CONFIDENTIAL
IMPLICATIONS FOR UK INTERESTS
Internal Stability
1. The internal debate about the pace and nature of economic reform has closely reflected the political dispute between reformers and conservatives, particularly
over the question of decentralisation of decision making.
The problems that have resulted from the introduction of
reforms has weakened the position of the reformist
leadership. Resentment over urban price increases
fuelled the student demonstrations this winter which were
catalytic in prompting the resignation of Hu Yaobang, and the decision to delay the programme of price reform preceded the anti-bourgeois liberalisation campaign which followed his resignation. Nevertheless, it would
probably be wrong to give too much weight to economic problems as a key factor in the power struggle. Rather
both sides have exploited the successes and failures to
strengthen their own position. There also appears to be a consensus within the leadership, embracing the most conservative elements, that the economic reform programme should continue: whatever the problems with current
policy, there are no advocates for a return to the more
centralised autarkic system of the cultural revolution
period. In particular, the failure of the Special Economic Zones to fulfil expectations is unlikely to
reduce China's interest in maintaining the stability and
economic usefulness of Hong Kong rather the reverse.
FCLABK
CONFIDENTIAL