TNAG-0843-FCO40-1053-Visit-of-Lord-Carrington--Secretary-of-State-for-Foreign-and-1979 — Page 20

CONFIDENTIAL

embryonic human rights movement in March/April were possible

setbacks for Deng Xiaoping. But he still has adequate

support within the Politburo and is likely to be able to

push forward his programme of reform and modernisation.

Session of National People's Congress (China's Parliament)

opened on 18 June: Hua Guofeng, as Premier, delivered major

report on Government work. Agenda also includes approval of

revised economic plans; electoral reform allowing for

direct elections by secret ballots; and changes in criminal

law.

Trade/Economy

5. The 10 year plan (1978-85) announced in 1978 for the

modernisation of China has been trimmed: many targets over

ambitious (eg production of 50 million tonnes of steel by

1985 1978 production 31 million tonnes), which led to

capital investments wastefully employed, and neglect of

infrastructure. Chinese also recognise their need to

generate foreign exchange to pay for large scale imports

of plant and equipment. Emphasis therefore switched from

heavy industry to agriculture and light industry. Energy,

transport, and raw materials also important for foreign

exchange and development of infrastructure.

6. The reassessment accompanied by a block on new foreign

contracts; some Japanese contracts suspended. But import

of advanced technology plant and equipment from West remains

an integral part of the modernisation programme. Scale of

imports will be related to Chinese ability to pay - renewed

emphasis on counter trade, joint ventures and cooperative

arrangements with foreign countries.

CONFIDENTIAL

/Defence