TNAG-1458-FCO40-1982-Relations-between-Hong-Kong-and-China-1986 — Page 119

CONFIDENTIAL

below) they could prove harder to attain from now on.

PARAMETERS

9. The implementation of the programme is subject to a number

of important conditions. These set its parameters.

condition is to provide employment.

One

He Guang, a Vice-Minister

of Labour and Personnel, told Lord Young in December 1985 that

jobs would have to be found for 50 million Chinese between 1986

and 1990. As there is already a good deal of unemployment

(there are no official statistics), and even more under-employment,

and as fewer people will be leaving the labour market than enter-

ing it, the provision of these jobs will not be easy.

10. Another condition, made clear to the IMF's Article IV

Consultation team in 1985, is to prevent any acceleration in the

rate of inflation. According to the official cost of living

By

index, the rate of inflation was 2% in 1983 and 3% in 1984.

implication, something in the region of 3% was regarded in 1985

as the tolerable maximum.

rate of inflation was 10%;

the real rate was higher.

In that year, however, the official

and there is plenty of evidence that

There is also evidence that this

caused a good deal of discontent, especially in the cities,

where 200 million people live.

11. It is possible that the price level was not much on the

minds of the leadership when it launched the reform programme.

But it certainly is now. Premier Zhao Ziyang put a lot of

emphasis on the need to control inflation in his report on the

Work of the Government to the National People's Congress in

CONFIDENTIAL

/ March