TNAG-1711-FCO40-2389-Future-British-Consulate-General-in-Hong-Kong-HMS-Tamar-1987 — Page 30

CONFIDENTIAL

foreign exchange reserves halved. This was achieved

through controlling the growth of imports (especially

consumer durables) while increasing exports.

Export

performance was good, increasing 13%, despite the drop in

earnings from oil sales, the most lucrative export item

over recent years, due to the fall in world prices.

Textile exports recorded fast growth in 1986 to take over

as the leading foreign exchange earner. But further

growth will be difficult: some of China's exports are

meeting protectionist barriers and there is a general

problem of poor quality and uncompetitiveness.

enterprises are generally cut off from and ill-prepared

to compete in international markets. The official

currency, the Renminbi Yuan (RMBY), has been steadily

falling in value over recent years and there are now Y5

to £1.

Chinese

5. Reform has brought great success in agriculture with

marked increases in production of non-staples such as

meat and vegetables as well as grain. Yet here, too,

there are problems. Grain production rose in 1986 over

the 1985 level but was below the record 1984 harvest.

Although far from a disaster in economic terms, the

reformers have suffered a presentational set-back.

government has offered incentives to prevent more

The

FC6AAJ

CONFIDENTIAL

Page 30Page 31