TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 148

G.F. 326

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Moreover, even if the average figures are correct, they mask considerable differences among individuals and individual regions. With the adoption of

responsibility system in the economy, the distribution of income has become more uneven. Those whose incomes are lagging behind will be more severely hurt by rising

prices.

36.

For many state enterprises, the upward adjustments in the prices of industrial raw materials and machinery have significantly raised their costs of production. The problem has been aggravated because some government departments and units levy all sorts of illegal charges on enterprises under the cloak of price reform. Steel, cement, electronics machinery, and industrial chemicals are reported to have been most affected by the covert raising of prices. Besides, for raw materials which are not allocated from the State, the enterprises have to obtain them from the market

One where they were sold at a much higher price. estimate suggests that extra-plan (market) prices for industrial raw materials in major cities were 166%-283% higher than the State-fixed prices. Some examples of the differences between the State-fixed prices and the extra-plan prices in Guangzhou are given in Table 8.

37.

In the original masterplan of the reformists, increases in the costs of input would be absorbed by an improvement in productivity. This, however, has not turned out to be feasible. Instead, as a result of the increases in production costs and keen competition from the non-planned sector, a considerable number of state

Such losses were enterprises have incurred losses.

estimated to have amounted to Rmb 2 billion in the

first half of 1986.

Thus, for those state enterprises

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