Passage 1
Analysis and forecast of China's export situation in 1998
In term of export policy environments in 1998, the reform of China's foreign trade mechanism required by the socialist market economy will progress with new changes in the administrative functions of the government. By means of support and preferential policies, the state will encourage the development of backbone industries that display strong competitiveness in intemational market hi-tech industries and capital-intensive industries. Policies that encourage exports will be further implemented. Under these premises, the state will adjust export policies in line with its macroeconomic development program New foreign trade policies are beginning to play active roles. They have raised tax rebates of textiles and will continue the effort to bring about a zero-rate terminally so as to reduce export costs.

The policy environments in 1998 will work to foster growth in exports. International and domestic markets are revealing the following favorable factors. First, importing countries are continuing to raise demand for Chinese products. Second, domestic production capacity has been upgraded although domestic investment and consumption are still limited. Third, inflation was kept under control in 1997. However the intemnational market has given rise to some negative impacts on China's exports. The financial crisis that shock South-east Asia in 1997 has caused many nations to devaluate their currencies. This has led to new level of competition within the region.The devaluation of the Yen has burt Chinese exports to Japan. A large share of the processing and assembling activities in China and around East Asia will be seriously affected by the currency devaluation. The financial turmoil has had a massive impact on many sectors of the economy.

Capital-intensive industries require large amount of capital investment.