China's economic planners have signaled deep disillusionment with a number of major industrial projects and suggested that they may eventually kill expected multimillion-dollar deals with some U.S. companies.
A vice president in the head office of the Chinese People's Construction Bank has sharply criticized recent importation of foreign factories that "exacerbated the shortage of fuel and power. We must never do this again in the future."
Authorities here have already halted work on mines and industrial plants that were to be built by several U.S. companies, including the Fluor Corp., the Bechtel Corp. and Kaiser Engineering Co. The new Chinese finance minister, Wang Binggian, also told the National People's Congress here that the government needed to exert "tighter control over imports."
Trade between the United States and China is expected to nearly double this year to about $4 billion, but three-quarters of that represents American exports to China, which drain China's foreign exchange earnings.
Peking's new emphasis on agriculture and light industry appears likely to slow or stop altogether some major heavy industry projects that U.S. businessmen counted on to raise the level of U.S. imports here even higher.
U.S. efforts to help the Chinese exploit their offshore oil resources do not appear to be severely affected by the shift in emphasis. Chinese economic leaders have reemphasized at the National People's Congress the nation's energy shortage but the need to conserve energy has at the same time cut into other large American projects.
In the cases of Fluor, Bechtel and Kaiser, each company was told a major project would be delayed after design and engineering studies had been completed but before actual construction had begun.
One company official said, "We were told there would be a "temporary delay, but nobody on the Chinese side was able to say whether that meant three months or three years."
Executives of the companies say they remain confident that the projects will go ahead. They have put many months of work into the planning and opened up fulltime offices here, paying as much as $690 a day in rent. The recent article by construction bank official Liu in the Peking Review, however, seems to challenge the need for creating new construction facilities such as theirs in areas without sufficient transport and communications.
Liu said that for every $1 spent on imported equipment, another $2.75 was needed to build "ancillary equipment" such as housing, fuel, electric power, rail lines, roads and telephones.
"If foreign funds are used on a scale exceeding the ability to provide investment for ancillary equipment, it will hold up the progress of construction and cause serious waste," Liu said. But without the ancillary equipment, he said, "these major projects cannot go into operation even after they are completed."
Liu mentioned no specific projects in his article, but the circumstances he mentioned describe some of the delayed U.S. projects.
Fluor had signed a contract to build a major copper facility at a remote site near the village of Dexing in Jiangxi province. The project was initially valued at $800 million, but it was discovered that the proposed copper concentrating mill would require new rail lines and other support facilities costing another $500 million.
An aluminum plant Bechtel was planning would have consumed "enormous amounts of electric power that just aren't available at the site," said one businessman familiar with the plan. Similar problems affected the iron ore project planned by Kaiser.
The Ministry of Metallurgy, which first approved and then suspended the U.S. projects, has come under heavy pressure for committing too much of its budget to heavy industry. The New China News Agency reported that deputies to the National People's Congress yesterday were "firing one question after another" at Minister Tang Ke for the ministry's decision to proceed with the huge $5 billion Baoshan steel plant north of Shang-hai. Tang told the deputies the plant would recover its investment, which includes substantial equipment from West Germany and Japan and some from the United States, in 13 years and help cut down on importation of foreign steel.
The widespread displeasure with such spending was shown by an accompanying article quoting many deputies calling for increased spending on universtiy education and cuts in other areas.