China's leadership headed by Deng Xiaoping has made an important strategic decision to finance an ambitious economic modernization program by a combination of domestic and foreign borrowing.
The decision is hinted at in figures cited by Premier Zhao Ziyang and Finance Minister Wang Bingqian in reports to the National People's Congress, China's legislature, Nov. 30 and Dec. 1.
According to a source familiar with the thinking of Chinese planners, the intention is to start with relatively slow and cautious growth during the current five-year-plan (1981-85), then accelerate during successive five-year-plans until the target of quadrupling industrial and agricultural output by the year 2000 is achieved.
Imports are to exceed exports throughout the current plan period. In 1985, imports are expected to reach 45.3 billion yuan ($22.7 billion), 5 billion yuan ($2.5 billion) more than exports. The government estimates it will run an annual deficit not to exceed 3 billion yuan ($1.5 dollars) during the next three years. Foreign borrowing for specific projects are forecast to reach at least $10 billion during the 1981-85 period and may come to much more.
This means is that China will once again become an attractive market for Western companies and their governments seeking to sell equipment and technology for projects related to the modernization program.
The over-ambitious targets set four years ago, for instance for 10 huge integrated steel mills comparable to the controversial one now under construction at Baoshan in Shanghai, have been scrapped. The euphoria among foreign firms arising from these plans of the past has long since faded.
But a more cautious and much better planned increase in China's trade with the United States, Japan, and Western Europe is quite possible. The Chinese are much clearer now about what they want, and they will not be afraid to borrow from foreign banks or governments to finance their purchases.
The industries China's planners rely on to spearhead their drive for quadrupled industrial and agricultural output by the end of this century are in three principal fields: machine building, light industry and textiles, and new industries - electronics, information, new materials. During the next three years China plans to import 3,000 items of technology in these fields and in many others.
The waste of energy in this country is shocking. Whereas in most Western countries it now takes only one unit of oil-based energy to increase gross national product by the same one unit, in China the equivalent figure is 2.4. China's leaders therefore stress oil conservation. Their goal is to reduce energy consumption by 20 to 25 percent overall.
The 1983 budget projects a deficit of 3 billion yuan. In addition the government will issue treasury bonds of 4 billion yuan and take out 5.4 billion yuan in foreign loans. In other words, the governments real deficit in 1983 comes to 12.4 billion yuan ($6.2 billion), and this situation is likely to continue throughout the five-year-plan period. This is a pretty bold step for China's planners who in the past have been notably cautious about foreign borrowing and even domestic indebtedness.
Meanwhile annual growth during the five-year period from 1981-85 is targeted at 4 to 5 percent. From 1986-90 it will reach 5 to 6 percent, and from 1991-95, 7 to 8 percent. The final five years to the end of the century will see growth of 10 percent a year. This is how China's planners intend to achieve their ultimate goal of quadrupling industrial and agricultural output in 20 years.