TNAG-2292-FCO40-3304-Official-visits-from-Hong-Kong-to-China-1991 — Page 18

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CONFIDENTIAL

3

機密

1992.

prices of a larger variety of raw materials, including

timber, coal, non-ferrous metals, building materials and

production equipment would be freed from state control in

However, a complete removal of the state-fixed

selling prices will still take some considerable time to

materialise.

The recent developments can nevertheless be

as encouraging steps

regarded

towards

a

more

market-oriented economy (or "commodity economy", following

the Chinese terminology).

10.

still low,

cities

Even though the overall rate of inflation was

inflationary pressures were building up in the where the cost of living index rose by 10.9% in June

1991 compared with the same month in 1990, and by an

first half of this year over the

Against the background of a buoyant

inflation in the second half of the

average of 6.9% in the

same period last year.

economy, the rate of

year is

expected to rise further. The additional increase

in bank loans as a result of the recent flooding(15) will

further heighten the inflationary pressures. In order to

meet the unexpected expenditures in the wake of the

flooding, the government

the amount of treasury

decided in late June to increase

bonds issued in 1991 by 55% to a

total of Rmb 15.5 billion(16). By cutting back on note

(15)

(16)

As a result of the serious flooding in central and eastern China, additional loans are required for ensuring adequate supply of basic necessities to people in the flood-stricken areas, for re-building the damaged facilities, and for restoring production.

In addition to the original lot of treasury bonds totalling Rmb 10 billion, a further lot of treasury bonds worth Rmb 5.5 billion, with a three-year maturity and carrying a coupon rate of 10%, will be issued in the rest of 1991. Besides, the Finance Ministry is planning to issue 60% of the treasury bonds through an underwriting system led by the Industrial and Commercial Bank of China, as compared to the original target of 25%.

CONFIDENTIAL

機密