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Summary of major developments in Hong Kong-China economic relations in the second quarter of 1987 (Paragraph references follow those
in the report)
(1) The Chinese economy continued to grow rapidly in the
second quarter of 1987. On a year-on-year
(2)
comparison, industrial output grew by 15.8% in real terms in the second quarter. The corresponding growth rates for light and heavy industries were 16.6% and 15.3% respectively (paragraphs 1 and 2).
Summer crop yield amounted to 90.8 million tonnes in 1987, 2.4 million tonnes less than in 1986. The rapid loss of arable land is posing a threat to China's agricultural sector (paragraph 1).
(3) Both capital spending and consumption expenditure
were buoyant in the first half of 1987. The official inflation rate of 6.3% for this period is likely to be an under-estimate (paragraphs 4 and 6). In order to restrain inflation, the State Council has recently announced a number of measures to tighten the controls over price increases (paragraph 5).
(4)
The Chinese government had a surplus of Rmb 5.4 billion in the first half of 1987. However, as the bulk of state expenditure usually falls in the second half, China may again turn out to have a large fiscal deficit for the year as a whole, unless stringent controls are imposed on any further increase in state expenditure (paragraph 7).
G.F. 326
CONFIDENTIAL #