The going gets more difficult

Chinese exports face competition from neighboring Asian countries which have devalued their currencies. Meanwhile, contracted investment has dropped in 1997, though actual investment is likely to rise since tax incentives are due to expire, and investors wish to beat the deadline. Foreign investors are concerned about meager returns, uncertainty about regulations and lack of infrastructure in some hinterland regions. Trade liberalization may be more difficult to achieve if investment drops and trade is hit by devaluations elsewhere.