37
CONFIDENTIAL
HKK
02611
RIKENED IN REGISTRY NO. 51
15 OCT 1981
K OFFICER
CALL ON THE LORD PRIVY SEAL BY SIR PHILIP HADDON-€. DESIGNATE OF HONG KONG 12 OCTOBER 1981
Present:
-
мо
PA
REGISTRY
Action Taken
CHIEF SECRETARY-
The Rt Hon Humphrey Atkins MP
Mr R D Clift
Mr MA Arthur
Sir Philip Haddon-Cave KBE CMG
Possible visit to Hong Kong by LPS
1. Mr Atkins explained that parliamentary considerations made it uncertain whether he would be able to visit Hong Kong before Christmas, but if not he would certainly do so as soon as possible thereafter.
Current Problems in Hong Kong
2.
Sir P Haddon-Cave mentioned the choice of the next Governor and inflation, where rising internal prices were causing concern.
Future of Hong Kong
3. Mr Atkins asked when the approach of 1997 would begin to cause political or commercial problems. Sir P Haddon-Cave said that logically this should come within about 2 years but this might well be stretched to 5 or 6. He pointed out the dilemma of the Chinese Government. On the one hand there was no chance of their making any major political declaration on Hong Kong within the next 3 years but it was important to them that the Territory should continue as an efficient provider of foreign exchange. One reason was that business interests might start discounting for the future in their calculations. This could lead to a rapid collapse. It might be necessary to find some interim arrangement to prevent this. The fact that we were now in the penultimate decade before 1997 meant that the Chinese Government would have to face up to the problem more squarely.
4. Sir P Haddon-Cave said that difficulties could arise over planned major projects such as the new airport. This would require a plan of revenue and debt financing. The capital market might be reluctant to provide the latter at sensible rates, unless some absolute guarantee for the future could be provided. Mr Atkins commented that the Chinese Government would indeed not be prepared to provide that at present. Sir P Haddon-Cave said that the Chinese certainly wanted to avoid any political move but would come to realise that they had to get round the problem possibly by some action on land leases.
Hong Kong Stock Market
5. Mr Atkins asked about the recent falls in the Hang Seng index. Sir P Haddon-Cave said that these were not surprising. Hong Kong investors were inclined to buy when others were buying and sell when others were selling. This led to a natural amplification of the fluctuations which were taking place in the world stock markets generally.
/Immigration Problems
CONFIDENTIAL