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CONFIDENTIAL
economic decision-making. There has recently been a move
to recentralisation, following excessive rates of growth
in capital construction which have led to shortages in
production of key commodities and transport bottlenecks.
China's leadership shows a growing awareness of the
economic problems ahead. But the magnitude of these
problems, and in particular the inability to press ahead
with price reform and resolve the question of where economic decisions are taken, mean that progress is slow
and halting.
4.
5. Although the difficulties facing the economic reform
programme parallel those in the political sphere, and are
exploited in the political debate, there is a broad
consensus on the need for economic reform although there
remain important differences on their extent. Economic
problems are not in themselves a major factor threatening
stability generally or the Hong Kong Agreement in
particular.
6.
China's present economic difficulties, particularly the problems with the decision-making process, mean that China remains a market which requires perseverance if the UK exporters are to maintain their gradually improving record. Delays on major projects, and in the
implementation of our soft loan agreement, are unlikely
to be reduced in the short term.
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Kim Sullivan
FCLABW
CONFIDENTIAL