CONFIDENTIAL
120015.
MDHIAN 4718
SENATE THIS WEEK IN SUPPORT OF A BILL TO PLACE CONDITIONS ON CHINA'S MEN STATUS WAS ALSO NOTED HERE AS JUST INSUFFICIENT TO OVERTURN THE EXPECTED PRESIDENTIAL VETO. NEVERTHELESS, WORRIES REMAIN, BECAUSE OF THE WAY THAT PRESIDENT BUSH'S ELECTION RIVALS ARE USING CHINA TRADE ISSUES TO APPEAL BOTH TO ANTAGONISM TOWARDS CHINA AND TO PROTECTIONIST SENTIMENT IN THE US.
4.
THE STOCK MARKET HAS RESPONDED VIGOROUSLY TO THE GENERAL MOOD OF OPTIMISM, ACHIEVING A SERIES OF RECORD HIGHS. (THE HANG SENG INDEX OF SHARE PRICES REACHED AN ALL-TIME RECORD OF 4895 TODAY (27 FEBRUARY.) SHARE PRICES, IN REAL TERMS, ARE NOW BACK TO THE LEVELS ACHIEVED BEFORE THE 1987 OCTOBER CRASH.
INFLATIONARY BOTTLENECKS
5.
ECONOMIC SUCCESS INEVITABLY BRINGS ITS OWN DIFFICULTIES. GROWTH IS AT THE MERCY OF SHORTAGES OF LAND AND LABOUR. AT PRESENT, THE DEMAND FOR BOTH IS EXCEEDING SUPPLY. CONSEQUENTLY, IN ADDITION TO FULL EMPLOYMENT. THERE IS ALSO PERSISTENT DOUBLE- DIGIT INFLATION AND A PARTICULARLY SHARP RISE IN THE PRICE OF DOMESTIC PROPERTY. THESE ISSUES HAVE BEEN HIGH ON THE LIST OF COMMUNITY CONCERNS DURING THE PAST TWELVE MONTHS.
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AND
THE GOVERNMENT HAS ACTED TO TACKLE THESE PROBLEMS. WE HAVE LAUNCHED A NEW SCHEME TO DOUBLE THE IMPORTATION OF LABOUR: WE HAVE HELD DOWN PUBLIC EXPENDITURE AND BOOSTED OUR SURPLUS: WE HAVE USED A NUMBER OF MEASURES TO RESTRAIN DEMAND INT HE PROPERTY SECTOR. THE INFLATION RATE IS BEGINNING TO RESPOND TO THESE EFFORTS, ALTHOUGH THE DECLINE WILL BE SLOW AND UNEVEN. THE CONSUMER PRICE INDEX PEAKED IN APRIL 1991 WITH AN INCREASE OF 13.9 PER CENT. BY DECEMBER, THE RATE OF INCREASE HAD DECLINED TO 10.3 PER CENT. HOWEVER, A SLIGHT RISE IS LIKELY IN THE EARLY PART
OF THIS YEAR.
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·
OF PARTICULAR CONCERN TO THE PUBLIC HAS BEEN THE SHARP RISE IN PROPERTY PRICES. THERE IS A WIDESPREAD BELIEF THAT SPECULATORS WERE RESPONSIBLE FOR MUCH OF THE PRESSURE ON PRICES FOR NEW FLATS. GOVERNMENT ENCOURAGEMENT TO THE BANKING SECTOR TO REDUCE THE FUNDS AVAILABLE FOR SUCH ACTIVITIES REMOVED SOME OF THE INFLATIONARY STEAM FROM THE REAL ESTATE SECTOR. WE ARE ALSO LOOKING TO DETER SPECULATORS BY TAXING THEIR PROFITS THROUGH
REVISED STAMP DUTY LEGISLATION.
8.
THE IMPACT OF INFLATION ON THE DISADVANTAGED IS ANOTHER KEY
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