CONFIDENTIAL
3
free market is still restricted to certain agricultural products and to the repair and service trades. While the partial relaxation of planning controls can only benefit the economy, the Central Committee made clear in its October decision that the economy will "on the whole remain a planned rather than a market economy". Deng, Hu and Zhao probably wanted a greater relaxation, but the views of Chen Yun, the Chief Planner of the 1950s and now a member of the Politburo's Standing Committee, still carry great weight. He is known to favour the "caged bird economy" (ie limited freedom
tight confines).
a)
within
But
Wage Reform. The October decision contained the statement that in future measures would be taken better to link wages and bonuses with good performance and to raise remuneration for mental work. it added that demands for consumption in excess of the capacity of production were incorrect. These guidelines remain to be converted into practice.
•
e) Price Reform. The October decision recognised the present pricing system as irrational and stated that it must be reformed. Approximately 1/3 of government income goes on subsidies (the bulk to agriculture products). The decision announced that the scope of uniform prices set by the state should be gradually reduced and that of floating and free prices proportionately enlarged. But, given the social consequences the decision stated that reform must be conducted in an extremely prudent manner. Reform of the pricing system is recognised as the key to industrial reform and as related to all the other reforms but specific measures of reform, which cannot be put off much longer if urban economic reform as a whole is to succeed, have yet to
materialise.
¿
8. The "open door" policy has gone hand in hand with policies to "enliven" the internal economy. China's imports grew by 17.9% in value in 1983 and look likely to grow by a further 12-13 % in 1984. The trend could further accelerate in future years. We know that Premier Zhao has expressed the view that Europe's trade with China, at present 16% of the total, should be increased to some 30%. There is thus great potential for considerable growth in Sino-British
trade.
CONFIDENTIAL
19.