TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 57

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4

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since 1982 that the output value of light industries

exceeded that of heavy industries. Rapid increases in the

output of consumer items like refrigerators, colour

television sets and cameras

cameras (5)

helped to absorb some of

the excess spending power of consumers.

6.

Rapid industrial growth since the fourth quarter

of 1986 has exerted strong pressure on the bottleneck

sectors which include energy, transportation and certain

key industrial raw materials. Their growth rates in 1988

were much slower than that of industrial output (6)

Shortages of materials are likely to constrain the growth momentum of the economy in 1989 (7).

7.

Despite repeated calls from the Central

Government for the local authorities to reduce investment

expenditure, investment remained in an over-heated state.

(5)

(6)

(7)

In 1988 the output of refrigerators, colour television sets and cameras increased by 86%, 54% and 15% respectively.

Growth rate (%) in output in 1988 :

Key raw materials

Pig iron

Steel

Rolled steel

2.1

5.2

7.5

Energy

Coal

Crude oil Electricity

5.4

2.1

9.3

The year-on-year growth rate of gross industrial output slowed down sharply to only 8.2% in January 1989. The corresponding growth rates for light and heavy industries were 7.9% and 8.4% respectively. The Chinese authorities expected that this slow down would become a trend in 1989 due to shortages of energy and key raw materials.

CONFIDENTIAL

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