CODE 18-77
$$ 10/76
CONFIDENTIAL
Reference
NOTE FOR THE FILE
HONG KONG BUDGET 1977/78 AND OTHER MATTERS
REGI
- 8 AUG 1977
HKK 100/2
1. Mr Smith, Senior Economic Adviser, called on Mr Stewart on 3 August to discuss his visit to Hong Kong last month (Mr Smith's minute of 14 July refers).
1977/78 Budget
Never-
2. Mr Smith said that in his view the Governor's letter of 25 June to Mr Stewart, which he had seen only after his visit to Hong Kong, did not meet our basic points such as that the budget statement should deal with forward financial planning, be an instrument of economic and social objectives and be more closely tied in with the Governor's statement at the opening of the annual session of Legco. Mr Smith accepted that the objective now should not be to rake over the coals as regards this year's budget but to seek to influence the budget for next year. theless, it was agreed that, as stated in paragraph 7 of Mr Stewart's letter of 16 June to the Governor, Mr Smith would prepare a draft to the Financial Secretary dealing with a number of technical aspects arising from this year's budget. Mr Smith will clear his draft with the department. For the rest, it was suggested that we should seek to ensure that the Governor's state- ment at the opening of the new session of Legco in October 'should look forward" to next year's budget and that the Governor's next visit in November/December would provide an opportunity for a preview of the budget prospects for 1978/79. It was not expected that the Financial Secretary would be present for such a discussion.
Report of the Third Inland Revenue Review Committee
3. Mr Smith said that he had written to the Board of Inland Revenue to ask them if they could provide a professional analysis of the Review Committee's report. He had understood from a subsequent conversation with the Inland Revenue that they had spoken to Mr Stewart about this request. Mr Stewart said that this was not so. It was accepted that we should leave the next move to the Inland Revenue.
IBRD Report on Hong Kong
4.
It was noted that the final version of the report was not yet available. Mr Smith said that he had found officials in Hong Kong to be rather critical of some of the views expressed in the first draft of the Bank's report, especially with regard to the possible creation of a Central Monetary Authority. It was agreed that nothing, further could be done about this matter pending the Bank's report that it was becoming clear that there was a growing body of opinion in Hong Kong which accepted that some kind of CMA was necessary.
Implications for Hong Kong of a US/China Rapprochement over Taiwan 5. It was noted that the Political Adviser in Hong Kong had written to the Head of FED putting forward the suggestion, as /Mr Smith
CONFIDENTIAL
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