TNAG-1458-FCO40-1982-Relations-between-Hong-Kong-and-China-1986 — Page 133

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more attractive prospect than growing grain. This combined with a planned reduction in the sown acreage and less than perfect weather led to a fall in grain output of 7% in 1985 to 379 million tons. It was a nasty shock and a poor omen for the first year of the second stage of agricultural reform.

Industry

7.

Industrial reform got off to a much slower start. In the

first place, the economy needed time to recover from the dislocations caused by Hua Guofeng's ill-conceived "Leap".

A three year period of readjustment, consolidation and

reconstruction was embarked upon in 1979, while Chinese planners

strove to correct imbalances that had arisen. Secondly, reform of the industrial economy was and is considerably more complex. There was no simple equivalent to freeing the peasants of the deadweight of the commune system. It was not until the Third

Plenum of the Twelth Central Committee in October 1984 that the

Chinese leadership really took up the challenge of reform in the urban sector, and adopted a comprehensive programme of

reform.

8. In the interim period there was nonetheless a considerable amount of experimentation, principally designed to stimulate

initiative through material incentives. The urban work force was given a number of pay rises and performance bonuses were introduced on a wide scale. Factories were given greater financial autonomy, through the introduction of a taxation

system to replace the automatic remittance to the State of all

earnings. Greater responsibility for decision-making was given to factory managers. While these measures did have a revitalising effect, they did not really begin to tackle the fundamental problems of the Chinese economy.

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