TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 65

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8.

9.

people and reduce nepotism and bureaucratism.

There had

been many remarks about the need for the Party to stand back from the management. This was beginning to happen at

enterprise level but was unlikely at the Centre. The

Congress was most likely to produce general statements

rather than specific policies.

S for T enquired about the status of Hu Qili. PA noted

that Hu was in the same mould as Hu Yaobang, but appeared

rather more solid. After the fall of Hu Yaobang, Hu Qili

had made a number of "conservative" remarks which appeared

to have protected his position. He was a contender for

the Party General Secretaryship, but Zhao Ziyang still seemed most likely to take on that job.

STI enquired whether there were likely to be any

reverberations in China from recent events in the

Philippines and South Korea. PA said that, given the

different natures of the societies involved, he did not

expect any.

QUARTERLY REPORT ON HK/CHINA ECONOMIC RELATIONS (Paper 9/87)

10.

DS(ES)2 introduced the paper, noting that there was still

overspending and overheating in the Chinese economy,

particularly with excessive capital investment. The Chinese Government was trying to impose tighter control

(e.g. on credit and the issue of financial instruments),

but it would take time for this to have any impact. The

impact of controls on bond issues would not be large given

the relatively small size of the non-bank sector. The

price reforms had resulted in increases in subsidies of

various forms, so the State budget deficit had increased. Around a quarter of the deficit was due to subsidies.

answer to CS, DS(ES)2 said he felt that deficit financing was a consequence of the present policies and resulted from compromise (in particular, the need for stable social

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