CHINA PLANS NEW ROUND OF TARIFF REDUCTIONS

CHINA PLANS NEW ROUND OF TARIFF REDUCTIONS

China plans a further round of tariff cuts this year, a move that is seen as an attempt to assist its re-entry into the world trading organization and reduce friction with the United States.

Rates on nearly 2,900 items will be trimmed by as much as 8.8 percent beginning Dec. 31, the General Customs Administration said Tuesday.The changes would affect about half of China's imports, Chinese officials said. The cuts will focus on raw materials and equipment in short supply. They will "lower the average tariff rate from the current 39.9 percent to 36.4 percent," a customs official said.

The announcement comes just days before a meeting between President Clinton and his Chinese counterpart, Ziang Zemin, the first since a pro-democracy demonstration was crushed by troops in 1989. The two leaders will meet at the Asia-Pacific Economic Cooperation summit in Seattle.

No complete list of reductions or items was released, though details probably will emerge over coming weeks.

An official of the tariff commission under the governing State Council said the list includes:

* Gasoline - to 1.5 percent from 2 percent.

* Naphtha - to 6 percent from 10 percent.

* N-cyclic hydrocarbon, ethylene, propylene and butene - to 9 percent from 12 percent.

* Methylbenzene - to 12 percent from 15 percent.

* Cresol - to 12 percent from 17 percent.

Other items intended for what this official called quite sharp cuts are vegetable oils, coffee, scented soap, color film, refrigerators, textile

machinery, electrical parts, color television sets, minicomputers, bicycles, watches and clocks and cosmetics.

While the cuts are intended to take effect Dec. 31, the official said actual charges will be based on the date of an agent's declaration.

China is working to regain its seat on the General Agreement on Tariffs and Trade, or GATT, the Swiss-based referee of world merchandise business. Existing members, led by the United States, are pressing for lower trade

barriers in return.

Gu Yongjiang, China's chief GATT negotiator, said in a separate statement his country "welcomes" the opportunity to negotiate tariff reductions with other members.

The United States ran a deficit on China trade of US$18 billion last year, and has sent a string of senior officials to Beijing in recent weeks seeking ways to cut that. China's eligibility for most-favored-nation trade status is also under threat in Congress, on human rights as well as strict trade grounds.

MFN, as it is known, guarantees an exporter the lowest available duties on goods shipped to the United States. Mr. Clinton must ask Congress to approve renewal for China next spring.

The United States is China's largest single export market, worth US$25.7 billion last year. Loss of MFN status would send the prices of its goods up by as much as 100 percent, thus destroying much of its competitive edge.

China is already bracing for its first annual trade deficit since 1989, most recently projected at around US$9 billion. In the first nine months, it was US$7 billion, official figures show, up from US$5.7 billion at end-August and US$4.6 billion at end-July.

Exports are growing at around 5 percent year on year, while imports are flooding in at a 25 percent-plus rate.

Fan Baoqing, an official at the Ministry of Foreign Trade and Economic Co- operation, said last week that the shortfall arose from strong domestic demand, high domestic prices, a shortage of funds for export goods and transport bottlenecks.

He also said many of the imports were raw materials and equipment bought by foreign ventures. They are increasingly important to China's trade overall, but still must source many inputs overseas for lack of Chinese alternatives.

Ventures with foreign investment accounted for 25 percent of China's total exports in the first half of the year, up from 19 percent a year earlier. But while their exports earned US$9.3 billion, their imports cost US$15.3 billion.