MY BEST JUDGEMENT NOW ABOUT THE ECONOMIC REFORM PROGRAMME IS THAT NO MEASURES WHICH HAVE BEEN ADOPTED ALREADY WILL BE RESCINDED, BUT THAT FRESH MEASURES (EXCEPT PERHAPS IN THE FIELD OF FOREIGN INVESTMENT) ARE UNLIKELY TO BE FORTHCOMING FOR AT LEAST SOME MONTHS. IT WILL BE PARTICULARLY INTERESTING TO SEE WHAT STATEMENTS ZHAO
ZIYANG MAKES ABOUT THE PROGRAMME IN HIS REPORT TO THE NATIONAL
PEOPLE'S CONGRESS AT THE END OF THIS MONTH. MY JUDGEMENT ABOUT
POLITICAL REFORM IS THAT MOST OF THE ENERGIES OF THOSE CONCERNED
(E.G. THE THREE MEMBERS OF THE GROUP MENTIONED TO ME BY THE YUGOSLAV
AMBASSADOR: PARAGRAPH 5 OF MY TELNO.276) WILL BE DEVOTED DURING THE
SPRING AND SUMMER TO PREPARING DOCUMENTS FOR APPROVAL AT THE 13TH
PARTY CONGRESS AND THE MEETINGS OF THE CENTRAL COMMITTEE WHICH ARE
LIKELY TO OCCUR BEFORE OR AFTER IT (OR PERHAPS BOTH). THERE WILL NOT
SE NEW PUBLIC INITIATIVES. BUT I HAVE IT ON GOOD AUTHORITY THAT
RADICAL IDEAS (FOR EXAMPLE, THE ABOLITION OF THE CELL STRUCTURE IN
THE PARTY) ARE STILL UNDER DISCUSSION AMONG AT LEAST SOME OF THE
LEADERS.
9. THE REFORM PROGRAMME APART, THE LEADERSHIP WILL HAVE TO DEAL WITH
CHINA'S NOW WORRYING EXTERNAL FINANCIAL POSITION. A DEFICIT OF
DOLLARS 15 BILLION ON TRADE ACCOUNT IN 1985 WAS FOLLOWED BY A
DEFICIT OF DOLLARS 12 BILLION IN 1986. MUCH OF THE TOTAL OF DOLLARS
27 BILLION WAS FINANCED BY SHORT-TERM BORROWING. THIS BORROWING
WILL HAVE TO BE ROLLED OVER OR CONVERTED INTO BORROWING WITH LONGER
MATURITIES UNLESS THE RESERVES ARE TO BE SEEN TO FALL A LONG WAY.
BESIDES, I DO NOT THINK THAT CHINA CAN AVOID ANOTHER LARGE DEFICIT
ON TRADE ACCOUNT IN 1987 WITHOUT A SERIOUS CUTBACK IN IMPORTS. I DO
NOT, REPEAT NOT, THINK THAT SUCH A CUTBACK WILL BE IMPOSED (TROUGH
IMPORTERS WILL CONTINUE TO BE TOLD TO SAVE FOREIGN EXCHANGE BY ALL POSSIBLE MEANS). IF IT IS NOT, HOWEVER, CHINA'S INDEBTEDNESS IS
LIKELY TO GROW BEYONG THE FIGURE OF DOLLARS 30 BILLION WHICH THE IMF
FORECAST FOR THE END OF 1986 IN JULY OF THAT YEAR.
PRESENT LEADERSHIP.
10. DENG APPEARS AT PRESENT TO BE PRESIDING OVER A COLLECTIVE
LEADERSHIP SPANNING A SPECTRUM OF OPINION FROM THAT REFLECTED IN
ZHAO ZIYANG'S PUBLIC STATEMENTS TO THAT REPRESENTED BY WANG ZHEN. IT
IS PERHAPS NOT QUITE THE COLLECTIVE LEADERSHIP HE WOULD HAVE CHOSEN.
3UT, AS I HAVE MADE CLEAR ABOVE, MEMBERS OF THE OLD GUARD HAVE
ASSERTED THEMSELVES SUCCESSFULLY IN RECENT MONTHS, AND HAVE BEEN
MAKING AS MUCH OF THE RUNNING IN PUBLIC STATEMENTS ABOUT CHINA'S
CURRENT CIRCUMSTANCES AS ZHAO AND EG TIAN JIYUN. DENG'S NEED TO
TAKE ACCOUNT OF THEIR VIEWS MAY EXPLAIN WHY HE WAS NOTICEABLY
UNSPECIFIC IN REFERRING TO CONTINUATION OF POLICY IN HIS
CONVERSATIONS WITH PRESIDENT BONGO AND SHULTZ. IN A MEETING WITH THE PRESIDENT OF TANZANIA ON 8 MARCH, HE WAS MORE FORTHCOMING IN THAT HE REFERRED TO THE MAIN ELEMENTS OF CURRENT POLICY (OPENING, REFORM, AND ENLIVENING OF THE ECONOMY), BUT HE ALSO HAD A GOOD DEAL
TO SAY ABOUT THE FOUR PRINCIPLES THE NEED FOR INTERNAL STABILITY AND
THE IMPORTANCE OF LEADERSHIP AND ORDERLINES FOR SOCIALIST CONSTRUCTION.
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THE FUTURE