GF 323
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and
last
1989 (10).
The
inflation rate
recorded
during the
economic boom in the late 1980s was the most severe.
The downward adjustment in the economy that ensued, as a
result of the government's anti-inflation measures, was hence also the most drastic. Only after the three-year austerity programme had officially come to an end in late 1991 did China's economy resume its high-growth path.
15.
Already in late 1992, several Chinese leaders, including the most pronounced reformist, Vice Premier Zhu
Rongji, sounded out warnings about the tendency towards overheating. But the question remained as to what kind of policy action the government should take. The experience in 1989 strongly argued against applying heavy doses, as this would stifle overall economic development and further reforms (11). Moreover, radical restraint measures were
expected to encounter great resistance in the provinces and
localities.
(10)
Growth rate in real terms of China's GNP
(%)
1980
7.9
1981
4.
4
1982
8.8
1983
10.4
1984
14.7
1985
12.8
1986
8.1
1987
10.9
1988
11.0
1989
4.0
1990
5.2
1991
7.7
1992
12.8
(11)
Deng Xiaoping was reported to have delivered a speech in Shanghai during the Lunar New Year period, calling on the policy makers in China to continue with economic reform, and not to haggle over the question of whether the economy was overheated or not. This was a reflection of the prevailing thinking among the Chinese leaders that policies for curbing inflation should not constitute a serious obstacle to economic reform.
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