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Economic Management
5. Moving on to the management of the Chinese economy, Huan said that he was worried that the de-centralisation process had gone too far. A price war between different provinces and organisations was recreating the need for greater centralisation "to tighten up on the anarchy". In answer to a question from you, he said that provinces were undermining each other in the bid to sell overseas. Huan said that inflation was running at 3-4%.
Agriculture
6. Huan said there were no plans to reduce the size of the rural labour force: the plan was to create more small rural industries to take up labour moving out of agriculture, and thus to raise rural incomes. There should be an agronomist and an economist in every village.
Energy
7. Huan spoke of the great debate inside China on whether a second Yangtze dam should be build (the Three Gorges project). Huan himself was not in favour. He believed that the ecological costs would outweight the likely economic benefits. His preference was for the Government to start with a small dam, possibly in Guizhou, his own Province. The main project should be delayed for further study. Official forecasts, although based on uncertain statistics, suggested that, by the turn of the century, hydro-electric power would meet the greatest proportion of China's energy needs, followed by coal and nuclear power in second and third place respectively. Many Chinese scientists favoured using coal as a feedstock for the chemical industry.
Cultural Exchanges.
8. Huan stressed the importance he attached to more cultural exchanges with the United Kingdom ("scholars are important, though they are not useful"). The Chinese Academies of Science and of Social Sciences were the right "docking mechanisms" for arranging exchanges with the United Kingdom.
MART for
лити
L Cowper-Coles
13 June 1985
Cc: PS/PUS
Political Adviser, Hong Kong
Mr Elliott, FED, FCO
Mr Galsworthy, HKD, FCO
CRD, FCO
Research Dept, FCO
CM Cruickshank Esq, OT2/3, DTI