WITH New Year's bells, China inaugurated a set of moves designed to enhance its bid to reenter the General Agreement on Tariffs and Trade (GATT).
Beijing created a market-based foreign exchange rate that moves the currency its first step toward convertibility. Import controls were also lifted on 283 categories of goods in the final week of 1993.
The first day of the year marked the end of China's confusing dual-rate foreign exchange system and state-set exchange rates. The government stopped issuing Foreign Exchange Certificates (FECs), an English-language scrip issued to foreign individuals and businesses. Beijing will gradually withdraw them. About $350 million certificates in circulation were sustained at the artificial rate of 5.8 to the dollar. The new, market-determined rate of 8.7 is set by already existing swap markets, where 80 percent of foreign trade businesses have been buying China's regular currency, the renminbi.
A few foreign companies with investments set by the official rate could see their assets devalued. But since most foreign invested businesses obtained Chinese currency at swap markets and not banks, analysts doubt the change will harm them in the long term.
"It's part of a beneficial move to make a good business environment," says Ann Stevenson, Beijing director of the U.S.-China Business Council. "It reduces the meaning and function of bureaucrats who run things, and that's generally for the good."
Many state-run enterprises that had enjoyed what amounted to subsidized imports, however, will have to buy from overseas at the less advantageous rate. Changes to boost exports
Although the new rate should help China's exports by lowering their prices overseas, officials vehemently deny that China intends to gain unfair benefits from the unified currency.
"It is groundless to claim that China is attempting to promote dumping by controlling the exchange rate," said Wu Yi, Minister of Foreign Trade and Economic Development through the official Xinhua News Agency. The new exchange system will "play a positive role in resuming China's signatory status in GATT," she added.
China tried to balance the advantages it gained through the new system by lifting controls on 283 categories of imports. At the same time, however, it slapped more restrictions on imports of machinery and electronics. …