CONFIDENTIAL #3
f
CRC INF 13/88
(CEC 7/88)
Inflation in China and
its implications for
the economies of China and Hong Kong
Contents
Introduction
Current rate of inflation in China
Paragraph
2
1
10
5
Underlying causes of inflation in China
6
(a) Excess demand over supply
7
11
(b) Shifts in relative prices
12
14
Possible measures to combat or accommodate
inflation
Repercussions of inflation in China's economy
(a) Income re-distribution caused
by inflation
15
22
23
27
(b)
Exchange rate of Renminbi
28
32
(c)
Resource allocation between
33
-
- 36
the domestic and the
external sectors
(d)
Possibility of hyper-inflation
37
―
- 38
and danger of social unrest
Implications of China's inflation problem
for Hong Kong
39
(a)
Prices of Hong Kong's imports
40
-
43
from China
(b)
China's demand for Hong Kong products
44
-
45
(c) Outward processing activities
46
(d) General economic stability of Hong Kong
47
Conclusion
CONFIDENTIAL & B
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49