TNAG-1622-FCO40-2236-Relations-between-Hong-Kong-and-China-1987 — Page 41

CONFIDENTIAL

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i) China's economic growth rate had recently

accelerated and there appeared to be a resurgence of overheating. This, if it remained uncontrolled, might lead to further stringent measures and controls on the economy. However, the full effects of recent greater

recentralisation and stricter import controls had

not yet been seen.

ii) there was concern about the effects of the

campaign against bourgeois liberalisation on the

economy, especially on economic reforms, but there

had been repeated reassurance from the highest

levels. Given possible overheating and the structural imbalances in the economy, the Chinese might wish to slow down certain reforms such as price reforms, not only for economic reasons. suggested that this area be kept under regular

review.

PA

iii) the Chinese appeared to be concerned by the

slowdown in the rate of foreign investment, and had announced 22 new provisions as a means of

improving the investment climate. The trade

deficit, while still large in absolute terms, appeared to have been brought under control: there had been slow growth in imports and a large increase in exports, despite the fall in oil

prices.

iv) there had been a surge in Hong Kong of re-exports of China origin, indicating that China was making more use of Hong Kong's efficient port to gain

access to world markets.

CONFIDENTIAL # *