TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 242

G.F. 326

CONFIDENTIAL # 3

(1)

(2)

CRC INF 12/88

(CEC 6/88)

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

(Paragraph references follow those in the report)

In the first half of 1988 the economy of China was characterised by rapid growth and high inflation. Its gross national product and gross industrial input recorded real growth of 11% and 17.2% respectively. The growth rate in the second quarter was even faster

than in the first. Inflation was running at a double

digit rate, 13% for the first half as a whole and 19% if June 1988 is compared with June 1987 (paragraphs 1

to 9).

The growth momentum in the industrial sector, which has been sustained for nearly two years, was putting great strain on several important bottleneck sectors including energy, transportation and industrial raw

materials (paragraph 4).

(3) Consumption demand and, to a lesser extent,

investment demand have been maintained at high

levels. The former has been further fuelled by inflationary expectations (paragraphs 7 and 8).

(4) The growth momentum of China's external trade

continued in the second quarter of 1988 and its

visible trade balance further improved. For the

first half of 1988 as a whole compared with the same period last year, exports grew by 26% to US$21.03 billion, while imports grew by 19% to US$22.18

billion, resulting in a visible trade deficit of only US$1.15 billion, compared with US$2 billion in the

CONFIDENTIAL #