JPRS ID: 8582 CHINA REPORT ECONOMIC AFFAIRS

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• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000100070027-4
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• Document Page Count: 23
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• Content Type: REPORTS

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~

23 JULY i979 CFOUO i1~9~ ~ ~ i QF i-
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JPRS L/8582 F~K ~~F~rini. u~a: c>Ni.Y
23 July 1974
China Re ort -
p
ECONOMIC AFFAIRS
~ (FOUO 1 /79)
FBIS FOREIGN BROADCAST INFORMATION SERVICE
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~
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JpRS L/8582 .
23 July 1979
CHINA REPORT -
ECONOMIC AFFAIRS
- (FOUO i/~9)
CONTENTS PAGE
GENIIiAL ~CONOMLC INFORMATxON
Ja~x~uese Newc~raper Reporta on Chint~'s Economy
(Sueo Sekiguchi; NIHON KEIZAI SHIMBUN~ 5 Feb 79) 1
Goverument Seeking Older Types of Machinery
(NIHON 3',EIZAI SHIMBUN, u. r~y 79) li -
Briefs -
_ , May Reduce Steel Purchasea ]2
~hirt Production
Automobile Delegation 12
Jspaneve ~lectronics Plant Approved 13
FOREIGN TRADE
Cancellation of Huge Petrochemical Contracts
(N',AIIVICHI DAILY NEFTS, 2 Jun 79) 14
'ASAHI': PRC Asks Japan To Take Risk in Bohai Oil Development
~ASAHI EVENING NE~i5, 29 ~y 79) 16
Br ie f's
Bei~ing Hospita'_ Pro~ect ~7
Banknot~ Ink Fram Japan 17
Japan Stee]mill ~nnovation Deal 17
Swellfish Inport to Japan lf3
Coal !~id to FRC 18 `
_ PRC Oil Import. Contract l~i
TRANSPORTATION
Japan-China Civil Aviation Tallss To Begin 22 May in Bei~jing
- (ASAHI EYEDi ING i�iFTw~, 15 ~Y 79 ) � - . . � . . . � � . . . . . . . . . � . . . 19
-a- [III-CC-83FOU0] `
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' GI?M~~/1L I~;CON()M~C YNI~IiM(~`1.'ION
JAPANESE NEWSPA~'EIt REPOEtTS ON CHINA' S ECONOI~tY
Toky~ NINON K~I2AI SliIMBUN in Japanese 5 Feb 79 p 14 HK
- (Report by 5ueo 5ekiguchi~ chief research fellow of the Japan Economic
Research Center: "China's SCrong Econamic Growth Power")
[Text) In view of the rapid opening up of China's
foreign policy and the d~velopmenC of e~~onomic rela-
tions between Japan and China~ the Ja~pa.n Economic
Research Center atarted a pro~ect on "Fteaearch on
the Economic Relations Between Japan aMd China" in
October 1977 (under the direction of Sueo Sekiguchi,
_ chief research fellow of the Japan Ecc~~omic ~tesearch ~
Center). Members of the pro~ect viei~ed China in -
December lasC year and xeviewed their find~,ngs. The
following is ~ resume of the resulCs.
A China boom began in 1978 in Western industrial countrips including
Japan, and China's economic policy toward thE. West became unexpectedly
active in the summer of that year. Vieitora to China at the end of last
year said that the Chinese authorities were talking to them about eco- -
' nomic matters three times more than they di~ in the summer. It seems
that the policy of the leaders has penetrated deep among the people who
are confidently and actively pushing the "f.our caodernizatione" ahead.
Naturally a visit to China by us nonexperte who have been engaged in China
watching for only about a yeax and a half cannot reveal much. But on the -
other hand, research by expsrts does not necesearily reveal the secrets
of China's economic developments. We must look at the aituation in Che
, light of both our own concept and their ic~ea of "self-reliance" and
"walking on two l~egs."
We must not for~et thaC political educatian and moral inducements play an
important role in China. However, there is a limit to this. Many an ~
earthquake in their policies in the past was not unconnected with this.
Some disputes over political leadership were centered around clashes _
over the value of moral and material inducements.
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HOEt U~'H'ICTAI. U5~ dN1.Y
- W~ nft~n use the eerm "ideneic~l race und id~nricnl l.~nguuge" whc:n we
talk ebouC the closenese of Japan and China. f3ue ehi~ is oversimplifyin~ .
Chings. IC ig also neceesgry to examine rhe theory that bec~u~e Chinu -
ae11s iea resources and Japan sells ite indu~Criel producte~ the economies
of the two co~ntries therefore complement each other. In the following,
we nonexperCe will diecuss China'e economic developmente and questions
concerning the ecnnomic relgCions between Japan and Chinn from our view--
poinC.
In tlie end we will deal with we~ys in which Japgn can contribuCe Chrougti
cooperation, bearing in mind the special relations between the Cwo coun-
tries.
Chinn's Present Cconomic Situgtion
:
IC is dif�icult to summarize the economic aituation of a country with a
territory as vast and~varied ae China. Here we will make an uttempt to
outline China's economy from five aspects~ which we feel would be u~eful
for the study of the economic relations between Japan and China.
LaCent Growth Power--There are various ways Co estimate China's CNP.
Tab1e 1 is an estimaCe by Che World Bank for international comparison.
According to this table, China's per capita GNP in 1975 reached about
$400. Since the population growth from 1970 to 1975 was 1.7 percpnt
annually, the annual per capita GNP growth is therefore eatimated at 5.3
percent. This growCh rate is low when compared with the RUK but fairly
high when compared with the United States, the Soviet Union or J~pan.
1. The People's Enthusiaem for Work
Since the beginning of the 1970's, China's economy has been growing at a
rate second only to the rapidly developing countries (the ROY., Mexico, -
Brazil and the like). But will this continuP? We believe it c~ill.
- China has gone through the Great Leap Forward (1958 to 1960), the
Gultural Revolution (1966 to 1969) and then the period of chaoa under -
the "gang of foux" (1976) during which China's economy remained sCagnant.
But now the leadership has e~tabliahed itself firmly. If they continue
with their current policy of industrialization, China's growth power is
believed to be strong.
This ~udgment is based firs~ of all on the universality of primary and
secondary education, the high quality of the labor force and the vigor-
ous enthusiasm of the peasanCs for their work. In a country such as
China, which has a population of 900 million, ite future is determined
by the mobilization and development of human resources rather than Che
possession of natural resources as is widely believed. But there are
~ still queations concerning the attitude of the people toward saving and
investment and the power of technical innovations, which will be dis-
cussed in the following.
~
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2. Selt-Sufficiency in Gr~ins
Nutrition, l~nod, Llving 5Candard--China'~ commodity prices h~ve bec~n
Htnble for long periode of time, but it is wrong to mnke income cnmpgri-
H~~i~ Uy ur~suming thnt its (;NP deflator moves in the eame wxy a~ in Weetorn �
lnduatrinl countrlea. nesides, in conneczion with Che official fnreign
- exchange reCe, when the consumption basket of developing countries ie
used as the basis, the estimated purchasing power of Che U.S. dollar
becomes too high. According Co L. G. (Reynolds), the value of Che dollar
ia inflated five Cimes when ttie consumpCion basket of upper class Shanghai `
workers around 1974 ia used as the basis of eaCimaCion.
Ct~ina is atill definitely poor. Its income is on about the same level as
Japan's during the second half of Che 1950's. BuC since the price of
= daily necessities such as food is cheap, its aCandard of nutrition ia up
to about 80 percent of thar of the ROK's (based on calories, ~.972 Co 1974).
Housing and durable consumer goods are aCill in ehort aupply, buC minimum
needs in cloChing and food are saCie�ied.
As shown in Table 2, China's agricultural producCivity is about half of
_ Japan's (based on the weight of grains) es a result of inaufficient uCili-
zntion of machinery and fextilizer; but it is believed that a level of
~ self-sufficiency in grains has been attained (This is a conCroveraial
issue; for details please refer to our report). ~Consequently, the possi-
bility of induatrialization being retarded by the burden af food imports
is small.
Table 2. China's Agricultural Labor Productivity
Labor productivity
' in grains kg/agr Number of Nitrogen Other
population tractors fertilizer fertilizera -
1965 1975 75 65 1965 1974 1965 1974 1965 1974
Japan 1456 2204 151 579 1147 134.2 123.0 104.5 128.5
China 894 ].075 120 1.2 7 12.8 34.1 0.4 3.1
(1964) [as published]
India 536 801 149 3.3 10.7 0.6 2.1
~ ROK 1187 1398 118 0.4 27 89.2 184.8 17.8 64.2
Remarks: Chinese tractors include garden tractors. The unit is number of
tracCors per 1,OOQ hectares. The unit for fertilizers is kilo-
grams per hectare.
_ Source: Calculated by this center according to varioua estimates.
~
The need to import agricultural machinery, construction machinery and
fertilizer is great as is the need for housing, electric washing machines
and electric refrigerators. These items are easential for improving the
_ sCandard of living as well as for easing the employment aituation.
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' rc~tt c~N~t~ rcr~~i. u;;i: c~tvt.,Y
- 3. [tevlHio?~ of the 1'oll~.y of. lliypersion of liidustri~~;~
'Che Cour~e ef Industrlalix~tion--Wi~li tt~e exeepl:lon of the 1950'~, ChLn~~':~ -
industrializntion hac~ been different Crom thut oC the Sovl.et Uni.on, which `
, ndvoc~teg centralization and prtority �~r lieavy i.ndue;try. (:{~icin has b~eti
. following Che policy uL disperaing its induetrie~ in e:h~~ provinces ~ind
muinCaini~xg a bal~~nce between agriculture and indu~try. I:v~~~ with~.ii tlic -
industry ieself, the producCion of con~umer goods ~irrd produc:er gooda hne
bcen developed evenly. 'Chis is perhaps u ner.eysary f.cc b~c.~;lusi~ oC i.ts
nationul dcfen~e necda, its foreign policy o� yelf'-sul'C1~:lency or Lts
- deficiency in dome~tic transporC. liowever, to eatisty the peop.le's dcslre _
to improve tt~eir l~.ving stnndards nnd realize the "tour moderniz~e.lo~is"
- uuder the circumstances of Che 51no-Soviet confrontatlon~ i~ is ess~~nCial
to improve productivity and centralize Che production of basic goods tu n
certain extenC. Thus madernizaeion and employment ot' large"BC:I~.C iridus-
tri~l equipment are being stepped up in "key stnte enterprivea." 'Thc
Baoshnn iron and steel complex in 5hanghai ie o~~e such example. -
Visits to factories and inCerviews conJucted during uur trip to Chlna in
December 1978 revealed that aurplus capabilities of departments of cou--
sumer goods productio? and factories usinb conventi.ona.l techniques wer~
- being transferred to new departmenCs insteud of all~wing tl~e original
departments and facCories to expand. The policy of disperai~~?i of 1ndt~s-
_ Cries may remain basically unchanged in view of the vuetness oE its
- territory, iCs deficiency in domestic transport and the diapersion of
its populatton, but it is beli~ved that the policy on tt~e production of
basic goods is being revised. In fact t~is is perli~~ps ~ rational cour:~~~. .
4. The Need To Introduce Foreign Cnpital
Accumulation of Capital--Accumulation of capital is thc key to economic
growth. Professor Ishikawa formerly had a system for making estimates ot =
China's capital accumulation, but there is as yet no accepted formula for
long-term estimates. We have attempted Co find the b~iLance of i~tvestments
- of savings in agricultural and nonagricultural departments utider a set oE
presumptions in the rate of labor distribution, raee c~f savi.ngs an~l
marginal capital coefficient. Although this is only ~1 ruugl~ esCimaee,
we found thnt during the periods of chaos (1959 to 19G1; 1967 and 1916)
capital wns wasted even in agricultural deparCments. tlowever, durin~
~ other periods, savings flowed from agricultural to nonagri.culturnl depnrt-
ments. To get closer ro the core, it may be necessary to f.ind evl.dence
= of the flow of surpluses from lighC Co heavy industry. But this is only
- a recent phenomenon.
Table 3 is a comparison of the results of our estimates with the rate of
investment in other Asian countries. China's rate of accumulntion is
- lower than those of Japan and the ROK, but it shows tha~ when there was
~ no chaos, the rates were over 20 percent. During the 1960's when Chere
_ was no foreign investment, the growth rate was 7 percent wt~en the
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margingl capital coefficient was 3.0, and 5 percene when the murginal
capital coefficient was 4.0 (using the simple (Harod-Domer] modul),
Tab1.e 3. International Comparison on Investment Rnte -
(5-year average invesCment rate; percenC)
Japan China India ROK
1955-59 31.0 30.2 12.7
1960-64 36.9 11.0 16.8 14.7
1965-69 35.8 22.9 18.0 23.4
- 1970-74 38.1 27.5 18.5 26.1
1975-76 32.3 13.5 25.8 _
- Remarka: InvestmenC rate is defined as amounC of inveatment divided by
- GNP.
5ource: Figures for China are estimates by Ch.:a center. OChers are =
according to the UN's "Asia-Pacific StaCistical Year."
In the past~ China's marginal capital coeffi~ient was believed to be
near 4. CapiCal efficiency was lowered by the increase of marginally
_ uaeful equipment, chaotic policies, political struggles and delays in
the distribution of raw maCerials. Thus, to accelerate ies industrializa-
tion, China must either lower its capital coefficient, increase its savings
rate or borrow foreign capital.
5. Increase of Savings Rate _
Prospects for the ~urrent 10-Year Plan--The Chinese Government published
= a plan ta expand its agriculture by 4 to 5 percent and its industry by ~
10 to 11 percent annually before 1985 which means an annual GNP growth
- of more than 8 percent. In this connection, R. F. (Denbaaga) and -
(Fuaasenfuesuto) estimated the annual growth rate at a"pessimistic"
6.5 percent in Cheir latest report to Che U.S. ~oinC congressional com-
' mitCee.
On the basis of the above arithmetic, if the savings rate is raised by
25 percent and the marginal capital coefficient lowered to 3.5 (3.0), the
growth rate will become 7.1 (8.3) percent. Naturally if China borrows
- foreign capital ae it is doing now, it will be able to raise its growth
rate correspondingly. OI1 the basis of thp GNP indicated, a percenC of
savings rate is equivalent to above $3 billion. When the capital coeffi-
cient is 3.5, an increase of savings rate by 2 percent will raise the -
growth rate by about 0.6 percent.
China is confronted with a shortage of domestic savings and of capital in -
its attempt to accelerate its industrialization. Although the presenC -
rate of family savings is still high, can the savings rate be raised? At
least the enterprises must increase Cheir efficiency and profits. To
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achieve Chis aim China is attempting to learn Western production Cech-
niques and enCerprise management. As long as the introduction of foreign _
capiCal and the import of conaumer gooda are not increased, conai.gnment
processing and compensaCion trade wi11 mean savings incregsea. Meanwhile, _
promotion of Couriam ia also closely asaociated wiCh domeatic eavings and
fnreign exchange increases. Acceptance of direct foreign inveatment ia
another megna Coward Cechnological innovaCion and introduction of capital.
However, delays in Che distribution of gooda according to the schedule af
- staCe plans will hamper the increase of overall efficiency even if tach- -
nological innovation is achieved within individual enterprises. This is
perhape China's Achilles' heel in its economic development.
Trade Relations Between Japan and China
The China boom also caught on in Japan last year. But in Japan the sit-
uation is different from thaC in the UniCed SCates. Fiere the economic
fact~r ia stronger than the political one. In fact we can say Che factor
, of selling to China is the strongeat. China is a highly attractive markeC _
for Weatern enterprises which are plagued by depresaion. However, if
Chinese products cannot be sald abroad, problems of accrued debt will aoon
sur.face in China. In the f~cllowing we shall discuss the trade relations
between Japan and China, limiting ourae].ves only Co the aspects of Crade
and investment.
1. Import of Light Industrial Products
Imbalance of Japan-China Trade--In Table 4 it is estimated that in 1977
Japan's share in China's total import volume was 30 percent; but China's
~ share in Japan's was only 2.2 percent. Since Japan imports little from
China, Japan takes in only about 20 percent of China's exporCs.
',Jhen the degree of reliance on trade with Japan is high, China becomes
aub~ect to fluctuations in the Japanese economy. Consequently China is -
probably trying to avoid concentrating on a small number of trading part-
ners to minimize the riek. In this connection, China's foreign exchange
policy is to keep Che official rate close to the arbitrate~d raCe. But
the RMB is strongly affected by the fluctuation of the U.S. dollar.
China's reliance on imports wae 2.3 percent in 1975, but increase in the
import of industrial plants pushed the rate up in 1978. If the exchange
rate ia not lowered, China will have to �inance its increased imports by
exports and borrowing of foreign exchange. China has a large favorable
balance of trade with Hong Kong (ENTRi~OT trade included) and there is no _
need to balance it. But what can Japan import from China? One might
' think it is only a question'of balancing the figures; however, it is not -
thaC simple. Indeed we can import some industrial raw maCerials in addi-
tion to oil, but we must also import some general light industrial products
such as textiles in addition to marine products which we are currently
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preparing to do. IC ia essential to ellmin~aCe current Japaneae restric-
tione on Cexeile imporCs and make it eas3er for Chinese and SouCheast
Asian exports of ligh~ industrial products. This will bring about an
expansion of diversif ied trade.
Table 4A. Indexes Relr~ted to Japan-China Economic Relationa: Japan
($/mi1; percent)
1965 1970 1915 1977
1. Total imports 8,169 18,881 57,863 70~809
2. Imports from China 225 254 1,531 i,s4~
3. No 2 divided by No 1 multiplied ~
by 100 percent 2.8 1.3 2.6 2.2
- 4. Total expores 8,452 19,318 55,753 80,495
5. ExporCs ro China 245 569 2,259 1,939
6. No 5 divided by No 4 multiplied ,
~ by 100 percenC 2.9 2.9 4.1 2.4
7. Rate of reliance on imports ~.n ,
relation Co GNP (markeC price) 7.8 8.0 11.8 10.2
8. Value of principal imports from ~
China
I. Crude oil 0 0 740 655
II. Textiles 2 26 199 184
III. Raw ailk 0 0 44 72
IV. Fish 18 23 67 68
V. Chemicals 6 23 40 48
VI. Soybeans 45 36 73 36 '
VII. Nonmetal ores 19 27 34
Table 4B. Indexes Related to Japan-China Economic Re~ations: China ~
($/mil; percent)
1965 1970 1975 1977
1. Total imporCs 1~845 2,240 7,360 6,418 '
2.. Imports from Japan 245 596 1,984 1,939 ~
3. No 2 divided by No 1 mulCiplied ;
by 100 percent 13.3 25.4 27.0 30.2 ~
4. Total exports 2,035 2,050 7,025 7,851
5. Exports to Japan 225 254 1,305 1,547 ~
. 6. No 5 divided by No 4 multiplied '
by 100 percent 11.1 12.4 18.6 19.7 ~
7. Rate of reliance on imports in ;
relation to GNP (market price) 1.1 1.0 2.3 ,
8. Value of principal imporCs from ;
Japan ,
- I. Metals 49 276 890 1,106
(iron, steel) (46) (237) (795) (1,028) '
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T~ble 41i (ConCinued)
1965 1970 1915 1977 -
II. Chemicals 93 138 453 3G3 -
(chemical ferCilizer (70) (88) (317) (149)
III. Machinery 68 119 696 217
(transport mnch.) (3) (39) (267j (109) -
IV. Textiles 24 21 123 198
Source: Sratistics from "Trade White Paper." Annual average rate ia used
for U.S. dollar conversion. "Foreign Trade" of Japan Cuetoms Duty `
Association. "SCaCistica on China's Economy~" 1977 of Japan-Cliina
Economic Association. "China: A lteassessment of tlie ~conomy~"
1975 and "People's Republic of Chi.na: InterttationAl Trade ltand-
book," 1975 of the U.S. ~oint congressional committee.
2. Abrupt Change in Foreign Policy
Investment and Technical Cooperation--China's adoption of a flexible
foreign policy to facilitate technological innovation cun be seen from
its aCtempts toward consignment processing, compensation trade nnd Che
drafting of a patent law. In addition, the Chinese Government has
recently been considering the acceptance of direct foreign investmenC
with the condition of being able to buy the foreign inv~sCment and
nationalize the enterprise after about 10 years.
� -
As a matter of fact, Chinese officials in the investigatien departmenCs of
the policy~making authorities have shown a very strong in?.~erest in invest-
ment agreements under the condition of nationalizations. But it seems
they are still unable to evaluaCe even the merits of coc;signment processing,
. which is one stage before investment agreement. Consequently, this author
believes the changes have been too abrupt. Japan's rate of domestic
savings tends to be roo high and we have also developed various tech-
~ nologies suitable to Chinese conditions. Furthermore, the Chinese system
of enterprise and personnel management is far closer to Japan's than to
that adopted in Europe or the United States. Ther~fore it is easy for
Japan to cooperate with Ctiina in areas such as providing lo,zns �~r offering
technological know-how. In the meantime, the cost f~r personnel exchanges
is also relatively lower.
3. Establishment of a Japan-China Cooperation Fund
Business should be carried out at the businessmen's own risk. The govern- ~
- ment should limit itself to beating the Western countries in reducing
tension in the COCOM (Coordinating Committee for Export Control), offer-
ing preferential duties and easing conditions for loans to China.
9
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= i
~
1~OIi U1~1~'iC1AL U51s ONLY '
If tif� Jgp~ne~~ Governmeut i~ tn consider the gpecial relutionghip between
,1~pc~n ~nd China ~ it should ~~t~blish a conperr~tion fund eg fi fnrm of wnr
rrprirr~r f u~~ to ('in,~anCe ~he ~xchnn~e of seudenC~ und CechniCir~n~ ~ We wiah
c~ uJvuG;at~ thi~ J~p~n-Chinu conp~ration fund.
CdI'Y1tIGilT; Nihou Keiz~i 5hinbunsti~~ 1979
C5U: 4105
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I~'Uk ON'}~'ICIAL U5~ UNLY
- t;i~NLttI~L rCONUMrC INI'~1iM/~~'1:ON
COV~RNM~N'I' S~~KING dLb~It '1'YP~S 0~ MACHIN~F~Y
Tc~kyn NIHON K~:I7.AI 5HIMBUN in J~p~nese 11 May 79 Morning ~dition p 8 OW
[TexCJ Witt~ re~~rd td Chin~'s pl~nt imports from J.~p~n, u l~nding govern-
- ment offici~l disclosed on 10 May r1~aC "China doeg nnC necesgarily eeek Cn
buy up-ro-date facilities, but rather hopes to introduce plants and machinery
produc~d in the early 1970'g." This desire w~s expressed by Chine~~ Vic~ `
rremi~r Kang Shien (who iy also minister oF the Statc f:conomic Commi~~ion)
to patenC of.fice director Kumaya when Che latter viBit~d China in April
this year. Commenting on Chis new Chin~se policy, the gov~rr~n~enC dfficial
s~id: "T}~is new move seems to be pert of China's efforC~ tn correct its
overly ~mbiCious modernization plnns. I believe thaC it representa II~n1~C}?
change in Ci~ina's economic consCruction program and reflecCg China'~ deaire
to be more pracCical in its planning. China hns thus f~~r persistently sought
to obt;~in the most up-to-date technology and nothing but ultramodern equip-
ment in its purchase dealing~ with Japan. The Baoshan Iron Plent mosC vivid-
ly reflects this persistent Chinese effort: the iron plant is using a
computerized system in its operaCions. However, successive imports of
~ ultramodern equipment in carrying out its plant construction pro3ects have -
resulted in a shorzage of funds and technicians, and an inabiliCy to cope
with t}~e inflow of up-to-date facilities. This is why China has now begun
to review its modernization plans and frozen its plant import contracts
with foreign countries. AbouC 30 contracts--valued ~t some 580 billion yen--
- involve Japanese firms.
According to the government official~ Vice Premier Kang--the highest official
in ct~arge of China's modernization program--told patenC office director
Kumay~~: "From now on China will not necessarily stick to its past practice
of seeking only to introduce ultramodern machinery and planCS. We now feel
that China's reality requires us to buy facilities which were produced in
the late 1960's or the early 1970's."
This is the first time a Chinese leader has expressed China's interests in
~ purchasing "old types of machinery." By purchasing old types of machinery~" .
and faci.lities China will be relieved from the need to turn out skilled
technicians in a hurry, while resolving its problem of lack of funds.
COPYRICHT: Nihon Keizai Shinbunsha (1979J ~
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GI;NI~~t~L 1~,CON~~M]'r. :tNI~'UiZl~ll~`rlnN
BItI~FS
MAY R~UUCH 5T~1:1. PUItCNAS~5--China may reduce it~ p~rchnses from Jnpan of
roll~d carbon ~teel by 20 p~rcent to gome 2 million metigources~gnid Mondaynt
in the 1~Cter half oY the current ye~r+ ~teel industry
Ct~in~ for u time repl~ced the U~Sor~shihmentginf1978~n~ndg2.5pmillinn~tongge
steel, buying 5.62 million tons f P
in the fir~t hnlf of 1979. The ~OOfcIIeglowdown~in its ambiriousCmodernizn-
or
chaseg to: --Chinn's ~nnouncement
tion program and of its ~tress on steel. ~-Chinn's lnck of fundg to pny
importg. --Growth in China's steel o~oP~heigources,~n3miseion fromtthe China
in terms of crude sCeel. According
National Meeals and Mineralg Import-~Xfor~negotiations withima~orC~teelmakerc -
Tokyo around the middl~ of C:?is month
on the price, volume and other terms no ~E1~AILYeYOMIURIginp~ngligh the
l.~tter half of the year. (Text~ [Toky
9May79p40W)
Ltd, has reached agreement: with the
SIiIRT PRODUCTION--Itioman & Company,
Chit~ese National Textile Import a~$ for~exportporThe~factoryi~~ill process
in 51i:~n~1~a i Co produce dress shir
materials shipped from Japan on a commission basis. It ia expecteTheo~utput
into operation in October, with gT k ouASAHItSHIMBUN in Japanese 16 May 79
figure will ultimately double. ~ Y
Morning ~d ition p 8 OW] _
AUTOMOBILE DELECATION--A 22-member del~e~tMinistryhof9Machine~Buildinq~ustry
While in
led by Rao ~u, vice minister of the Fi
arrived in Japan on 9 May to inspect Japan's automobile indusCry.
Ja an until 15 M~Y, the delegation will visit Isuzu1gn~noperACedBbyiToyota
p Nissan Motors' Zama plant~ and a p
Fujizawa plants,
Motor Company. (Text] ITokyo NIKON KEIZAI SHIMBUN in Japanese 10 May 7
Morning Edition p ~
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- 1~'Ult U1~NIGIAI. USI: ONLY
JAYAN~S~ ~L~C'CEtONIC5 ~LAN'T [~'PI~OV~U--~he Coordin~ting Committee fnr ~xport
Control (COCOM), whi~h nver~e~~ expdrCe of ~trntegic gond~ Cn communidC nn-
tion~, hne ~ranted gp~cinl npprovnl to a Japnnpse electronic firm'~ ~ule ~E
nn int~p,rntcd Circuie (iC) pl~nt tn China~ gources di~clos~d Wedne~dey. Thi~
- i~ th~ ~ir~t time ttint th~ COCOM h~s nuthorixed thp export to China of IC mnnu-
- fncturing faciliti~~~ IC~ arr the mdet c~dvgttced ~r~~ iri elecCrnnic t~chnolagy.
'The Cnnernct f~r ehe 10 billion y~n plnnt we~ ~igned lgat Augugt betwe~n
Chin~ ~nd 'To~hib~ Corpnrntion. Th~ pl~nt will b~ built nenr 5hgngl~ i~nd
prnduc~ ICg for uge in 900,000 cnlor televi~inn g~C~ ~ y~gr. 'rh~ COCOM
ti~g recently beco~ne mnr~ fl~xibl~ nbout thp gale of large cnmpuC~r~ and other
electronic equipmE~nt to Chinn, principally because the U.5. regardg Chicia
ag ~n importnnt potential exporC market. [TexCj [Tokyo ASA1~I ~V~NINC N~SJ5
in ~ngligh 21 Jun 79 p 1 OWJ
C5G: 402Q
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~OIt UE~'~ICIAL US~ ONLY
~'OTt~;Z(3N '1'~2AU~
CANC~LLATION 0~ HUG~ 1'~TItOCN~MICAL CONTEtACTS
Tokyo MAINICHI UAILY N~W5 in ~ngli~h 2 Jun 79 p 5
(TexC] Chinn, apparently facing pgyment difficulties, hag told Japanes~
firm~ rhar it will have to cancel two mu1Ci-million dollgr contracta for
eon~CrucCion of peCrochemical p1anC~ in Peking and Nan~ing (Nanking),
infnrmed sources said Friday.
They eaid Che decision by the China National Technical Import Corporation
was conveyed to Toyo ~ngineering Corporation, which signed the denls in
January along wiCh three trading housee--Tolw Bussan, C. Itoh 6 Co, and
- Mitsui & Co.
Thie is the first time that China hae decided to abrogate plant equipment
importanC contract~ with Japanese firms.
In February, China unilaterally told Japanese companies that it would
shelve implementation of 22 deals value~d at 580 billion yen ($2.9 billion),
including one for construcCion of a large steel mill at Paoshan near
~ 5hanghai. Peking cited a review of its economic development plans as the
reason for the action.
The Chinese notice to annul the two contracts came as renegotiations are
going on in Peking on some of the 22 suspended plant export deals. -
The sources said that Japanese firms were shock~~ at the move as it came
on the heels of a remark Wedneaday by Chine&e Vice Premier Deng Xiaoping
to a Japanese parliamentary delegation in Peking that China wants to re-
solve the question of shelved conCracts as quickly as possible. _
According to the sources, the two contracts which China wants to abrogate
involve two ethylene plants, each with an annual production capacity of
300,000 tons, to be built in Peking and Man~in.
China signed another contract for two more ethylene plants of the same
- capacity, to be built near the Shenli oilfield.
14
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~dit O~~ICIAI. USh dNLY
'I'lir tc~tril rn~~trnrt viilu~ nf th~ f~ur pl.untd wnH put nt 102 billidn ycn
($5LU millic~n) .
The gdurce~ ~aid Chinn ggve nn gpecific reaeons fnr its cnncellgCion
deai~ion.
'The xourC~s cit~d an ineufficienC ~uppLy of crude oil and naphtha, the
raw mnt~rinl of et}~ylene, ~ gtill in~dequgte infra~tructurp euct~ n~ pnwer
gupply unit~ nnd u delay in n1lnc~tinn of congtruction fundg due to the
r~cent review of Chinn'g modernizaCion plane ae poseible fgctorg behind
the deci~ion.
Toyo ~ngineering Corporution, Che main contracCor, ha~ made known that
it will not ~gree to ehe pruposed canCeLlation~ the source~ said.
They sgid the company is expected to send Vice Preaidenr Masao 5akurni
to Peking ~~rly next week to discusg the matter with the Chine~e.
COpYRIGH'T: Mainichi Ugily Newa, 1979
C50: 4020
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I~UIt U1~f~lCI~L USI? t1NI~Y
l~'d12L~aN 'i'IiAUL
' ASAHI' : PItC ASKS JAl'AN TO TAK~ ItISK IN BOHAI OIL DEV~LOPMEN'T
Tnkyo ASAHI EVBNING NEWS in Englieh 29 May 79 p 1 OW
[TexC~ China has asked Japan Co bear the risk in proapecting in the propoeed
~oinC develapment of offahore oil in South Bohai (Pohai) bsy, according to
a source Monday.
Negotiations on the pro3ects were suddenly euspended in mid-February ar the
Chineae requesC, but the source diaclosed Chat Bei~ing has aeked rhe ~~apan
National Oil Corp. (JNOC) ro resume the talks shortly.
The JNOC is expecred to accept lh~ Chinese request and dispatch a negotia-
Cing team to China nexC month. The JNOC and the Ministry of International
Trade and Induatry want to reach agreement with China as soon as poaeible
and secure a stable aource of eupply for the nation because of the worsen-
ing global supply siCuation.
In the talke before mid-February, the two nation's agreed that (1) Japan
would undertake the whole procesa from prospecting to developmenC and even
if no oil was found, Japan would not bear the loss--so-called no-riak basis;
(2) The total pro~ect cost would be fixed at around 400 yen billion; and
(3) Japan would take abouC 2,000,000 tona of crude a year,
However, the source said China has presenCed new conditions: (1) Japan
would make a loan of $200 million and if China atruck oil, the loan would
be paid back in crude oil to Japan, but if China failed to find oil, Japan
would noC ask for Che repayment of the loan--eo-called riak basis; (2) If
China succeeded in finding oil, the volume of oil Japan would take would be
increased; (3) The non-risk basis would be adopted in the atage of develop-
ment; (4) The Japaneae loan would he denominated in dollars, instead of yen
as proposed by the JNOC, and the intereat rate should be as low as poaeible; _
and (5) China should get contract terms more favorable than international
atandards for the entire project.
COPYRIGHT: Asahi Evening Newa [1979) -
CSO: 4020
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rpltl;ICN 1'ItAt)1:
_ BRIEFS
BEIJING HO5PITAL PROJ~CT--Japanese eources digclosed on 9 June plang for -
China's largeat general hoapital Co be completed in gei~ing in 1981 as a
Japan-China cooperation pro~ect. The Chinese Miniatry of Public Health
and Kanematau-Cosho~ Japan's repreeentative, recently a~reed in Bei~ing
to set up a preparntory committee Co diecuss conetruct~on of the hospital
which will be equipped with approximately 1~000 beds and up-to-date facili-
ties, and formulate plane regarding deaigns, equipmenC and coars. Further
talks on cooperation in Che technical and �unding areas are expected to
get underway during the fortl~coming visits to China of Takemi, Chgirman of
Ghe Japan Medical Asaociation, and Eigehimoto~ Minieter of Health and Wel-
fare. The proposed aite for the hoapital is an 260,000-aquare meter-area
attached Co Bei~ing Central Medical College. [Tokyo NIHON KEIZAI SHINBUN
in Japanese 10 Jun 79 morning edition p 1 OWJ
BANKNOTL INK FROM JAPAN-~he People's Bank of China has recently asked Dainip-
pon Ink and Chemicals to provide it with a production technique for banknote
printing ink cnd with relaCed equipment. According to the company, an
official of the bank visited Japan this February to inspect the company's
Tokyo plant. The company recently also received a 200-million yen order
from the China Council for Promotion of International Trade for three off-
aet pressea and their inatallation by March of next year. It ie apeculated
that China is trying to improve ita advertising publication program with _
this order. [Tokyo NIHON KEIZAI SHINBUN in Japanese 23 Jun 79 morniag edi-
- tion p 6 OW]
JAPAN STEELMILL INNOVATION DEAL--Nisshin Steel Co. will probably
initial an agreement with China National Technical Import Corp. in
June to help replace the existing equipment at Taiyuan Steel Works
in Shanxi Province with modern facilities, Sanwa Bank, Ltd., said
11 May. Nisshin Steel is a member of the Sanwa Bank Group. The bank
said,the pro~ecCed improvement in facilities would require an estimaCed
6 billion yen, and a syndicate of banks, led by Sanwa, would extend an
easy-to-pay loan to China to help finance the pro~ect. According to
- the bank, a 15-member Chinese mission is coming later in the month for
final negotiations. [Text] (Tokyo MAINICHI DAILY NEWS in English
12 May 79 p S OW]
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' I
SWI.LLt~I511 iMi'Olt'C ~'0 JAPAIV--Chi?t~ will b~gln expnrLing HwelJ I'i~l~ Cu .Inpnn
Crom ncxt ~uCumn ~~nd thc ~xti~nrt will rench ~ S--mil.linn-ton Lr.vel in e~vernl
y~~~r~, ar.cc~rdin~ Co Shimono;~eki City officinl.~ who vlsited Chinu from -
' 15 td ZZ Mnrr.h. Although ~wel.lfish iy l~beled "poi~on Eiyh" ~~nd iCe fi~hing
cind g~le~ b~nned in Chin~, the Jnpnne~e nffici~l~ tniked 1'RC ofFiciul~
tnto the deal. A memorcindum they exchanged with the 'Cinn~in Municipal
t~oreign 'I'r~de I3ureAU indic~7t~~ rhaC China wi11 begin Crin1 Eishing in April
7nd th~ Eiret trial shipment i:~ expected to urrive in Shtmonnseki in June
ur .1uly, ~T~~kyn YOrfTUftI 5HtNl3UN in J~p~~ne~e ~3 Mnr 79 ~tornin~ i:diCion ~
i~ ~ oW J
COAI, AiU 'PO I'ItC--Che Jup~n Co~~l l~ederation p1~ns to send n de.legaCion heiidc~d _
by 1're~idenr. 5hingo Ariydshi to Bei~ing in mid-April to negotiate a cogl
mining development plan in Yanzt~ou, Shandnng I'rovince, with the PItC Mini~try
of Co~l IndusCry. The visir. will be mMde in response to the Chinese offer
~o ,~ointly develop coal in the Yanzhou are~ with Japan. Cogl produced
- ~here will be used in powerplanCS. The delegaeion will ask for Chinese ,
caoperaeion in boring and oeher predev~lopmenC surveys. It will be
= accompanied by officials of Japan ExporC-Import Bank and ciCy banks to con-
- duct negotinGions on financing and seCClement problems gim~lCnneously.
[Tokyn NIHON KEIZAI SHINBUN in Japatteae 10 Apr 79 Morning Cdition p 7 OWj
PItC OIL II~ORT CONTRACT--Maruzen Oil Company has signed a 4-yenr conCract
with China Co import 100,000 Cons of grade-A crude from China nnnually.
This (is] the first long-Cerm oil import contract that e Japanese firm has
ever signed with China. The contracr will bring Che percentage of Chinese
- oil in Maruzen's roCal grade-A crude oil imports up to nearly 2Q percent.
This crude oil is used in engines of small fishing boaCs. [Tokyo YOMIURI _
SHINBUN in Japanese 7 Apr 79 Morning EdiCion p 9 OW]
CSO: 4105
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COIt d~FICIAL U5~ ONLY
TI2ANSP0~'TATION
,TAPAN-CHYNA CTV7L AVIATION '1'ALKS TO B~C'IN 22 MAY TN ~~I.TTNC
7'okyc~ ~~~f~7 F:V~NINC N~W5 in Cng.tish 1S May 79 p 3 OW
- (TextJ Jnpan ~nd China will negoriaCe a civii aviaeion ~greement in Bei~ing
far three duys from hiay 22, government sources discl.osed on 5und~~y.
_ M~~or issues to be taken up during the negotiati.~na will be a prnposed
incre~?se in the number of flighCs between Cha ::wo countriea nnd t:he poasi-
bility of changing bonc ~ounCriee righC to fly beyond deaignated places.
China propoaed lnse yenr to increase Che number of flighCs the ewo nations
operaCe beCween tliem from Ct~e present six a week seven. Chinfi is
expected to presenC this proposal again aC tl:e forCl-~coming n~gotiationa.
Sources say the two countries will probably agreQ ::o pdd an extr~ flight
a week And they could be operaCing as early na Ch~s ~3Li. .
At rhe [3ei3ing negor.inCing table, Japan is wo ~er~; ~hina'a apnrovul far
allowing the Japnn ~`.i~ Lines to operate flighrs %~ey~nrl Cuang~hou (Kwangchow)
in addition to Che present two Chinese cixte~ ~x Aei~ing and Shanghai.
Japan will also ask C1ii.;~a to permit Che JaparPSe national flag carrier to
fly from Japan ~o i~aa ~;i^ the Karakorum Mounr.ain3 i.n wes:ern China and on
to Pakisran. Flights over the rouCe, the sh~rte~t one linking Japan and
the Middle EasC oi~ p~oducing country, are currei:':?y used by the national
- flag carriers of ar.~.;~ three countries--C;~�na, T_~an aad takietan.
Economic ties betweaa Japan and Iran have gr~~n cl~sa: than before and
~ analysts predict more .Iapanese will want ta fly ever the rouCe, which is
the same as the ancient silk road. Consequsntly, Japan i.s eager to acquire .
Che right to use ir..
China is expecte:_' to as~c Japan to expand its r~.gh~ :o fly beyond Tokyo so
that it can land fn moLe than two cities in che Ur.ited States. Under the
presenC Sino-Japanese agreement on civil aviatian, China is given Che right
to fly to only one A~~nerican city via Tokyo. China is believed to have made -
this an issue at similar negotiations it has begun witr? the United States
- through Commerce Secretary Juanita Kreps.
China is also likely to seek Japan's approval for its operations to Fukuoka
in connection with Japan`3 demand for the right to fly to Guangchou.
COPYRIGHT: Asahi Shimb~:n ~okyo Honsha
CSO: 4020 , END
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