CONFIDENTIAL
Reference.............
55
CODE 18-77
$$.10/76
Mr quantrill K 247
HONG KONG:
I will talk to fr Hadden lave next week but
I have no hose of usefully wending fences fusefully prespeak. 6
ECONOMIC DIALOGUE
1. Your minute below.
2.
sas
Mr Smith's letter drew the sort of reply forecast by our predecessers (document 53). In view of this it would, I suggest, be pointless to simply attempt to establish a dialogue between experts without further action on our part. In the circumstances therefore I would advise Mr Stewart to take this question up with the Governor and or the Finance Secretary during his visit.
3.
4.
As I see it, there are three major objectives:- a) To elicit whether the Hong Kong Government are willing or prepared to take part in a mean- ingful technical dialogue;
b) To determine the Hong Kong Government's priorities between the means of deficit finance. This would be particularly important if the MFA negotiations were to result in a significant down turn in exports;
c)
To discever the Hong Kong Government's views on the proposed alternative budgeting procedure. This is I believe particularly dear to the hearts of the Economists Department.
Clearly (a) is of prime importance since, if there is a satisfactory outcome, the other two can be achieved through technical discussions. I would suggest however that Fir Stewart tries to obtain some insight into the Hong Kong Government's thinking as to the relative merits of digging into the reserves, borrowing and increasing taxation as methods of meeting short term deficits, such as may be experienced if the EEC's proposals on MFA do come into force.
KKK 100/2
11303
3.31
29 September 1977
See sep.mante 12.5/10
ои
J Thompson
upien
Hong Kong & General Department
You will recall that when for Haddon Cave called at the Office in thay, be seemed to agree to a technical discussion of his Endget proposals with the Economists Department ( para 7 of your letter of 16 Ime to the Governor
• -FEngA). As Smith's attempt to Camach such a dialogue
CONFIDENTIAL
bes