TNAG-1625-FCO40-2239-Relations-between-Hong-Kong-and-China-1987 — Page 80

HKB moli

15 DEC 1967

Mr. Hum

a sombre assessment. At risk

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nating a glib judgement. I would say

to be able to survive

ought to be

that HK ought

cotain (even a considerable) conservative shift may from current reform policies

It is

return to ultra-left extremism that

would really hurt HU.

Tom Smith 1/12

Mr Fletcher-Cooke, FED

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From: P Clark

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comments of

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Far Eastern Section Research Department

OAB 2/125 A

210 6217

Date: 27 November 1987

CC

: Mr Wye, Peking

Mr Peirce, DPA Hong Kong Mr Smith, HKD

Mr Hallett, Economic

Advisers

Mr Ashton, Assessments

Staff

PUS D

D14 MOD

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again

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ASSESSING CHINA'S PROSPECTS

1.

In our recent RD/FED seminar on China's economic reforms and other discussions (notably with Assessments Staff's Canadian visitors), I was struck by the broad agreement on the state of the reforms ie. that while making due acknowledgement of important successes to date, the reform process is now faced with a number of obstacles which it is unlikely to overcome sufficiently well to enable China to modernise successfully and take her place amongst the world's advanced economies. This assessment should lead us to revising the questions we ask about China's medium-term development, up to the end of the century and taking in the magic date of 1997.

2.

Broadly speaking, Western assessments of the reforms have gone through two stages. First, there was the optimism based on impressive early (and relatively easy) gains, made all the more so in contrast to the staid shortcomings of the Soviet economy. Then, beginning in 1985 and becoming more widely adopted at the beginning of 1987 with the fall of Hu Yaobang, came a more realistic approach based on a realisation of the practical difficulties of implementing reform policies. This has opened the way for a third stage. We should no longer be asking whether the reforms can succeed but how they are going to fail.

3.

A crash caused by sudden social or political upheavals or gross economic mismanagement now seems unlikely. An undramatic drift towards more conservative policies and stagnation seems more likely. More reformist measures are in the pipeline. If these faïl (it is difficult to see how they can succeed) and have to be reined in the credibility of the

пло reformist strategy may be seriously úhdermined and with it the authority of reformist leadership. In such a situation, a

CODE 18-77