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(v) The appreciation in the value of the Hong Kong
dollar 5% so far this year is a threat to
Hong Kong's external competitiveness.
(vi) The OECD's recent forecast of a recession in
On
late 1977 is also a matter of concern. past form, the effects would be felt quickly in Hong Kong. However, the Director of Commerce and Industry in Hong Kong recently told the Head of Hong Kong Department that the Hong Kong economy would not be greatly affected by
anything other than a really major recession.
(vii) The Chief Secretary, Sir Denys Roberts, in
winding up the debate in the Legislative Council on 11 November, stressed that social advancement was essential and, in this connection, said: "We must not discount the possibility that, if necessary, additional taxation, whether direct or indirect, may have to be imposed in order to achieve the wholly admirable aims which we have now set ourselves, though the Government will not forget that low rates of taxation are a vital element in our development and in the continued effectiveness of our industries." Parts of the Chinese press in Hong Kong have welcomed this statement. It is possible that the Financial Secretary, without whose agreement such a statement would not have been made, intended it as a concession to Lord Goronwy-Roberts' understanding of what was to have been done about taxation in
the last budget (see paragraph 1 above). Alternatively, the Financial Secretary may be expecting a hostile attitude on our part to what- ever budget proposals he puts forward. also have already decided against proposals for progressive taxation.
He may
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