TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 20

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individual leaders are mixed, and observers views reflect

this. According to one reading, Secretary-General Zhao Ziyang has suffered most from the set-back to the rapid reform with

which he has been most associated. Li Peng's implied criticism of specific aspects of the earlier line, including price reform and over-emphasis on the coastal policy is seen as a boost for Li over Zhao. However, HM Embassy in Peking point out that Li

Peng himself is associated with the admitted failure of a policy the execution of which he was, in practice, responsible

for from the 13th Congress in 1987 when he became acting

Premier.

8.

The Embassy consider that Li's opponents may have been working to manouvre Lim into a position where he will become

increasingly vulnerable. Li is likely to bear the brunt of any

disgruntlement should the unpopular austerity programme not

bring the required results or should it lead to stagflation.

It was noteworthy that Li's report did not pay much attention to "moral education" a problem that Deng Xiao Ping described to

the Ugandan President as more serious than inflation. Some

have seen this comment as a veiled criticism of Li who headed

the State Education Commission between 1985 and 1988.

Zhao may

indeed have been attempting to seize the ideological high

ground by recent stress on the importance of "moral education" and party discipline. At the press conference after the

Congress, Li did not show any sign of. a crack in confidence. Both he and Zhao are taking opportunities of appearances in public to show that each is still operating effectively.

9.

This NPC session was important because it resolved to carry on with economic stabilisation policies at least in the

short-term. But it also revealed increasing and unresolved strains on a large number of issues. There was nothing in the

events or implications of the session to rule out Deng's

retiring from his last formal offices, as he would like to

later this year, or to dislodge Zhao as his most likely

political (and military) heir. But this will now have to be

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