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Foreign Exchange Funds Utilized to Support Oceangoing Transportation Fleets (1964 - 1976)


 

In the planned economy, Bank of China as a specialized foreign exchange bank authorized by the state was responsible for unified operation and management of foreign exchange funds, which consisted of two parts: state-owned funds and funds owned by Bank of China. From the beginning of 1970s to the end of 1976, Bank of China's foreign exchange funds increased constantly to USD 1.671 billion.

Bank of China proposed to the State Council and relevant authorities for many times to use the foreign exchange funds it held for national economic development, which was affirmed by State Council leaders at many meetings. Bank of China supported national economic development and played a role in the national macroeconomic adjustment by accumulating, collecting and using foreign exchange funds.

As an important part of foreign trade, foreign trade transportation was very important to guarantee the success of import and export. In 1965, there were only 63 ships with the total capacity of 576,000 DWT in China's oceangoing fleet. During that period of time, China had to lease foreign ships as the foreign trade transportation tasks were increasing constantly with insufficient free capacity. Foreign exchange spent on ship leasing reached USD 153 million in 1965.

The most reasonable way to relieve the burden of ship leasing was to develop local oceangoing fleets. In 1964, Premier Zhou Enlai instructed the Ministry of Transportation that oceangoing transportation should be based on the development of domestic shipbuilding industry. The shipbuilding and ship purchasing might be carried out at the same time, when the domestic shipbuilding could not meet the demand. At that time, the capability of oceangoing shipbuilding was still weak and the oceangoing fleets built with domestic capability could not meet the urgent demand. Therefore, purchasing foreign ships was the first step to fulfill the ever-increasing tasks of foreign transportation. However, it was difficult for the state to purchase ships with the insufficient foreign exchange reserves.

In 1963, the State Council decided to use Bank of China's foreign exchange loans to purchase oceangoing ships. In the trial period from 1964 to 1965, two foreign exchange loans were acquired for ship purchase amounting to USD 25.6 million. In 1973, 2.25-million-ton foreign ships were purchased with loans of USD 300 million from Bank of China. From 1972 to 1976, the foreign exchange loans provided by Bank of China amounted to USD 880 million for the construction of oceangoing shipping fleets. Foreign exchange loans were mainly used for the following purposes: purchasing and commissioning oceangoing ships, 232 oceangoing ships with the total capacity of 4,276,700 million tons purchased and commissioned from 1972 to 1976; importing cargo handling machinery used on ports; establishing ship repairing bases; and importing materials and equipment for domestic shipbuilding.


The Great Wall oceangoing ship constructed with the loans of Bank of China was launched

Ship purchase with Bank of China's foreign exchange loans achieved good effects.

Ⅰ. Bank of China assisted the Ministry of Transportation in establishing a China's own oceangoing fleet of considerable scale in the shortest time without national investment. In China's oceangoing fleet, there were only 63 ships with capacity of 576,000 tons in 1965, among which 23 ships purchased with loans with capacity of 211,900 tons were in operation. There were 340 oceangoing ships with capacity of 5.56 million tons in 1976, among which there were 262 ships purchased with loans with capacity of 4.6 million tons. The fleet developed very rapidly. The capacity of China's oceangoing fleet in 1965 accounted for only 13.3% in total volume undertaken by Chinese side, and it was increased to 70% in 1976, which fundamentally changed the situation of dependence on leased foreign ships. Bank of China's ship purchase loans made contribution to the establishment of China's own oceangoing fleet, and to the elevation of the international status of China's oceangoing fleet.


An oceangoing ship financed with Bank of China's loans was navigating in the sea.

Ⅱ. Bank of China helped with increase of foreign exchange funds and reduction of foreign exchange expenditures. Since the second half of 1971, the price of old ships slumped due to the recession in capitalist countries and the depression of sea freight business. Prices of the late-1950s old ships dropped by 60%, and the prices of the 1960s old ships dropped by 30% in 1972 compared with that of 1970. In this period of time, China made use of Bank of China's foreign exchange loans to purchase a large number of old ships, which saved the expenditure of foreign exchange. Before, most foreign freight charges in foreign trade were paid to foreign ship companies. When China's oceangoing fleet grew stronger, the freight charges gradually flew to China. Meanwhile, the ships purchased with loans earned profit, contributing to revenue growth and expenditure reduction.

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