Original at: HKK0267
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CONFIDENTIAL
Mr Murray
Mr Cortazzi
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RECEIVED IN REGISTRY NO. 51
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1 SMAR A80
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PA
NG. ST
REGISTRY
Action Takan
Au
2012
VISIT TO HONG KONG BY HEADUCF BOGD : 19 FEBRUARY TO 3 MARCH 1980
REGISTRY
1. The following are some generalakpressions. separately with refuge
I have dealt immigration and staffing questions.
Relations with China
D
2. Changes of attitude were most striking in this field, compared. with my last visit in 1977. Then the problem was discussed certainly, in private and official circles, but was not the subject of uninhibited debate. Now it comes up regularly in conversation, both with business- men and politically conscious people, and is raised far more often in the press.
3.
There is clearly an overlay of optimism, resulting from the new posture of the Deng administration. China's benevolent view of Hong Kong is seen as genuine, and as making good sense from Peking's point of view. Thinking people at the same time point to the unpredictability of internal Chinese politics and some see a possibility of disagreement between Peking and Guangdong turning to Hong Kong's disadvantage, if provincial elements are tempted to try to cash in too quickly on Hong Kong's prosperity.
4.
Commercially economic cooperation, cross-border investment and the special economic position of Guangdong are seen as beneficial to Hong Kong. But there is a very large dose of realism about the speed with which these opportunities can be exploited. Undoubtedly there has been considerable development, for instance in the Shumchun special zone. Reports suggest that about 400 joint ventures of varying size- have ben set up. Many of these are on a small scale, using local Hong Kong capital, although some of the big Hongs are exploring openings (eg a recording cassette factory by Swires). But experience has already shown that the advantages of space, cheap land and lower wages are to a considerable extent off-set by low productivity on the Chinese side of the border. Returns are therefore not as good as expected. Most of the investors are likely to stick it out, but with longer term profits and a general foot in the door' philosophy as their main impulse.
5. In the shorter term many observers see the rapid growth of Chinese investment in Hong Kong as more significant. So far the main motive is clearly economic. But the move will gradually have the twin effect of increasing both Communist influence in the territory and China's stake in the economic buoyancy and stability of Hong Kong.
6.
There may also be a side effect on the problem of New Territories leases. In particular the recent purchase by China Resources of a large area North West of Yuen Long, at Tin Shui Wai, probably for residential development, could lead to some Communist bodies putting pressure on Peking for a more flexible approach to
/the
CONFIDENTIAL