TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 160

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12

Situation in China

CRC 15/88

The last report (CRC 11/88) covered price reform in China. This continues to be the most important problem to be tackled by the Chinese leadership.

Price Reform

2.

Up until the middle of July the Deng/Zhao line on price reform held firm: It was necessary in order to achieve the Chinese goal of reaching the level of a moderately developed country by the year 2050. Li Peng, presiding over the Second Plenary Session of the State Council on 15 July, supported this line stating that his aim was the "deepening reform and stabilising the economy" so as to provide a

foundation for the quickening of the pace of reform in 1989.

3.

However statistics for the first half of the year showed the economy to be overheating. Inflation was reported

to have reached 23%. Public discontent was growing. There were reports on bank buying. In response to this the, Chinese leadership announced at a State Council meeting in mid July

that there would be no more price rises that year. This was

the first signal that change was in the air. The discussion on price reform then continued at Beidaihe over the summer, and at

the Politburo meeting held at the seaside resort in mid August

the "tentative plan on price and wage reforms" for the period 1989 - 1993 was approved. This was to rationalise the price structure whilst regulating wages so that the peoples' living

standards could be maintained. Under the plan, most prices would be left for market regulation with only a few commodities

being controlled by the State. The five tasks set for 1989

were;

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a)

b)

to accelerate enterprise reform;

to reduce inflation;

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