source to give a net foreign debt balance of US$52.58 billion, with a debt service ratio of 8.5% up to the end of June 1991.

^38. See World Bank, China's External Trade and Capital (Washington D.C.: The World Bank, 1988), p. 28.Google Scholar

^39. This has been prominently reported in the Hong Kong press. See for example TKP, 6 06 1992Google Scholar about the FDI intake in Shenzhen (p. 18), Fujian (p. 4); and TKP, 28 05 1992Google Scholar about Shanghai. Cf. also SCMP(Hong Kong), 3 04 1992Google Scholar (Business Post, p. 2) for a similar report.

^40. Moreover the frenetic buying even extended to the “B shares” issued by Chinese enterprises; see SCMP, 1 06 1992, (Money Post, p. 6).Google Scholar These stock shares are backed by strong foreign exchange earnings and can only be bought with foreign currency, in contrast to the “A shares” which cater to domestic Chinese subscribers. Note that the Hong Kong Stock Exchange is still pondering whether the major Chinese companies with B shares could be allowed to be publicly listed in Hong Kong without complying with the strict local legal and accounting requirements for listing.

^41. An increased share seems to have been taken by mainland Chinese interests based in Hong Kong, but it appears unlikely that such ventures will overrule the importance of genuine Hong Kong investors. For a comprehensive study of Hong Kong's involvement in China see Sung, Y. W., The China-Hong Kong Connection: the Key to China's Open Door Policy (Cambridge: Cambridge University Press, 1991).CrossRefGoogle Scholar

^42. See ZGTJNJ 1991 p. 630Google Scholar for the country-wise distribution of FDI in China.

^43. See for example Wen hui pao (Hong Kong), 5 06 1992, p. 2Google Scholar; and TKP, 13 02 1992, p. 23.Google Scholar A number of Chinese provincial statistical yearbooks do have a separate entry for Taiwanese FDI in recent years. TKP (ibid.) reports that Guangdong had the largest FDI intake from Taiwan in 1991, with 410 new Taiwanese enterprises with a pledge of investment of US$490 million. Fujian ranked second, with 329 enterprises and US$400 million. The same sources show that compared with 1990, pledged Taiwanese investment increased by 190% in Hainan, 50% in Shanghai, 34% in Liaoning, 30% in Beijing and 60% in Nanjing.

^44. See Lee, C. J., “An analysis of the international factors that influence the development of small and medium enterprises: the case of Taiwan,”Google Scholar paper presented at the conference on “Global Interdependence and Asia-Pacific Co-operation,” Hong Kong, 8–10 06 1992.Google Scholar

^45. GATT statistics as cited in SCMP, 30 03 1992 (Business Post, p. 2).Google Scholar

^46. Compared with Hong Kong, Taiwan certainly has a stronger industrial base and demand for technological upgrading of its industrial structure.

^47. See n. 45, above.

^48. The export of sanzi enterprises through Hong Kong has indeed become so substantial that in the last couple of years it has been the focal point of a China-U.S. trade dispute, with the Chinese arguing that its trade surplus with the U.S. should essentially be accounted for by “outward processing” from Hong Kong for which the Chinese partners earn only a minimal share of processing fees.

^49. Note that South Korea's export (virtually the same as China) ranks with Taiwan as the world's thirteenth (or fourteenth) largest exporter; see n. 45, above.

^50. ZGTJNJ 1991, p. 630Google Scholar shows that for 1989 and 1990 Chinese foreign borrowings from Japan amounted to US$2,595 and 2,500 million respectively, compared with US$1,027 and 1,011 million from the second-largest lender, the World Bank.

^51. Cf. ZGTJNJ 1990, p. 654Google Scholar, ZGTJNJ 1991, p. 630Google Scholar and Howe, Christopher, “China, Japan and economic interdependence in the Asia Pacific region,” in The China Quarterly, No. 124 (12 1991), pp. 662–693.Google Scholar

^52. Christopher Howe, “China, Japan and economic interdependence,” attribute: the Japanese disinterest partly to the cancellation by the Chinese of the Long-terrr Trade Agreement in the early 1980s and the souring of Sino-Japanese relations tha followed. “Political frictions in the mid 1980s and the failure of the Chinese to satisf; Japanese demands for a stable and non-discriminatory investment environment have [also] led in recent years to an investment ‘strike’ by Japanese companies and a majo: mismatch of intentions and expectations” (p. 683).

^53. Yaohan, a Hong Kong-based multinational of Japanese origin has recenti; completed a major deal to open in Shanghai the largest department store in China. Thii was closely followed by plans for Sun Hung Kai, a giant multi-purpose holding company from Hong Kong, to develop the largest commercial complex in Beijing, jus to the east of the Forbidden City.

^54. See TKP, 3 03 1992, p. 2.Google Scholar The regulatory import taxes are primarily fo: marking up prices of imported producer foods to levels comparable to that produced domestically. The measure is partly to protect domestic industries from outside competition, and partly to balance the discrepancy between internal and external price: caused by the distorted Chinese price system.

^55. Wu Zhenkun and Song Zihe, , Development Strategies of Opening up the Economy, pp. 45–46.Google Scholar

^56. The document has not yet been publicly made available, but TKP, 15 06 1992, p. 2Google Scholar disclosed considerable details.