CHINA TO BOOST GOLD INVESTMENT AND PRODUCTION AIM IS TO ENSURE DEBT REPAYMENT

CHINA TO BOOST GOLD INVESTMENT AND PRODUCTION AIM IS TO ENSURE DEBT REPAYMENT

In a further indication of its concern over mounting foreign debt, China says it will boost investment in the gold mining industry this year. Taking inflation into account, however, means expenditure will drop in real terms.

The intention is to increase gold output by nearly 7 percent "to ensure the country's ability to repay foreign debt," Xu Daquan, director of the State Gold Administration, said Monday.Investment will total 1.1 billion yuan ($234 million), up from 1 billion yuan last year, he said. The money will go into nine new mines to be operating by the end of the year and faster work on four under construction.

China's foreign debt stands at about $40 billion. Repayments are bunching up - they are expected to hit $10 billion a year by 1992 - against a background of falling hard-currency reserves.

Officials never reveal the amount of China's gold output, though outside analysts reckon its reserves are about fifth in the world after South Africa, the Soviet Union, the United States and Canada. Production is estimated at something over 50 metric tons a year.

Earlier statistics showed output grew 13.7 percent last year over 1988, and that output in the first two months of this year was 31 percent higher than in the corresponding 1989 period.

Mr. Xu, who is also vice minister of the metallurgical industry, told a meeting of gold industry executives in Beijing that output over the last decade has maintained average growth of 10 percent a year.

This year's efforts will be focused on new mines in Henan, Shandong, Heilongjiang and Xinjiang provinces. Construction will be accelerated on mines in Shandong, Henan and Heilongjiang, he said.

A gold smelter is also meant to be completed this year in central Henan, one of the country's main gold producing areas.

The first indication of a direct link between gold and debt emerged last

December. The official English-language China Daily newspaper said the gold industry "must maintain a steady growth rate in preparing for the country's foreign debt repayment peak in 1992."

Whether China actually meets its production goals may be less important to lenders and others with business dealings than the mere fact of increased investment. It implies that China is aware of its looming repayment crunch and is prepared to act accordingly.

Equally, some analysts here believe the gold industry itself may have taken advantage of the situation to squeeze more money out of an increasingly tight-fisted central administration. China curbing spending in many areas to keep the economy under control, though this policy lacks coordination.

Mr. Xu reiterated stern warnings about smuggling and other unauthorized gold activity, which have plagued the planners for some years. A government ban on private mining will remain in force, he said.