TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 103

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5.

Retail sales remained buoyant in the first quarter of 1987 and were 12% higher in volume terms than

in the same quarter last year. On a year-on-year basis, retail prices were officially estimated to have increased

by 5%; the true increase in the cost of living was

probably considerably higher.

6.

For the agricultural sector, as the first

quarter was not the harvest period, meaningful production figures are not available. However, there are indications

of considerable growth in the output of chemical

fertilizers and of small tractors in the first quarter of 1987. In the past two years, the growth in output of both

had been sluggish. Fertilizer factories had no incentive to expand production as costs of labour and raw materials

were rising but output prices could not be raised. The supply situation has improved since the latter half of

1986 when more flexibility in adjusting prices was given to local enterprises and imports of chemical fertilizers were stepped up. Appreciating the need to improve farming technology, the Chinese government has recently decided to

increase capital spending in rural areas by 40% in 1987.

But a substantial part of this increase in rural

investment is due to the fact that the government can no

longer mobilize voluntary labour to build and maintain

rural facilities such as dams and irrigation projects. In

an attempt to halt the loss of arable land to

non-agricultural activities in the countryside, the

central authorities have decided to levy a new tax on

individuals who use arable land for non-agricultural

purposes.

G.F. 326

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