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Chinese officials in Hong Kong and Guangdong. Cooperation over illegal immigration and a wide range of technical matters, including water supply, have been entirely satisfactory. Investment by Chinese agencies in Hong Kong and by Hong Kong companies in China has been extensive, and investment in China has secured for some of Hong Kong's senior entrepreneurs access to the highest levels of the Chinese leadership.
14.
A new town is being built in Shenzhen, immediately across the frontier, to tap Hong Kong capital, increase Chinese foreign exchange earnings, and provide employment, but above all to absorb the lessons of Hong Kong management and marketing expertise for application elsewhere. The project should succeed, given time. But certainly we cannot allow it to fail or disappoint in circumstances for which Hong Kong could be blamed. I therefore visited the area at the end of the year, both to publicise our wish to cooperate and to identify the items involving joint action or action by Hong Kong.
15. Finally there has been a marked rise in discussion here of the future of Hong Kong. This is inevitable as 1997 draws nearer, but it was given sudden impetus by the Nationality Bill, and the Secretary of State's visit to Peking and the prospect of that by the Lord Privy Seal maintained public interest and discussion. The Prime Minister's visit next autumn will certainly lead to intense speculation here that something may be arranged.
16.
While confidence is an unpredictable commodity, and some new development could either buttress or undermine it, it is a fact that while the future is a consideration in land and investment policy, it is still a minor one in comparison to, for instance, interest rates or the level of worldwide economic activity. So though the volume of noise in Hong Kong is increasing there has been no slide in confidence, nor will the Chinese Government be persuaded at this stage that one is imminent. In these circumstances, and given the immense preoccupations of the Chinese Government, it would be a mistake to try and force
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CONFIDENTIAL