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U.S. DEPARTMENT OF STATE
CHINA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                    PEOPLE'S REPUBLIC OF CHINA

                     Key Economic Indicators
        (Billions of U.S. dollars unless otherwise noted)


                                   1992      1993      1994 1/

Income, Production and Employment:

Real GDP (RMB bn/1980 base) 2/    1,272     1,440     1,606
Real GDP Growth (pct.)              9.5      13.4      11.5
GDP (at current prices)           315.4     309.5     417.6
GDP by Sector:
  Agriculture                      85.2       N/A       N/A
  Energy/Water                      N/A       N/A       N/A
  Manufacturing                   140.9       N/A       N/A
  Construction                     21.7       N/A       N/A
  Rents                             N/A       N/A       N/A
  Financial Services                N/A       N/A       N/A
  Other Services                  117.9       N/A       N/A
  Government/Health/Education       N/A       N/A       N/A
  Net Exports of Goods & Services   6.3       N/A       N/A
Real Per Capita GDP (RMB) 2/      1,828     2,013     2,214
Labor Force (millions)              568       571       575
Official Unemployment (pct.)        2.5       2.3       2.5

Money and Prices:  (annual percentage growth)

Money Supply (M2)                  31.3      25.0      35.0
Base Interest Rate                  N/A       N/A       N/A
Personal Saving Rate 3/            40.0      40.0      40.0
Retail Inflation                    5.4      14.0      21.0
Wholesale Inflation                 N/A       N/A       N/A
Consumer Price Index                8.6      16.0      23.0
Exchange Rate (RMB/USD;year-end)
  Official 4/                       5.8       5.8       N/A
  Parallel 4/                       6.8       8.8       8.5

Balance of Payments and Trade:

Total Exports (FOB) 5/             84.9      91.8     118.0
  Exports to U.S. (CV) 5/          25.7      31.5      38.5
Total Imports (CIF) 5/             80.6     104.0     117.0
  Imports from U.S. (FAS) 5/        7.5       8.8      10.3
Aid from U.S.                       0.0       0.0       0.0
Aid from Other Countries            N/A       N/A       N/A
External Public Debt               61.0      66.0      80.0
Debt Service Payments (paid)        8.8       9.3      10.5
Gold and Foreign Exch. Reserves    20.7      21.2      40.0
Trade (Merchandise) Balance 5/      4.4     -12.2       1.0
  Trade Balance with U.S. 5/       18.2      22.8      28.2


N/A--Not available.

1/ 1994 figures are all estimates based on monthly data
available in October 1994.  Sources:  State Statistical Bureau
Yearbook, PRC General Administration of Customs Statistics,
International Monetary Fund and World Bank reports, U.S.
Department of Commerce trade data and U.S. Embassy estimates.
2/ Real GDP and real per capita GDP are given in renminbi (RMB)
using 1980 prices.  All other income and production figures are
converted into dollars at the parallel rate.
3/ Personal Saving Rate is as estimated by the IMF in May 1992.
4/ Prior to 1994 China maintained a dual exchange rate system
with an official rate and a parallel "swap market" rate.  In
January 1994 these two rates were unified.
5/ Source:  U.S. Department of Commerce (U.S.-China bilateral
trade data); PRC Customs (Chinese global trade data).



1.  General Policy Framework

    Since the beginning of economic reforms in 1979, the
Chinese economy has grown at an average rate of nine percent
per year, and in 1992 and 1993 growth accelerated to over 13
percent per year.  This striking evidence of the dynamism of
the Chinese economy has transformed foreign views of the
potential of the Chinese economy and encouraged large inflows
of foreign direct investment over the past three years.  With
appropriate economic reforms, China should be able to sustain
high growth rates into the next century.  But the next phase of
reform will require China to tackle problems such as enterprise
reform that were largely bypassed in the first phase of reform,
and to build new legal and political structures more
appropriate to a market economy.

    During the first nine months of 1994, real GDP growth
reached 11.4 percent, down only slightly from the torrid pace
set last year.  But despite the introduction of stabilization
measures in mid-1993, rapid growth in 1994 has been accompanied
by a steady increase in inflation.  The national cost of living
index was up 24 percent in 1994, as inflation reached its
highest level since 1988-89.  Chinese authorities blame most of
the 1994 inflation on price reform and developments in the
agricultural sector.  But the more fundamental cause appears to
be the accommodating monetary and fiscal policies that China
has maintained, except for a few brief interludes, since the
current boom began in 1991-92.

    China's economic reform program in 1994 has been guided by
the landmark "decision" approved at the Third Plenum of the
Chinese Communist Party, held in November 1993.  This
"decision" established a broad framework for China's transition
to a "socialist market economy," including ambitious plans for
fiscal, financial, and enterprise reforms to be implemented by
the end of the decade.  In keeping with the spirit of the Third
Plenum "decision," the Chinese government introduced major
reforms of China's foreign exchange and taxation systems at the
beginning of 1994, and it announced plans for a series of
important economic laws, including commercial and central
banking laws, a foreign trade law, and a securities law.  Some
of these reforms have been taken with an eye to China's
standing application to join the World Trade Organization (WTO)
which remains under consideration by WTO members.

    During 1994, however, concern over inflation and domestic
stability have slowed the pace of some reforms while others
have met with mixed success.  The unification of China's
foreign exchange rates has gone relatively smoothly, with the
renminbi actually appreciating slightly against the U.S. dollar
since January 1994.  Tax reform has led to a more simplified
code and has reduced the gap in tax rates for state-owned and
other enterprises.  The new structure of tax-sharing between
central and provincial governments also marks a significant
improvement over the old tax-contracting system.  But the new
tax system has yet to increase real government revenues or the
share of government revenues in GDP, two of its key
objectives.  During 1994 many foreign corporations in China
expressed concerns about possibly discriminatory application of
taxes to their operations there.

    Concern over the social costs of cutting subsidies to state
enterprises has slowed enterprise reform, and little progress
has been made in reforming China's backward financial system. 
The Draft Securities Law and the Central and Commercial Banking
Laws now appear unlikely to be passed by the National People's
Congress before the first quarter of 1995, and despite the
establishment of three new state development banks, China's
large state banks remain only in the preliminary stages of
their transformation into true commercial banks.

    Chinese authorities have announced that enterprise reform
will be the centerpiece of their reform efforts in 1995.  Some
loss-making state enterprises will reportedly be forced into
bankruptcy, and there has been continued discussion of possible
measures to establish a new social insurance system that could
buffer the costs of restructuring the state sector.  But the
success of reform in 1995 will depend heavily on China's
ability to limit high inflation and by continued concern about
the possible impact of rising urban unemployment on social
stability.

    While the government hopes to reduce inflation to 15
percent or less in 1995, it has avoided implementing tough
austerity measures of the type that have been effective in the
past but that might slow economic growth and increase urban
unemployment.  Unfortunately, the government's tentative
stabilization program has proven ineffective, and there is a
significant risk of inflation worsening still further unless
the government takes more decisive steps to cut lending to the
state sector and control China's rapidly increasing money
supply.


2.  Exchange Rate Policies

    China unified its dual exchange rate system on January 1,
1994 and began phasing out the use of Foreign Exchange
Certificates, a convertible form of the renminbi (RMB) formerly
reserved for use by foreigners within China.  Chinese
authorities describe the current exchange rate as a "managed
floating rate."  During each day's trading the exchange rate is
permitted to fluctuate in a narrow band around a central rate
announced by the People's Bank of China.  Since January 1994,
the RMB/USD exchange rate has appreciated slightly from about
8.7 to 8.5.

    Under new foreign exchange guidelines, the RMB is
conditionally convertible for certain trade and current account
transactions.  Most Chinese enterprises are now required to
sell their foreign exchange earnings to Chinese banks at the
new unified rate.  A Chinese importer with a valid import
contract and any required import licenses or quota permits can,
in principle, purchase foreign exchange through a designated
foreign exchange bank at the unified rate, without receiving
prior approval from the State Administration for Exchange
Control (SAEC).

    The Chinese authorities have maintained separate foreign
exchange rules for foreign-invested enterprises (FIEs), which
can maintain foreign currency deposits and keep their foreign
exchange earnings.  FIEs are formally excluded from the
"interbank" foreign exchange market and required to buy and
sell foreign exchange from each other in a modified version of
the old swap center.  In practice, however, most FIEs now buy
and sell foreign exchange using designated foreign-exchange
banks, including branches of foreign banks, as their agents. 
These transactions are completed over the same trading system
used by Chinese banks for their domestic customers.

    While FIEs have generally enjoyed improved access to
foreign exchange this year, the current system has several
serious shortcomings.  FIEs still need to obtain SAEC approval
before they can purchase foreign exchange, and they remain
subject to foreign exchange balancing requirements.  While the
SAEC did not enforce these requirements strictly in 1994, they
could be used to control FIE purchases of foreign exchange for
imports or the repatriation of profits if conditions in the
foreign exchange market should change.


3.  Structural Policies

    China's structural policies remain caught between plan and
market.  The "decision" of the Party's Third Plenum in the fall
of 1993 detailed plans to establish by the end of the decade
the foundation for a "socialist market economy," in which free
market principles would guide nearly all economic activity but
public or socialist ownership would still predominate.  The
government claims that prices have been freed for about 95
percent of consumer goods and 85 percent of industrial inputs. 
Nevertheless, as part of the fight against inflation, the
government has over the past year intervened extensively in
pricing for daily necessities, basic urban services, and key
commodities, including petroleum imports.

    In addition, under the guise of "macroeconomic management,"
the government has begun to formulate sectoral industrial
policies that will affect U.S. investment in, and exports to,
China.  The Automotive Industrial Policy, issued in July 1994,
contains a number of measures to protect infant industry,
including import controls, local content and other performance
requirements for foreign investors, and temporary price
controls for sedans.  In the "Framework Industrial Policy for
the 1990s," the government announced plans to issue industrial
policies for the following other sectors:  telecommunications
and transportation, machinery and electronics, construction,
foreign trade, investment and, possibly, textiles.


4.  Debt Management Policies

    China's current external debt burden remains within
acceptable limits.  At the end of 1993, China's external debt
stood at about $80 billion, or 87.2 percent of exports,
according to official Chinese estimates.  China's 1993 debt
service to export ratio was about 12-13 percent.  The Asian
Development Bank, the World Bank, and Japan are China's major
creditors, providing approximately 60 percent of all China's
governmental and commercial loans.  In September 1994, China's
official foreign exchange reserves were $39.8 billion, up $18.6
billion from the beginning of the year; foreign exchange
reserves continued to climb later in the year with the People's
Bank of China alone holding $48.9 billion in November 1994.


5.  Significant Barriers to U.S. Exports

    China continues to impose barriers to U.S. exports, despite
its stated goal of reforming and liberalizing its trade
regime.  In addition to prohibitively high tariffs in many
sectors, China relies on multiple, overlapping nontariff
barriers, administered at the national and provincial levels by
various bureaus or ministries, to limit imports.  These
barriers include absence of transparency in the trade regime;
import licensing requirements; import quotas, restrictions and
controls; standards and certification requirements; and
scientifically unjustified sanitary and phytosanitary (SPS)
measures.  Strict controls over Chinese enterprises' trading
rights are also a major market access barrier.

    On October 10, 1992, the United States and China signed a
Memorandum of Understanding (MOU) on Market Access that commits
China to dismantle most of these barriers and gradually open
its markets to U.S. exports.  The actions China has committed
to take are among those being considered by members of the
GATT/World Trade Organization (WTO) in examining China's
pending application for membership.  Until the signing of the
MOU, many of China's trade laws and regulations were considered
"internal" documents not available to foreigners.  As agreed in
the MOU, China has taken certain steps to make its trade regime
more transparent, including:  1) publishing trade laws and
regulations in a newly established central register and making
available some information of commercial interest to U.S.
companies; 2) publishing a State Council notice, intended to
halt the use of restricted internal directives, stating that
only trade laws that are published can be enforced; and 3)
identifying agencies involved in the import approval process. 
To date, however, China has not fulfilled its MOU commitment to
publish import quotas or to deal with SPS restrictions.

    High and unpredictable tariffs make importing into the
Chinese market difficult.  Tariffs on discouraged imports, such
as automobiles, can run in excess of 100 percent.  In addition,
tariffs may vary for the same product, depending on whether the
product is eligible for an exemption from the published
tariff.  Under commitments made in the market access MOU, the
Chinese government lowered tariffs on 3,371 items in December
1992 and on an additional 2,898 items in December 1993.  Among
imports with lowered tariffs are edible fruits and nuts,
vegetable oils, photographic/cinematographic goods, games,
miscellaneous chemical products, iron/steel articles,
machinery/mechanical appliances, electrical machinery and
parts, and perfumery, cosmetic and toiletry preparations.

    China currently retains nontariff measures (quotas,
licenses or tenders) for 784 tariff line items.  Under
commitments made in the market access MOU to progressively
phase out import barriers, China eliminated such measures for
283 items on December 31, 1993, and an additional 208 items on
June 1, 1994, including a number ahead of, or in addition to,
the schedule set in the MOU.  Time frames for liberalization
vary from product to product.  Under the market access MOU
liberalization time table, China agreed to eliminate
approximately 75 percent of all import licensing requirements,
quotas, controls and restrictions by the end of 1994, and 90
percent will be removed by the end of 1997.  Export sectors
affected by the MOU which are of interest to U.S. firms
include:  autos and parts, medical equipment, computers,
photocopiers, telecommunications, electrical appliances,
chemicals, agrichemicals, pharmaceuticals, film and instant
print film, instant cameras, beer, wine, alcoholic beverages,
mineral waters, wood products, steel, and a wide range of
machinery products.

    Despite its commitments in the market access agreement,
China has not stopped using unscientifically-based standards
and certification as barriers to trade.  China's phytosanitary
and sanitary measures for imports of plants and animals are
often overly strict, unevenly applied and not backed by modern
scientific practices.  In the market access MOU, China
committed to resolve questions about scientifically unjustified
phytosanitary restrictions on citrus fruits, stone fruits,
apples, grapes, wheat, and tobacco, and to negotiate a
veterinary protocol regarding the import of animal breeding
stock.  As of October 1994, U.S. concerns have been partly
resolved with regard to apples and bovine semen.  For
manufactured goods, China has required quality licenses before
granting import approval, with testing based on standards and
specifications often unknown or unavailable to foreigners and
not applied equally to domestic products.  In the MOU, China
committed to applying the same standards and testing
requirements to nonagricultural products, whether foreign or
domestic.

    A fundamental philosophy of import substitution stood
behind these various policies.  In the market access MOU, China
has agreed to eliminate the use of import substitution policies
and measures, and has promised that it will not subject any
imported products to such measures in the future, nor will it
deny approval to imports because an equivalent product is
produced in China.  Import substitution lists have been
publicly disavowed.  Nonetheless, the Chinese government has
continued to place local content requirements on foreign
investments in China, most recently in the industrial policy
governing the automotive industry.

    In the past few years, China undertook a number of reforms
to improve its trade regime.  The National People's Congress
(NPC) adopted an Unfair Competition Law, effective December 1,
1993, which deals with protection of trademarks and commercial
secrets, unfair practices by state monopolies and government
departments, bribery, false or misleading advertising,
predatory pricing, collusion, and other unfair practices. 
China's first comprehensive Foreign Trade Law also went into
effect on July 1, 1994.  The law aspires to be consistent with
requirements of the GATT, but it serves mainly as a framework
codifying the existing system or setting goals for future
reforms.  A key concern is that the Foreign Trade Law does not
establish a legal standing for foreign individuals or
foreign-owned firms engaged in trade in China.  Implementing
regulations have in many cases not yet been drafted.

    While implementation of the market access MOU will reduce
or eliminate many of the most serious barriers to trade in
goods, China has only recently begun to reform its services
sector.  China has permitted "experiments" in foreign
investment in service sectors by authorizing a limited number
of foreign firms to establish joint ventures in insurance,
legal services, tourist resorts and department stores.  In
general, Chinese restrictions on certain foreign service
activities (including construction, banking, accounting, travel
services, audio visual services, and data processing services)
prevent U.S. firms from enjoying a reciprocal level of
participation in China's service sector.  U.S. and other
foreign banks cannot engage in local currency business in China
or deal with Chinese clients, while the Bank of China branch in
New York has conducted all forms of branch banking activities
since 1980.  Numerous non-transparent approval procedures
hamper foreign banks' dealings with other foreign-invested
enterprises.  Except for one "experimental firm," U.S.
insurance firms are not allowed to participate in the direct
insurance market in China.  U.S. lawyers and accountants must
largely limit their activities to servicing foreign firms that
do business in China.  Foreign firms cannot establish
wholesaling operations and can only engage in a very narrow
range of retailing:  restaurants, "experimental" department
stores and retail outlets selling only products made at a
foreign investor's own factory in China.

    Many joint ventures are highly dependent on China's
state-owned sector for downstream services.  Some investors
have been permitted to set up their own marketing and service
organizations, but many have no choice but to rely on PRC
channels for support.  Imports of audio and video recordings
are hampered by quotas, restrictions on foreign exchange
availability, and lax enforcement of intellectual property
laws.  China does not permit foreign investment services firms
to establish profit-making operations or gain membership on its
stock exchanges.  Foreigners are limited to holding "B" shares,
a small volume of outstanding equities.  Representative offices
of foreign companies must hire their local employees through a
labor services company.

    There are also significant barriers to investment which
warrant further reform.  FIE's continue to be treated
differently for tax purposes.  Foreign firms established prior
to January 1, 1994, pay a 17 percent value-added tax on
domestic materials in exports from which Chinese firms are
exempt.  Foreign investors may not own land in China.  Chinese
authorities are, however, approving long term land use deals 
for investors, some lasting up to 70 years.  Chinese
regulations and policies place strong pressure on most foreign
investors to export and to localize production through greater
use of Chinese components rather than imports.  China also
encourages the development of favored industries through tax
incentives and tariff exemptions.  Depending on the locality,
investments above $30-50 million require national as well as
local approval.  The law permits repatriation of profits, so
long as the venture has earned sufficient foreign exchange to
cover the remitted amount.  Foreign equity participation is
restricted in some industries but not in others, although
solely-owned foreign ventures are still rare.  In at least one
recent case, a U.S. company has tried unsuccessfully to file an
international arbitration award with a Chinese court, despite
the court's obligation to accept the case under China's law and
international treaty obligations.

    Although open competitive bidding procedures are
increasingly used for both domestic and foreign-funded
projects, the great majority of government procurement
contracts in China are handled through domestic tenders or
direct negotiation with selected suppliers.  Projects in
certain fields require government approval, usually from
several different organizations and levels.  Procedures are
opaque and foreign suppliers are routinely discriminated
against in areas where domestic suppliers exist.

    Customs procedures are not applied uniformly throughout
China.  Importers frequently report being charged different
rates for the same product.  Some products, including foods and
chemicals, are subject to different inspection or registration
procedures than domestic products (violations of the GATT
principle of national treatment).


6.  Export Subsidies Policies

    China abolished direct subsidies for exports on January 1,
1991.  Nonetheless, many of China's manufactured exports
receive indirect subsidies through guaranteed provision of
energy, raw materials or labor supplies.  Other indirect
subsidies are also available such as bank loans that need not
be repaid or enjoy lengthy or preferential terms. 
Import/export companies also cross-subsidize unprofitable
exports with earnings from more lucrative products.  Tax
rebates are available for exporters, as are duty exemptions on
imported inputs for export production.  Although China does not
currently provide extensive agricultural subsidies, it has
sought in GATT/WTO accession negotiations to retain the right
to offer very large subsidies should it see fit in the future.


7.  Protection of U.S. Intellectual Property

    China has made significant progress in recent years in the
enactment of laws and regulations to protect intellectual
property, but enforcement of these measures has been extremely
poor.  A copyright law, passed in 1990, went into effect in
June 1991, and a trade secrets law was passed and went into
effect in October 1993.  China has joined the World
Intellectual Property Organization and has acceded to a number
of intellectual property conventions, including the Paris
Convention on the Protection of Industrial Property, the Berne
Copyright Convention, and the Madrid Agreement Concerning the
International Registration of Trademarks.  Although not now a
member of the GATT/WORLD TRADE ORGANIZATION (WTO), China has
publicly declared its support of the Uruguay Round text on
trade-related aspects of intellectual property protection
(TRIPS).

    Much of this progress followed the U.S. decision in April
1991 to identify China as a "priority foreign country" under
the Special 301 provisions of the Trade Act for its failure to
provide adequate and effective protection of U.S. intellectual
property.  Subsequent negotiations under the Special 301
investigation resulted in the signing of a bilateral Memorandum
of Understanding (MOU) on the Protection of Intellectual
Property on January 17, 1992.  China met most of its
commitments under the MOU, which included amending its patent
law, joining the Berne Convention, and enacting trade secrets
legislation.  Enforcement of laws, however, remained lax. 
Consequently, China was again named as a "priority foreign
country" and a Special 301 investigation was initiated in June
1994 seeking improved enforcement of intellectual property laws
and better market access for U.S. products.

    In 1994 China has taken some additional steps to strengthen
its enforcement regime.  The government recently passed
legislation adding criminal penalties for copyright
infringement.  It empowered the Customs Administration to
provide border enforcement for intellectual property and the
Copyright Office to enforce software copyrights.  The State
Council established an intellectual property enforcement office
whose mandate includes coordinating enforcement efforts
countrywide.  However, these recent steps have yet to alter the
environment of rampant infringement of products relying on
intellectual property.  Factories producing massive quantities
of pirated sound and video recordings, long identified to China
as IPR infringers, continued to produce IPR infringing works at
the end of 1994.  Lack of market access for licit audiovisual
products also remains an impediment to effective enforcement. 
Recent regulations outlining agency responsibilities in this
area have not clarified access procedures for foreign exporters
and manufacturers.

    Among the most serious issues facing U.S. right holders is
the pervasiveness of copyright infringement.  For instance,
U.S. industry associations estimate that pirating of U.S.
copyrighted works cost U.S. rights holders nearly $1 billion in
China in 1994.  Competing bureaucratic interests and the lack
of a reliable legal system for resolving commercial disputes
have hampered the establishment of effective enforcement
mechanisms.  Chinese authorities also face great challenges in
educating the public on the value and importance of protecting
intellectual property, a concept hitherto foreign to the vast
majority of Chinese.

    The 1992 intellectual property rights MOU committed China
to make important improvements in the protection of patented
products.  An amendment to China's patent law, which took
effect on January 1, 1993, extended patent protection to
chemical, pharmaceutical and food products, materials which 
heretofore were excluded from eligibility.  The amendment also
extended the term of patent protection from 15 to 20 years from
the date of filing and gave the patent holder rights over
importation.  The MOU additionally provided for administrative
protection of certain U.S. pharmaceutical and agricultural
chemicals as of January 1, 1993.  China agreed to provide the
equivalent of full product patent protection for these products
if they were patented in the U.S. between 1986 and 1993 but not
yet marketed in China.  The Ministry of Chemical Industries is
administering the regime, and the U.S. government is currently
monitoring the Ministry's procedures.

    China's trademark regime is generally consistent with
international practice.  Revisions providing for increased
criminal penalties for infringement have significantly
strengthened the law's efficacy.  However, pirating of
trademarks is still widespread and actions taken against
infringers generally must be initiated by the injured party.


8.  Worker Rights

    a.  The Right of Association

    China's 1982 Constitution provides for "freedom of
association," but this right is subject to the interest of the
State and the leadership of the Chinese Communist Party.  The
country's sole officially-recognized workers' organization, the
All-China Federation of Trade Unions (ACFTU), is controlled by
the Communist Party.  Independent trade unions are illegal. 
The 1993 revised Trade Union Law required that the
establishment of unions at any level be submitted to a higher
level trade union organization for approval.  The ACFTU, the
highest level organization, has not approved the establishment
of independent unions.  Workers in companies with foreign
investors are guaranteed the right to form unions, which then
must affiliate with the ACFTU.  Fourteen coastal provinces have
passed regulations requiring all foreign-invested enterprises
to establish unions before the end of 1994.

    b.  The Right to Organize and Bargain Collectively

    The long-awaited National Labor Law, passed by the Chinese
National People's Congress Standing Committee on July 5, 1994,
permits workers in all types of enterprises in China to bargain
collectively.  The law, which will take effect January 1, 1995,
supersedes a 1988 law that allowed collective bargaining only
by workers in private enterprises.  Some high profile
experiments in collective bargaining have been carried out at
state enterprises.  In the past, the ACFTU has limited its role
to consulting with management over wages and regulations
affecting working conditions and serving as a conduit for
communicating workers' complaints to management or municipal
labor bureaus.  Worker congresses have mandated authority to
review plans for wage reform, though these bodies serve
primarily as rubber stamp organizations.

    c.  Forced or Compulsory Labor

    In addition to prisons and reform through labor facilities,
which contain inmates sentenced through judicial procedures, 
China also maintains a network of "reeducation through labor"
camps where inmates are sentenced through non-judicial
procedures.  Inmates of reeducation through labor facilities
are generally required to work.  Reports from international
human rights organizations and foreign press indicate that at
least some persons in pretrial detention are also required to
work.  Justice officials have stated that in reeducation
through labor facilities there is a much heavier emphasis on
education than on labor.  Most reports conclude that work
conditions in the penal system's light manufacturing factories
are similar to those in ordinary factories, but conditions on
farms and in mines can be harsh.

    d.  Minimum Age of Employment of Children

    China's new National Labor Law forbids employers to hire
workers under 16 years of age and specifies administrative
review, fines and revocation of business licenses of those
businesses that hire minors.  In the interim, regulations
promulgated in 1987 prohibiting the employment of school-age
minors who have not completed the compulsory nine years of
education continued in force.  In poorer isolated areas, child
labor in agriculture is widespread.  Most independent observers
agree with Chinese officials that, given its vast surplus of
adult labor, China's urban child labor problem is relatively
minor.  No specific Chinese industry is identifiable as a
significant violator of child labor regulations.

    e.  Acceptable Conditions of Work

    The Labor Law adopted in July codified many of the general
principles of China's labor reform, setting out provisions on
employment, labor contracts, working hours, wages, skill
development and training, social insurance, dispute resolution,
legal responsibility, supervision and inspection.  In
anticipation of the law's minimum wage requirements, many local
governments already enforce regulations on minimum wages. 
Unemployment insurance schemes now cover a majority of urban
workers (primarily state sector workers).  In February 1994,
the State Council reduced the national standard work week from
48 hours to 44 hours, excluding overtime, with a mandatory
24-hour rest period.  A system of alternating weeks of six and
five-day work weeks began in March 1994, with a six-month grace
period for implementation.  The same regulations specified that
cumulative monthly overtime could not exceed 48 hours.

    Every work unit must designate a health and safety
officer.  Moreover, while the right to strike is not provided
for in the 1982 Constitution, the Trade Union Law explicitly
recognizes the right of unions to "suggest that staff and
workers withdraw from sites of danger" and to participate in
accident investigations.  Labor officials reported that such
withdrawals did occur in some instances during 1994. 
Nonetheless, pressures for increased output, lack of financial
resources to maintain equipment, lack of concern by management,
and a traditionally poor understanding of safety issues by
workers have contributed to a continuing high rate of
accidents.  Partial year statistics provided by the ACFTU
indicate that 11,600 workers were killed in industrial
accidents from January to August of 1993, up 12.9 percent over
the same period of 1992.

    f.  Rights in Sectors with U.S. Investment

    Worker rights practices do not appear to vary substantially
among sectors.  In general, safety standards are higher in
U.S.-invested companies.  There are no confirmed reports of
child labor in the Special Economic Zones or foreign-invested
sectors.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                             223
Total Manufacturing                                   461
  Food & Kindred Products                    66
  Chemicals and Allied Products              67
  Metals, Primary & Fabricated              (1)
  Machinery, except Electrical               16
  Electric & Electronic Equipment           (1)
  Transportation Equipment                  (1)
  Other Manufacturing                        53
Wholesale Trade                                       144
Banking                                               (1)
Finance/Insurance/Real Estate                          -2
Services                                              (1)
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  877      

(1) Suppressed to avoid disclosing data of individual companies
Source: U.S. Department of Commerce, Bureau of Economic Analysis
(###)


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