TNAG-1458-FCO40-1982-Relations-between-Hong-Kong-and-China-1986 — Page 112

CONFIDENTIAL

4.

The despatch also points to low capital productivity

and low allocative efficiency as difficulties. It is not

clear whether these might not in fact simply be

indicators which highlight the potential for further improvement. Nevertheless I agree with the general lines of the despatch's analysis of the technical difficulties facing China's economic reform programme. But it perhaps underestimates the political difficulties that may still

stymie the programme. The memorandum refers to the time

and effort needed to counter criticism and maintain

forward momentum. These are very real constraints on the

reformers, and show up something of the nature of the political dialogue within China.

5. Sir Richard Evans stands by his earlier judgement (in

February) that the existing reform programine was likely

to remain unchanged in its essentials during the period

leading up to and following Deng's death. I am inclined

to put more weight on the temporary loss of impetus which

could follow Deng's departure.

6.

By this minute, I am asking Economic Advisers and

Research Department for comments so we can submit a

considered departmental view to the Secretary of State before his departure for Peking. We will then reply to Sir Richard. The Department is arranging to print the despatch as a diplomatic document, but Protocol

Department may wish to pass an advance copy now to the

Palace.

Iain c. m

ناشد

CONFIDENTIAL

I C Orr

Far Eastern Department

K 258

233 5863