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ii. The Chancellor raised the question of potential difficulties over achieving decentralisation of economic management, while maintaining central control to avoid disintegration. Mr Yaobang agreed that this was a problem which they were far from solving. They would set out a macro-economic strategy, with consequential sets of policies and codification these policies to provide regulations and laws to support them. This process would be supported by efforts to improve Party democracy to promote discussion of the strategy. Within this strategy, they would seek to leave room for local initiatives. But, Mr Yaobang added, they also have a central fund for allocations to backward regions. He acknowledged the difficulty of this; and of possible resentment in richer regions. But he stressed the importance of national cooperation. He did not regard the regional problem as an acute one.
iii. Referring to relative Chinese economic performance, the General Secretary was very clear that China's current ouput was still very low by comparison with the major industrialised nations (of which he placed the European Community first), and that, while output had been doubled between 1980 and 1988 (ie two years faster than the 10-year plan), this was from a very low base. He saw continued economic growth in three phases; from the present to the end of the century; the first two decades of the next century; and the subsequent three decades. If all went without mistakes, they would hope to approach the level of the most advanced industrial nations towards the conclusion of this third phase.
iv. On trade issues, the General Secretary said that he anticipated bilateral trade increasing in volume, although from a very low base. The Chancellor agreed, saying that, as with Hong Kong, apparently difficult problems could be solved with good faith on both sides. The General Secretary said Vice-Premier Li Peng would raise points with his interlocutors concerning Daya Bay (Guangdong) and container ships.
In conclusion, the Chancellor conveyed the Prime Minister's greetings and her anticipation of their meeting. The General Secretary and the Ambassador enquired after Mrs Tebbit's health and wished their regards to be conveyed to her. The meeting concluded with Mr Yaobang's wish that Mr Tebbit should visit Peking, whereupon they could enjoy a longer conversation.
I am sending a copy of this letter to Charles Powell (No 10), Geoff Dart (DEnergy), John Mogg (DTI) and to Paul Thomas (OAL).
Your Sicely,
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ANDREW LANSLEY
Private Secretary
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