TNAG-1622-FCO40-2236-Relations-between-Hong-Kong-and-China-1987 — Page 10

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2 2 JUN 1987

CONFIDENTIAL

FROM:

KIM SULLIVAN

No Roman

ce 1916

се

DATE:

CC:

FAR EASTERN DEPARTMENT

19 June 1987

PS/Lord Glenarthur

Mr Gillmore

Mr Braithwaite

Economic Advisers

Research Department

HKD

TRED

CHINA: ECONOMY

1. As requested in Mr Culshaw's minute of 14 May, I

submit Peking telno 847 and Research Department's redraft in non-telegraphic form, together with co-ordinated comments by Research Department and Economic Advisers,

and a note prepared within the Department on implications

for UK interests. DTI and ODA concur. Mr McLaren saw and

approved this submission in draft before leaving for Hong

Kong.

2. The Chinese economy had a reasonably good year in

1986 but deep-seated problems remain. Substantial achievements include respectable growth figures and an

improved foreign trade picture (exports up by 13% with

only a negligible increase in imports).

3.

These promising signs are offset by a failure to

make progress on serious structural problems (principally

the need for price reforms and the phasing out of

subsidies), and the worrying trend for qualitative

indicators, such as efficiency and profitability.

other major unresolved problem is where to strike the

balance between centralisation and decentralisation in

The

FC1ABW

CONFIDENTIAL

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