TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 70

G.F. 326

CONFIDENTIAL #

22.

23.

24.

CS asked whether, with uneven distribution of income,

people would divert away from State-controlled (or

desired) areas, e.g. from staple crops to cash crops.

DS(ES)2 said this was happening, and also in the urban

areas as more small service-sector shops were set up (e.g.

cobblers, retail outlets, etc). In answer to CS, DS(ES) 2

confirmed that there was dissatisfaction with the uneven

distribution of income, particularly between rural and

urban areas. Rural reforms had come first because they

were easiest to tackle. Now the focus had shifted to the

urban areas where action was necessary. In answer to S

for T, DS(ES)2 did not foresee serious risks of conflict

over this, partly because of controls on population

mobility. However, while it had been easier to tackle the two sectors separately, they were now becoming more

closely linked.

STI expected greater progress in certain areas such as the

Pearl River Delta. He believed the current emphasis on

the coastal regions to be the correct approach. He

pointed out that the Shenzhen SEZ was in practical terms developing and expanding into the Pearl River Delta, principally along the proposed superhighway route. CS

commented that, in Shenzhen, rural workers were moving

into the factories, so that agricultural workers were "imported" from the North. STI said that the same applied

to Shanghai.

DS(ES) 2 said that the emphasis on coastal areas derived

from historical and geographical factors. These areas already had better facilities and thus were able to offer

better economic returns on investments. The State would

continue to develop them, but would also provide funds and

subsidies for the development of infrastructure in the

inland areas. Much of the income generated locally tended

to be ploughed back into the local economy, although there was some cross-subsidisation.

CONFIDENTIAL #