CONFIDENTIAL
11.
This note of realism was taken up in subsequent reports on the achievements of 1978 and planning for 1979. From the statistical information that was given - more than at any time since the fifties it was clear that although some creditable results were achieved in 1978 (including a level of grain production, at 304 million tonnes, far above preliminary estimates) the period of taking up the slack is over. After rapid advance in 1977-78, growth rates in the current year are cut back sharply. Agricultural production is projected to grow Within an by 4% this year, and grain production by a mere 2%. overall industrial growth rate of 8%, production of steel and coal will show virtually no increase and even the priority sectors of oil output and electrical power generation will grow by only 5% and 7% respectively. The level of investment from central funds will actually fall slightly, with agriculture and light industry receiving proportionately more at the expense of heavy industry. The only major indicator projected to rise at a faster rate this year than last is retail sales a token of the government's determination to deliver the goods to the consumer. Budgetary expenditure on defence is, however, also increased. Although contacts had earlier suggested that funds were being pegged, if not cut back, a rise was announced from 13.3% of budget expenditure to 17.8%, to cover the once-for-all cost of the Sino-Vietnamese hostilities and also a modest increase in border defence. There is perhaps the suspicion that, to build confidence for the future, some of the 1979 targets are set so as to be well within the economy's grasp. Quantified targets for 1985 which
It
Hua unveiled with a flourish last year were not mentioned. must be assumed that they, like so many other features of his 1978 report to the NPC, must be inoperative. We may not know for sure until 1981, when the five year plan for 1981-85 is
announced.
CONFIDENTIAL
6.
/12.
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