CONFIDENTIAL

progress

interfering with Hong Kong's electoral process: bad mark s for their apparent unwillingness to contemplate further

in the development of Hong Kong representative and governmental system. The next round of air service

talks in November are widely regarded as a political test of good intentions going far beyond the questions on the agenda.

7.

In consequence there are still those who plan to

enjoy the next ten years and then leave, and a much larger number who are adopting a "wait and see attitude".

The majority of course will have to stay and there are on the other side plenty of people prepared to do their best

to make the arrangements laid down in the Joint

Declaration work.

8.

from

The political scene in Hong Kong is very different

elsewhere. With the signature of the Joint

that

Declaration

the risks of polarisation between the left

(communist and Peking supporters) and the right (supporters of Taiwan) have been much reduced. The Joint

Declaration has firmly committed the left to

to the support

of the existing system and the right, which has little

influence, plays it cool.

China's influence over

community leaders generally is somewhat stronger than a

year ago. The political associations which sprouted

during the elections earlier this year have not

prospered. The special interest groups (or pressure groups) are still small. They are vocal, generally well-

intentioned and given much media coverage but do not

carry great weight in the community. They will

nevertheless continue to be a feature (and by and large a

healthy feature) on the political scene.

RELATIONS WITH CHINA

9.

Hong Kong's relationship with China is developing rapidly, both economically and in other fields.

very China has become Hong Kong's second trading partner after the United States (although the content of that trade in

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