G.F. 326
CONFIDENTIAL #≈
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wages and the total wage bill paid to staff and
workers
(7)
•
These increases are mainly attributable to bonus payments, above quota payments and the adoption of
The substantial piece rate wages by some enterprises.
increases in incomes, coupled with a shift of social attitudes in favour of high consumption, have contributed to the consumption boom and inflation in China in the years since 1984. More recently, fears of further inflation has led to a flight from money into goods.
9.
Against the background of China's under-developed tertiary services sectors, heavily subsidised housing system and limited availability of imported luxuries, there exist only a few effective channels to absorb the excess purchasing power of the Chinese public. Thus the consumption boom has so far been concentrated on a limited number of commodities, mainly foodstuffs and some consumer durables like electrical
appliances.
10.
Runaway capital construction is another reason for the intensification of inflationary pressures since
1984. The value of investment in fixed assets in China has increased by over 24% p.a., to Rmb 351.8 billion in 1987 from Rmb 183.3 billion in 1984. Investment projects undertaken by industrial enterprises, especially those by rural and township industries, competed for the limited supplies of energy and building materials and exerted upward pressures on the prices of these items.
(7) As an illustration, during the four years between 1983 and 1987, there have been increases of 14% and 17% per annum respectively in the average annual wage and the total wage bill paid to staff and workers in state enterprises.
CONFIDENTIAL #3
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