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controls and/or rationing), public confidence on China's reform programme may be adversely affected. This could
well have a damaging effect on confidence in Hong Kong.
Any attempts by China at control that are seen as more
than a temporary repudiation of the reform programme could
have serious implications for confidence. The need for
China to establish a convincing track record in terms of
economic policy remains.
(a) External sector
12.
According to China's Custom Statistics, the US$ value of its exports rose by 20% to US$11.88 billion in the third quarter of 1988 compared with the same quarter last year. The generally rapid growth of China's exports in 1988 notwithstanding high domestic inflation was partly because of the enterprises' need to fulfil export quota
assigned to them in return for the allocation of
subsidized inputs or other privileges. Some
cross-subsidization from local sales to exports were likely. On the same basis, the US$ value of imports rose
by 34% to US$14.14 billion. The corresponding growth
rates in the first half were 26% for exports and 19% for
imports. As a result, the visible trade deficit in the
third quarter increased to US$2.26 billion, about twice
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