9.
CONFIDENTIAL
cost of living does not start to rise again, there is no
cause for serious alarm. But for this we are dependent on
how demand develops in the United States and Europe.
13.
The Chinese Government has continued to be
noticeably helpful in various ways. In particular they
have used their influence with communist controlled
Trades Unions to prevent any industrial or social issues
resulting from the current hard times from escalating into
a confrontation with the Government. The relationship
of Hong Kong officials with Chinese officials stationed
in Hong Kong is relaxed and effective.
14.
Nevertheless the prevailing atmosphere
of near-depression, adjustment, anxiety and frustration,
is not a pleasant one for a government of this sort. It
is a situation in which at best the population and press
are querulous and nervous and inclined to look for scape-
goats, and at the worst there is much dry material lying
about to which a spark might be set by bad luck or clumsy
administration. It is a year in which we must certainly
be very careful.
15.
I end this despatch by a plea to bear
this in mind in dealing with Hong Kong this year.
Whether
the issue is trade negotiations with the EEC or the United
States, or the negotiation of a new Defence Costs Agreement,
or any other matter in which H.M.G. plays a distinct and
/dominant role