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5.
Retail sales remained buoyant in the first quarter of 1987 and were 12% higher in volume terms than
in the same quarter last year. On a year-on-year basis, retail prices were officially estimated to have increased
by 5%; the true increase in the cost of living was
probably considerably higher.
6.
For the agricultural sector, as the first
quarter was not the harvest period, meaningful production figures are not available. However, there are indications
of considerable growth in the output of chemical
fertilizers and of small tractors in the first quarter of 1987. In the past two years, the growth in output of both
had been sluggish. Fertilizer factories had no incentive to expand production as costs of labour and raw materials
were rising but output prices could not be raised. The supply situation has improved since the latter half of
1986 when more flexibility in adjusting prices was given to local enterprises and imports of chemical fertilizers were stepped up. Appreciating the need to improve farming technology, the Chinese government has recently decided to
increase capital spending in rural areas by 40% in 1987.
But a substantial part of this increase in rural
investment is due to the fact that the government can no
longer mobilize voluntary labour to build and maintain
rural facilities such as dams and irrigation projects. In
an attempt to halt the loss of arable land to
non-agricultural activities in the countryside, the
central authorities have decided to levy a new tax on
individuals who use arable land for non-agricultural
purposes.
G.F. 326
CONFIDENTIAL #