CHINA'S ELECTRONICS INDUSTRY: THE BOOM CONTINUES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T01017R000605820001-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: March 9, 2011
• Sequence Number: 1
• Publication Date: March 25, 1986
• Content Type: MEMO

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DATE 3Jz8J9 _
DOC NO 6A 20,091
OCR 3
P&PD I
Central Intelligence Agency
DIRECTORATE OF INTELLIGENCE
25 March 1986
China's Electronics Industry: The Boom Continues
Summary
Over the next five years, growth in China's domestic electronics
industry will continue to outpace gains projected for most other sectors of
the economy, although it may be somewhat slower than during the
1981-85 period. Imports of computers, scientific instruments, electronic
components, and automated production machinery will continue to
increase, but China will sharply curtail its purchases of electronic
consumer goods as it moves to protect its infant domestic industry. F-1
Outlook for the Domestic Industry
China's electronics industry is among the country's fastest growing industrial
sectors, with the value of output growing at a nominal average annual rate of 23.3
percent from 1981 to 1985, according to Chinese press reports, compared with 12.6
percent for overall industrial production. Strong consumer demand for televisions,
radios, cassette recorders and other home electronics led to heavy investment in the
This memorandum was prepared byl I Office of East Asian Analysis.
Information available as of 25 March 1986 was used in its preparation. Comments and
queries are welcome and may be directed to the Chief, China Division, OEA,
25X1
25X1
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sector--by central, provincial and municipal Chinese entities as well as by foreign firms.
The implementation of industrial and wage reforms also contributed to the surge in
output. F__1
Although leaders have set more modest growth targets for the Seventh Five Year
Plan (1985-90), the electronics sector will continue to develop at a faster pace than
other sectors of the economy, according to China's Minister of Electronics (MEI), Li
Tieying. ' The Ministry plans 16.5 percent annual growth, with target output in 1990
valued at $60 billion. Production priorities will be integrated circuits, consumer
electronics, computers, and communications equipment.
The Ministry also plans to improve the quality, reliability, and sophistication of its
products. By 1990, MEI hopes to bring 70 percent of its major electronic goods up to
the international standards of the early 1980s, according to Minister Li. Over the next
few years, China will need to introduce more scientific instrumentation to test output
and ensure better quality control. China's ability to produce the required
instrumentation is extremely limited, however, and imports will be crucial.
Growth in Electronics Imports to Slow
Imports, which had grown 35 percent annually from 1981 to 1985, will continue to
increase, but at a slower pace (see figure 1). We believe China will import about $15
billion worth of electronics equipment over the 1986-90 period, up from $6.8 billion over
the last five years. Several factors account for our moderately optimistic assessment.
We believe China will need to continue to import automated production machinery,
instrumentation, and electronic components in order to sustain its planned growth in
domestic electronics output. Between 1981 and 1985, for example, imports of
electronics grew 50 percent faster than domestic electronics output. We believe China's
imports of nonconsumer electronics will continue to grow slightly faster than the
domestic industry, averaging at least 20 percent per year.
Current measures to curb foreign exchange expenditures and to recentralize
foreign trade authority will curtail purchases of consumer electronics and personal
computers, however, and our estimate assumes China's purchases of foreign consumer
electronics will drop roughly to their 1983 levels, remaining constant through 1990. We
do not believe these cutbacks will affect imports of nonconsumer electronics, however.
Even during previous periods of economic retrenchment, when Beijing has centralized
control over its foreign trade apparatus and slashed imports as it did from 1981 through
1983, imports of nonconsumer electronics continued to grow. We believe Beijing will
China's Ministry of Electronics Industry is the country's largest producer of electronics
goods, overseeing production at some 2,400 enterprises, 55 institutes, and four
research academies. The Ministry also controls a large share of China's electronics
imports, through its trading arms, China Electronics Import and Export Corporation,
and China National Electronic Devices Import-Export Corporation. Minister Li
assumed his post last year, when his predecessor, Jiang Zemin, was appointed Mayor
of Shanghai.
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continue to authorize purchases of the larger-ticket items needed to modernize
factories, facilitate economic planning, or strengthen military research or command and
control.
US firms may increase their sales of electronics to China even more dramatically
than exporters from other countries over the next five years. The United States has an
increasing share of China's market for scientific instruments and computers--especially
mainframes--and sales should remain .strong in both areas (see figure 2). As Beijing
implements measures that link purchases to technology transfer, US exporters may
further increase their share of these markets, particularly because they are generally
more willing to engage in cooperative production agreements than their Japanese
counterparts. Moreover, Chinese restrictions on imports of televisions, radios, tape
recorders, and other consumer items will primarily affect Japan--more than half of
Japan's total electronics exports to China fall in the restricted categories. US firms are
less vulnerable, accounting for less than one percent of China's imports of consumer
electronics; Japan accounts for 60 percent.
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Typescript "China's Electronics Industry: The Boom Continues
Distribution:
1 - Bill Abnett, Director of Chinese Affairs, Room 316, USTR, 600 17th Street, NW
Central Intelligence Agency
2 - C/OEA/CH
1 - C/OEA/CH/FOR
1 - C/OEA/CH/DEF
1 - C/OEA/CH/DOM
1 - OEA/Production Officer, 4G-48
1 - D/OEA, 4F-18
1 - DDI, 7E-44
1 - Senior Review Panel, 5G-00
1 - PDB Staff, 7F-30
1 - NIO/EA, 7E-62
1 - C/PES, 7F-24
1 - FBIS/NEAAD/China Branch, 306 Key
1 - C/EAR 5E-18
1 - CPAS/ILS, 7G-50
5 - CPAS/IMC/CB, 7G-07
1 - Author
1 - Chrono
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Figure 1:
Exports of Electronics to China, 1980-85
2500-1
1980 1981 1982 1983 1984 1985*
* Estimated.
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Legend
? Computers
? Instruments
Ca Consumer Elect.
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Figure 2:
China: Sources of Electronics Imports, 1984
Computers
Japan
18.2
Hong Kong
52.8.40
Instruments
Consumer Electronics
Japan
us 60.07.
/r- 27.2%
us
0.4
S.t : Y//~//Y/////,j Other
Hong Kong
13.47:
k __ Hong Kong
39.07
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