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3
4.
Natural disasters like 1 Loods
the northern
part of China and drought and storms in some parts of the south have affected the current year's agricultural output. According to China's official forecast, the grain harvest for 1985 as a whole will amount to 385 million
metric tons, about 5% less than the record high of 1984. Grain output has also been undermined by reduction in acreage as Chinese farmers shift the emphasis of their production from grain crops to cash crops and, to a lesser extent, also to livestock and dairy products.
5.
Investment, as indicated by capital
Capital
construction, has also grown rapidly. construction spending in the first three quarters of 1985 grew by 38.6% compared with a year earlier to Rib 53.5 billion. The sharp increase could be attributed to a lack of control over local projects on the part of the central authorities. As a remedial measure, controls on bank loans have been stiffened. Interest rates charged on bank loans were raised by an average of nearly three percentage points in August. Besides, there is an increasing concern over enterprise inefficiency. The Chinese Government has stopped granting subsidies and tax reductions to enterprises which fail to make good their losses within a certain time period.
6.
As regards the external sector, the imbalance experienced in the first half of 1985 continued into the third quarter. According to the figures released by the Chinese Customs Administration, the value of exports in the third quarter of 1985, at US$6.9 billion, was roughly the same as in the third quarter of 1984. But the value of imports grew rapidly, by 54%, to US$10.5 billion. China's visible trade account still showed a large
As
C.F. 326
CONFIDENTIAL # 3
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