TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 58

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CONFIDENTIAL FUENT

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According to a statement made by the President of the

People's Construction Bank of China (PCBOC) in January

1989, there were 200,000 projects under construction with

a total value which exceeded Rmb 1,300 billion (most would

not be completed in 1989). The government decided to suspend 10,000 project, accounting for only 5% of the

total in terms of numbers and about 3% in terms of value.

Total fixed asset investment undertaken by all enterprises

in China in 1988 amounted to Rmb 431.4 billion, 18.5% more

than in 1987.

8.

(8)

Rapid growth in workers' payroll and

inflationary expectations on the part of consumers led to

a consumption boom in 1988. The value of retail sales,

estimated at Rmb 740 billion, was 28% higher than in

1987. Discounting for the effect of higher prices, the

(9). growth rate in real terms was about 8%

9.

Measured in terms of retail prices, the average

rate of inflation in China was 18.5% in 1988. The rate of

inflation was accelerating during most of 1988.

It was

only in the last three months (October, November and

December) that it showed the first signs of peaking, at

around 26%.

(8)

(9)

In 1988 the amount of money paid to those employees on the payroll of all enterprises (including state-owned, collectively owned and privately owned) increased by 22.1% to Rmb 229.7 billion. Average income (including wages, bonuses and subsidies) of urban residents went up by 26.5% in 1988, more than offsetting the rate of inflation at 20.7% in cities.

This growth rate was substantially lower than that of gross industrial output in real terms at 17.7%. Such an apparent discrepancy was due to the fact that a large proportion (probably well over half) of the Chinese consumer spending was on foodstuffs. growth rate in real terms of agricultural output in 1988 was slow at only 3.2%.

The

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