TNAG-1873-FCO40-2661-Relations-between-Hong-Kong-and-China-1989 — Page 59

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10.

While agreeing that inflation represents the

(10) "principal contradiction" in China's economy, most Chinese leaders appear anxious to maintain a reasonable

rate of growth in 1989. This is presumably because,

notwithstanding the onset of many new problems, the most

remarkable achievement in the past ten years of reform has

been the expansion of the economy, resulting in increased

per capita incomes. Thus, sacrificing most of the growth for the sake of price stability is apparently not

considered desirable. This attitude is evident in the

forecasts for 1989 announced by the State Council on 13

January : 7.5% for GNP (3.7 percentage points lower than

in 1988), 8% for gross industrial output (9.7 percentage

points lower than in 1988) and 4% for gross agricultural

output (one percentage point higher than in 1988). For

inflation, the State Council's forecast for 1989 was in

the range of 13.5-15.5% (three to five percentage points

lower than in 1988).

(c) External sector

11.

While the slowdown in the growth rate of China's

exports continued into the fourth quarter of 1988 (only 13% in the fourth quarter), the growth rate of its imports

(10) In Communist philosophy, at any point in time there

exist many contradictions (i.e. problems). But only one of these is of principal or primary importance. Other less important contradictions are relegated to secondary importance. Thus, at any point in time the Communist Party should devote most of its resources to solving the principal contradiction. present, this is inflation.

At

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