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5
Hong Kong/China relations
18. Hong Kong's relations with resident Chinese officials and with Guangdong continued to be pragmatic, friendly and satisfactory. It is noticeable that if leading Chinese personalities come to Hong Kong they now have no inhibitions about meeting me or other members of the Government. The Chinese Government followed up their invitation to me in 1979 with one to Sir Philip Haddon-Cave last year and his visit to Peking was a distinct success.
19. The special economic zone at Shenzhen across the border, is slowly taking shape, and Hong Kong investment in it, in Guangdong, and in the rest of China has been widespread. I rarely meet a leading businessman, whether Chinese or expatriate, who has not a large or small venture going in China. Most are more concerned with experience than immediate profits. But many are consciously buying contact with the leadership, whether at a national or provincial level. The investments and the contacts are desirable in themselves, and have political value. We encourage this process, have regular meetings with Guangdong officials about trade, and monitor progress.
20. The Guangdong Authorities proposed a nuclear power station be built in Guangdong and operated jointly with Sir Lawrence Kadoorie's China Light and Power Company so that the foreign exchange content could be repaid through sales of electricity to Hong Kong. A joint feasibility study has been completed, and provided it survives the current squeeze on capital projects orders should be placed in the course of the year.
21. The steady improvement and multiplication of commercial and official contacts between Hong Kong and China personalities is certainly providing an improved basis for eventual dialogue about the future of Hong Kong-as of course, on a much more important level, does the warmth of Sino/British relations. Undoubtedly the Chinese would like to leave things as they are for many years to come, but the politico/legal problem of how to do so is complex and sensitive, and the preoccupations of unwinding the cultural revolution and changing person- alities and policies do not produce an atmosphere conducive to settling it. Nor do booming land prices in Hong Kong give any signal of urgency. Meanwhile there is plenty of time, but it is shortening.
Postscript
22. In retrospect 1980 was a year of some achievement and a year in which most people in Hong Kong had much to be thankful for. But that is not how most people feel. Latterly inflation and static or dropping real incomes, and a rapid rise in commercial rents, have affected wide and articulate sections of the middle and lower income groups. Uncertain forecasts for 1981 offer no prospect for early relief. Hong Kong may have been lucky largely to have escaped the effects of world-wide recession so far, and in the last half of 1980 was only lightly touched by it. But after five years of steady growth and rising affluence, and coming on top of the disturbing influx of immigrants most of the population feel the new climate threatening and chill. This Government will need to tread warily.
23. I am sending a copy of this despatch to Her Majesty's Ambassadors at Peking and Tokyo.
I am Sir
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Yours faithfully
C. M. MACLEHOSE.