TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 51

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(4)

from tourism (paragraph 12), China's foreign exchange

reserves were at an historic high of around US$18 billion during most of 1988 (paragraph 12). A large proportion of the foreign investments in China were found in the coastal provinces, particularly

Guangdong and Fujian (paragraph 14).

In an attempt to combat the high rate of inflation,

the Chinese authorities tightened their control over

loans and currency issue in the fourth quarter of

1988 (paragraph 15) and increased the interest rates

on bank deposits and bank loans (paragraph 17). But

these measures can only be successful in reducing the

inflationary pressures after some lead time

(paragraph 16). Reflecting the tightening of the

supply of Renminbi, its exchange rates in the foreign

exchange adjustment centre and the black market were

reported to have strengthened considerably (paragraph

16).

(5)

(6)

Guangdong was the fastest growing province in China in 1988 and recorded growth rates in real terms of

16% and 33% respectively for GNP and gross industrial

output (paragraph 21). But Guangdong's over-heating

problem was also more serious with its average rate of inflation in 1988 being in excess of 28%, significantly higher than the national average of 18.5% (paragraph 22).

Hong Kong domestic exports and re-exports to China continued to grow rapidly in 1988. Strong domestic

consumption in China and the increase in outward

processing activities contributed to this rapid growth (paragraph 27).

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