TNAG-1623-FCO40-2237-Relations-between-Hong-Kong-and-China-1987 — Page 71

G.F. 326

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- 9.

25.

26.

27.

PA said that price reform underpinned the whole economic

reform programme. For example, the bankruptcy law made

little sense without price reform. He wondered whether

there would be bold steps or tinkering with the system.

DS(ES)2 agreed that price reform needed to move ahead with

other reforms (e.g. of the enterprise system and the legal

system). In view of the complexity of price reform, he

felt that the Chinese Government was unlikely to take bold

steps but to continue chipping away at the system. This

would inevitably leave the most difficult areas to be

tackled later. He agreed with PA that this approach might

cause further distortions, although, given the rigidity

of the system in the first place, some changes would

probably provide net gains.

SDA asked about China's prospects for becoming a developed

country. DS(ES)2 said that, given the size of the

country and its low economic base, China was unlikely to

become a middle-income country by the turn of the

century. STI said that when China was accepted into the

GATT, that would be a sign of the success of price

reforms. However, there was a long road ahead.

The paper would be copied to the FCO, Peking and the

British Trade Commission.

Action:

Secretary

TRANSPORT BRANCH AND DEPARTMENT VISIT TO GUANGDONG (Paper 12/87)

28.

DC for T introduced the paper. He noted that the visit

had had limited objectives, principally to make personal

contacts and establish ties, and to seek further

information on Guangdong's plans for transport

development. It was not easy to understand the Chinese

bureaucracy, nor to know where the decision making powers

lay, nor who had budgetary authority.

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