7.
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CONFIDENTIAL #
fixed assets.
The People's Bank of China will control the
overall scale of collective investment through a loan
granting system, but only those activities stipulated in a guidance plan drawn up by the State Planning Commission will qualify for loans from the People's Bank.
Consistent with the general slowdown in economic growth and reflecting the imposition of stricter control over wage funds, the consumption boom showed signs of weakening in the first quarter of 1986. The value of retail sales, at Rmb 117.7 billion, was 9.6% higher than in the same period last year. This growth rate, though still substantial, represents a significant slowing down when compared with the increase of 28% recorded in 1985. The rate of inflation, on the other hand, remained high, probably reflecting the continued adjustments to the price reforms introduced in the past two years. In the first quarter of 1986, the year-on-year rate of increase in consumer prices was officially estimated at 8%, compared with 9% for 1985 as a whole. But these official estimates
are likely to have underestimated the actual rate of price increase.
8.
The imbalance in the external sector showed some improvement. According to the figures released by the Customs Administration for the first quarter of 1986, the value of exports grew by 4.3% over the first quarter of last year to reach US$5.84 billion, while the value of imports grew by 3.6% to US$8.77 billion. In consequence, a visible trade deficit of US$2.93 billion was recorded in the first quarter of this year. Although this is roughly the same as that recorded in the first quarter of 1985, it compared favourably with the deficits of US$4.9 billion in
the fourth quarter of 1985 and of US$14.9 billion for 1985
as a whole.
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