TNAG-1457-FCO40-1981-Relations-between-Hong-Kong-and-China-1986 — Page 65

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37.

Whether China can put its own house in order and

solve the recent problems of imbalances and overheating

depends very much on the willingness of local governments

and enterprises to comply with the guidelines laid down by

the central Government. Any significant resistance at the local level will invite even greater pressure from the

central authorities and hence render the adjustment

process more painful.

38.

immi

But insofar as economic reforms are concerned,

the reformists seem to have got all they wanted. The Plan

-is fundamentally liberal and there is no sacrifice in

principle of-the open door' policies. The reformists'

concessions are mainly in the propaganda field and in

re-stating the importance of grain production.

39.

Some fairly drastic reforms are planned for the

housing construction and tertiary services sectors. If

successful, these would bring substantial improvements to the Chinese people's standards of living. Also striking is the very great importance attached to indirect controls by means of economic levers like prices, interest rates,

tax rates and exchange rates rather than direct controls.

Concluding remarks: implications for the Hong Kong economy

40.

China's continued commitment to liberal economic

policies will be of great benefit to Hong Kong, particularly in the longer term. More specifically, plans by China to de-regulate its housing construction sector is likely to induce an increase in its private sector

construction activity although the extent of this will depend on the overall performance of the economy and the

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