TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 118

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Summary of Major Developments in Hong Kong-China Economic Relations in the third quarter of 1988

(paragraph references follow those in the report)

CRC INF 1/89

(CEC 9/88)

(1)

China's economy remained buoyant in the third quarter of 1988 (paragraph 1). Its gross industrial output

recorded a real growth of 18%, which was even faster

than in the first and second quarter (paragraph 2). Rapid industrial growth since the fourth quarter of

1986 has exerted strong pressure on the bottleneck

sectors (paragraph 5). Both consumption demand and

investment demand have been maintained at high levels

(paragraphs 7 and 8). Reflecting the over-heated state of China's economy, inflation was in excess of 20% in the third quarter (paragraph 9).

(2) The Third Plenary Session of the 13th Party Central

Congress decided that in the next two years, efforts

will be concentrated on restoring control of the

economic environment, re-establishing economic order

and deepening enterprise reform (paragraph 10).

(3) The year-on-year growth rate of China's exports

slowed down to 20% in the third quarter of 1988, from

26% in the first half, and that of imports

accelerated sharply to 34%, from 19% in the first

half. As a consequence, the visible trade deficit in the third quarter was enlarged to US$2.26 billion,

from US$1.15 billion in the first half

(paragraph 12). High inflation appears to be exerting some adverse effects on China's visible

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CONFIDENTIAL

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