China Currency Reserves Down, Bankers Say

PEKING —  China’s foreign exchange reserves have dropped and the shortfall is causing a sharp decline in Chinese imports, foreign bankers in Peking said Thursday.

Western and Japanese bankers said they estimated that China’s foreign exchange reserves had fallen to about $11 billion or $12 billion from $14.4 billion, the last official figure at the end of 1984.

China is long overdue in announcing its foreign exchange reserves, a figure normally issued four times a year, said the bankers, who asked not to be named.

They said the drop had delayed foreign contracts in a squeeze on foreign exchange spending that would last at least until next year.

Chinese figures exclude gold. Foreign exchange reserves stood at a record $16.6 billion at the end of September, 1984.

Dropped Below $13 Billion

An analyst of Sino-Japanese trade in Tokyo put the foreign exchange figure at $13 billion at the end of February of this year.

The bankers in Peking estimated that the figure has now dropped to $11 billion or $12 billion because of big purchases of foreign aircraft, locomotives and telecommunications equipment in the first quarter of the year and increased investment in Hong Kong.

“This time a year ago, we had been given the exchange reserves figure for the end of March. The figures have not been published this year because the authorities consider them too low,” a Western banker said.

“The problem began last autumn when provincial enterprises were given foreign exchange, which was spent on consumer imports like televisions and electrical goods which do not generate foreign currency,” a Japanese banker said.

“This was stopped in March, when new chiefs were appointed to the Bank of China (the country’s foreign exchange bank) and the People’s Bank of China (the central bank),” he said.

He said the foreign firms hardest hit would be those, mostly in Japan, exporting to China such consumer goods as electrical equipment, refrigerators and cars.

“There is also a political element in China’s spending. It wants to build up Western Europe by giving it more business and reducing imports from Japan,” the Western banker said. Japan’s exports to China rose to $7.2 billion in 1984 from $4.9 billion a year earlier, bringing Japan a $1.2-billion surplus, against a $180-million deficit in 1983.

“Energy, transport and communications are priority areas and will be least affected, while other projects are being deferred or foreign exchange for them is being refused,” an American banker said of China’s new import policies.

Asked how long the tightening would last, the Japanese banker said China had limited room to increase exports as its key exports of oil and coal commanded low world prices.