TNAG-1711-FCO40-2389-Future-British-Consulate-General-in-Hong-Kong-HMS-Tamar-1987 — Page 28

CONFIDENTIAL

PRINCESS MARGARET'S VISIT TO CHINA: 18-27 MAY 1987

BRIEF B (b)

THE CHINESE ECONOMY

1. The aim of China's economic reforms begun in the late

1970s, is to modernise the economy, quadruple gross

output value by the year 2000, and catch up with the West

by 2050. The 7th Five-Year Plan (1986-1991) reflects

these goals. The strategy has been to decentralise

decision-making, reduce the role of mandatory planning

and encourage trade and technological co-operation with

the West and Japan.

2.

Decentralised decision-making will give enterprises

greater responsibility and allow them to use material

incentives to improve performance in response to the

market. Successful enterprises are just starting to

raise funds by issuing stock. A few loss-making

enterprises have been allowed to go bankrupt but this is

a controversial area and progress has been slow.

Horizontal commercial links between enterprises and

between regions are encouraged to offset the stifling

effects of vertical administrative control by centralised

ministries. These measures will be supplemented by

taxation, wage, price and employment reforms.

FC6AAJ

CONFIDENTIAL