CONFIDENTIAL
045330
MDHIAN £80
DOMESTIC SITUATION
IN
4.
JIANG ZEMIN, IN A LONG ACCOUNT, DESCRIBED THE CENTRAL TASK OF THE GOVERNMENT AS MAKING PROGRESS ON THE ECONOMY WHICH WAS IN TRANSITION FROM CENTRAL PLANNING TO A SOCIALIST MARKET ECONOMY. 1992 IT HAD GROWN BY 12.8% AND WAS EVEN HIGHER THIS YEAR. THERE WERE PROBLEMS IN THE FINANCIAL SECTOR AND INVESTMENT HAD BEEN EXCESSIVE. HE RULED OUT THE OLD ADMINISTRATIVE METHODS OF CONTROL: THE ONLY WAY TO RESOLVE THE DIFFICULTIES WAS TO ACCELERATE THE MOVE TO THE SOCIALIST MARKET ECONOMY AND TO DEEPEN REFORM. THE BRAKES HAD TO BE APPLIED SLOWLY TO THE ECONOMY IF THE REFORM PROCESS WAS TO BE MAINTAINED. IN THIS REGARD, HE POINTED TO THE STRENGTHENED LEADERSHIP OF THE BANKING SECTOR THROUGH ZHU RONGJI'S APPOINTMENT TO RUN THE CENTRAL BANK. THE TIGHTER MONETARY POLICY HAD ALREADY YIELDED AN IMPROVEMENT IN THE EXCHANGE RATE. THE CHINESE CURRENCY HAD STRENGTHENED BY SOME 15% ON THE BLACK MARKET. IN FUTURE, CHINA WOULD HOLD A STORE OF CURRENCY IN ORDER TO INTERVENE IN THE CURRENCY MARKETS AS NECESSARY.
5. THE FOREIGN SECRETARY SAID THAT UK/CHINA TRADE WAS IMPROVING BUT WAS WELL BELOW THE LEVEL IT MIGHT ATTAIN. IT WAS STILL ONLY HALF THE LEVEL OF BRITAIN'S TRADE WITH SINGAPORE AND KOREA. HONG KONG WOULD BE A VALUABLE LINK IN BUILDING UP TRADE. JIANG ZEMIN AGREED. THE RECENT RAPID GROWTH OF CHINA'S TRADE WITH THE REST OF THE WORLD MEANT THAT THE CHINESE ECONOMY WAS NOW INSEPERABLE FROM THE WORLD ECONOMY. THIS WOULD BE A FACTOR CONTRIBUTING TO STABILITY AND A SMOOTH TRANSITION IN HONG KONG.
6.
THE FOREIGN SECRETARY ASKED ABOUT THE AGRICULTURAL SECTOR. JIANG ZEMIN SAID THE POSITION OF THE 900 MILLION RURAL CHINESE VARIED. IN THE COASTAL REGIONS, THE RAPID ECONOMIC GROWTH HELPED SUPPORT THE AGRICULTURAL SECTOR. BUT INLAND, THE PRICE OF BASIC FOODSTUFFS, SUCH AS GRAIN, HAD FALLEN. THE SITUATION HAD BEEN MADE WORSE BY THE PRACTICE LAST YEAR OF PAYING FARMERS FOR GRAIN IN IOUS. HE HAD CALLED FOR AN END TO THIS PRACTICE AND WAS PLEASED THAT THE MORALE OF FARMERS HAD IMPROVED AS A RESULT, AND THEY WERE NOW ENTHUSIASTIC ABOUT INCREASING GRAIN PRODUCTION.
7.
THE FOREIGN SECRETARY CONCLUDED BY SAYING THAT BRITAIN WELCOMED CHINA'S PROSPERITY. THERE WAS NO QUESTION OF US WANTING CHINA TO GO THROUGH ECONOMIC DIFFICULTIES. JIANG ZEMIN SAID THE PROCESS OF STUDYING ECONOMIC REFORM IN THE WEST WAS STILL UNDERWAY, AND THE LESSONS FOR CHINA WOULD BE CONSIDERED LATER THIS YEAR. THROUGHOUT THE CONVERSATION, HE WAS CLEARLY COMMITTED TO CONTINUING RATHER
2
PAGE
CONFIDENTIAL
CONFIDENTIAL
045330
MDHIAN 8280
THAN REVERSING THE REFORM PROCESS.
JIANG ZEMIN ASKED THE FOREIGN SECRETARY TO CONVEY HIS WARMEST GREETINGS TO HM THE QUEEN AND TO THE PRIME MINISTER.
8.
MCLAREN
YYYY
MAIN
65
DISTRIBUTION
72
.HK POLICY
HKD
PUSD
FED
LEGAL ADVISERS//MS BARRETT
LEGAL ADVISERS//MISS BROOKS LEGAL ADVISERS//MR GILES
NEWS D
NTCD
PLANNERS
RAD
PS
PS/MR GOODLAD
SIR J COLES MR HUM
ADDITIONAL
7
CAOFF//SIR R BRAITHWAITE (DIO) CAOFF//MISS NEVILLE-JONES
CAOFF//MR SIBSON PS NO 10.
NNNN
PAGE
3
CONFIDENTIAL
A The National Archives
DEPARTMENT/SERIES
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Extract details:
FCO 40 4040/1
Date and
sign
folio 109
CLOSED UNDER FOI EXEMPTION
27.().
07-01-2019
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