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* Some of Has is
conected with the clearing of the debt chains.
ill increasing, particularly in urban areas. Nominal rates of credit growth of 40 per cent and cash in circulation of 50 per cent reported for 1992 (in Hong Kong press) would seem likely to raise inflation further in 1993. Investment growth of at least 20 per cent in real terms cannot be sustained indefinitely shortages of rolled steel, copper, aluminium, timber and high grade cement have been reported as well as
The trade surplus, though railfreight to get goods to market. still substantial, narrowed in 1992 The parallel exchange rate has depreciated markedly in recent months reflecting large (i.e. billions of dollars) unrecorded capital outflows in the balance of payments.
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9. Not all however is gloom. It is unlikely that China is actually growing as fast as it says the heating of the economy is overstated. According to a recent World Bank study statistical methods exaggerate China's growth rate because price deflators make insufficient corrections for inflation and because the fastest growing sectors (notably town and village enterprises) are over-represented in the calculation of overall growth. This also means the exagerration of the "real" growth rate will worsen as inflation picks up (i.e. particularly in 1992). This may partially explain why overheating has not become more apparent we were working on the wrong figures.
Distribution of growth
10.
Growth continues to be markedly higher in the SEZS and in
An indication of the South East provinces as a whole. relative growth rates (but not absolute growth rates) can be seen in the attached chart.
Key measures for 1993
I
11. Mr Li Peng was rather vague on measures for 1993. understand "to fully transform government functions" to mean getting the bureaucracy out of the planned economy mode of thinking and into playing a guidance role in the economy. I imagine "creating a market for the means of production" refers to increased labour market flexibility (as recently announced in Zhuhai SEZ) and further land and housing market reforms.
which is what thes trading partnek wanted!
Concluding Comment
12. No one has yet shown a willingness to get a firm grip on the economy. Players like the People's Bank and the State Statistical Bureau seem to be aware of the inflationary threat but have little policy clout. Zhu Rongji, in charge of economic policy implementation, has made some cautious speeches whilst Deng Xiaoping, apropos overheating, is reported as saying there is no need to "make much ado about nothing". Many more provincial administrations have been given privileges similar to coastal zones and all appear very
their incentives eager to climb to the top of the woodpile are likely to continue to maximise growth.
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