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chairman and Members of the subcommittoos:

The purpose of this statement is to review the current status and accomplishments to date of OPIC prograns in china.

Current status

As a 0.8. Government agency operating under the foreign policy guidance of the Secretary of Stato, OPIC supporto fully the administration's condemnation of recent events in China. Consistent with rutrictions included by congress in OPIC'S authorizing legislation, OPIC has ceased active operations in China. For example, OPIC's statuto includes the requirenent that OPIC take into consideration observance of human rights by the country before proceeding with any new project, Panding a further review of the situation in China, we will remain

suspended.

History of OPIC Programs in china

OPIC, As you know, is a wholly-owned 1.8. Government corporation created by congress in 1969, to "mobilize and

facilitate the participation ot United states private capital

and skills in the doonomic and social development of loss developed friendly countries and areas, thereby complementing the development assistance objectives of the United states," Operating under the policy guidance of the Secretary of State, OPIC Ourrently operates programs in over 200 developing

countries.

Section 620(C) of the Foreign Assistance Act of 1961, as amended, prohibits the axtension of any assistancı under the Aot (including the operation of OFIC) to any communist country. On August 8, 1980, the President signad legislation waiving this prohibition as to OPIC's operations in the People's Republic of China (china). on October 30, 1980, the Governments of the United States and China signed an Investment Incentive Agreement providing for the operation of all OPIC programs in China, and OPIC offering its first insurance contract in China in 1982.

since 1980, OPIC has provided political risk insurance for 34 Investments made by 0.8. companies in China and provided one guaranty under its small contractors guaranty program as well Approved a loan guaranty for a second project. Additionally, OPIC sponsored an investment mission to China in 1984 and a

Wreverse" mission of Chinese officials to the Unitad states in

April 1987,

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The investments that OPIC has inoured have created approximately 14,730 jobs in China and facilitated some $873 million of V.8. Investmant in China, or somewhat over 50% of total u.s. Investment in that country at present. In the United States, these projects have created an estimated 9,700 jobs and generated $1.10 in 0.8. exports for every dollar of U.S. investment. The 11 projects OPIC supported last year are expected to generate $34 million in V.8. exports during the tirat five years of operation.

OPIC has no financial exposure

diraot loans or loan

guarantios

in china at this time.

OPIC's only exposure at

this time is under its political risk insurance program where OPIC currently insures 29 investments in 15 localities in China against the risks of expropriation and political violence. coverage against the risk of inconvertibility of currency has never been offered because the Chinese renminbi le not freely

convertible.

During the past eight years, 0.8, investment in china nas

steadily increased and along with it the demand for OPIC political risk insurance. In the wake of the political instability following the Tianamen Square incident, many u.8. companies have been reevaluating their china investment plans, Although many are taking a wait-and-see attitude, many others ara proceeding with negotiations. Companies that are going forward are now, more than ever, looking for political risk

insurance coverage.

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Because OPIC coverage currently is not availabl., 0.8. companies are looking to the private insurance market. However, following the Tianamen Square incident, the private political risk insurance market has virtually dried up. In the past few weeks, limitad private market coverage has again become available, but at considerably higher rates. It is reported that Lloyd's Insurers in London are flooded with

requests and that available capacity may be exceeded within six

months.

As long as there is capacity, OPIC clients can look to the private market for political risk coverage. However, most 0.8. investors have preferred OPIC Insurance because of its 20-year duration (the maximum duration for private insurers is three years) and its backing by the U.S. Government. Also, private coverage for political violence 108bes affecting fixed assets is extremely soarce for any country.

Existing Restrictions on OPIC Programs

Before providing support for any project, OPIC carefully reviews the project for its anticipated impact on 0.8. exports and employment, its anticipated developmental benefits to the host country, and possible detrimental environmental affacts. The corporation rejeots any project that is likely to have a

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significant negative impact on U.S. employment or the 0.8. economy, lecks developmental benefits, or i. ilkely to have unacceptable environmental effects.

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As previously mentioned, OPIC-supported projeots must mort other qualifying criteria, OPIC takes into account the

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observance of and respect for human rights and fundamantal

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freedoms in the countries where it operates. The Corporation consults with the State Department's Bureau for Human Rights and Humanitarian Affairs prior to making inaurance or finanoing commitments to any project.

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Furthermore, since 1985, OPIC programs have been otterad only in countries which are taking steps to adopt and implement laws that extend Internationally recognized worker rights. For those countries, such as china, which are not part of the GSP system, OPIC makes worker rights determinations in consultation with the Departments of state and Labor and other interested

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agencies.

Other countries' Programs

At your request, we have consulted our counterparts in other countries about the status of their investment guaranty programs. Most other agencies have temporarily stopped processing new applications for investment insurance in China, but they are maintaining maximum flexibility regarding the issuance of future insurance coverage.

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