CODE 18-77
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Reference.............Commentary.
Shops. 19/1 Bir Davies.
Mr Broadbent
My Bach Li
Pa .
4
11 MMB 090/1
Mr.
Greegloos.
2. JAM 1093
CHINA ECONOMY 1993: THE TASKS AHEAD
1.
DTI 072/20
CC DTI
HKD
(3
"Very useful a servible
analysis from McLane
You asked for some comments on Peking telno 005 on economic tasks for 1993-
The growth target
2.
Many Chinese authorities are predicting or, more accurately, targetting 10.5 per cent GNP growth in 1993. Others look towards 8 per cent. Both are a reduction on the estimated 12 per cent growth for 1992.
3. Although the Chinese authorities routinely refer to the economic situation being "normal", "balanced" or "good" the risks of overheating are now becoming more prominent in policy speeches and press reports. As Peking reported on 21 December (Chinese leaders warn of inflationary threat) this is an admission of the inevitable which will require more controlled macroeconomic policy in 1993.
4.
Lower growth in 1993 is seen by the Chinese Authorities as "business as usual" but with cutbacks in areas of excessive growth during 1992.--Ambassador Ma said at a London conference (13/1) that China was looking for a "soft landing".
5.
Priority areas for policy tightening are what is known as the "three favours of provincial authorities", namely:
* Real estate investment
* Special economic zone development/ expansion
* Stock exchange listing/expansion
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Vice Premier Zhu Rongji for example recently noted that capital construction is excessive and in many cases inefficient, particularly in real estate and the proliferating economic development zones.
7. These actions will require tighter credit policy (though strong action has already been ruled out). There has already been some reporting of the People's Bank trying to curtail credit expansion at the provincial level (speeches mention measures being in place) but as yet there is no evidence of any success. If anything the authority of the People's Bank has been weakened by the recent proliferation of new banks and and non-bank financial institutions (as reported in FEER 14 January).
- is it manageable?
ô.
Western economists would in general take a more qualified view on the underlying economic picture. There is no imminent economic crisis but it is clear that the situation remains potentially unstable. Inflation whilst moderate, is
14,
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