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機密
CONFIDENTIAL #2
Report on developments in Hong Kong-China Economic
Relations - Fourth Quarter 1988 (Paper CRC 7/89)
Govt Econ (Ag) informed members that the Chinese economy was still overheated although there were signs that
inflation was levelling off. Problems in the bottleneck
areas, e.g. power and raw materials, were still evident. More time was needed before the austerity measures introduced by the Central authorities would
begin to take effect. The Chinese visible trade deficit
had widened due to the diversion of resources from the export to the domestic sector of the economy. China's overall foreign exchange balance was still quite
healthy. The interest rate had been raised but this had
been matched by inflation. People were thus still reluctant to place their money in the bank for long periods.
Guangdong was booming and could be described as
seriously overheating. It was the number one exporting province, accounting for a fifth of all China's
exports. The effect of inflation in China on consumer
prices in Hong Kong was not as great as media reports led people to believe. China did not constitute the
major source of Hong Kong's food and her share of the market had declined in recent years. The increase in prices in food mostly occurred at the retail level. The
prices of such goods only rose marginally higher than those from other countries.
CS expressed surprise that the Renminbi had strengthened despite the various economic problems besetting China. Govt Econ (Ag) said this was probably seasonal, due to Chinese New Year. Foreign exchange had entered China now and the Renminbi was beginning to weaken once more.
In response to CS's comment that measures taken by the Central authorities seemed to be having an impact, Govt Econ (Ag) said restraints imposed by the Centre would
CONFIDENTIAL # 機密
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