TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 164

G.F. 326

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2

the cumulative total of realised direct foreign investment in Guangdong up to the end of 1987 was US$3.6 billion, Besides slightly more than 40% of the national total. direct foreign investment, it is believed that more than 90% of the outward processing activities in China are located in Guangdong. Hong Kong investors accounted for about 60 to 80% of the direct foreign investment and nearly all of the outward processing activities found in Guangdong (paragraph 8).

3.

(c) Stability

One symptom of economic instability is that the rate of inflation experienced in Guangdong has been several percentage points higher than the national average for most of the past three and a half years

(paragraph 10).

This is related to Guangdong's

over-heated economy with aggregate demand far in excess of aggregate supply (paragraphs 11 and 12).

Guangdong's economic development strategy

4.

(a) Quantity increase versus quality

improvement

At present Guangdong's main development objective is to build up a larger manufacturing base with emphasis on increasing output rather than product upgrading or innovation. This is probably sensible given Guangdong's relatively unsophisticated manufacturing sector (paragraph 13). An additional consideration is that Guangdong's industrial sector needs to expand its output and at the same time remains relatively labour intensive in order to absorb the surplus labour freed from land. Thus automation or labour saving devices aiming at increasing output per worker employed has had a low priority (paragraph 14).

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