GRS 1250
CONFIDENTIAL
FM HONG KONG
TO DESKBY 23113OZ FCO
TELNO 2299
OF 2310157 OCTOBER 25
2
CONTIDENTIAL TOP COPY
HHH 02716
RECEIVED IN REGISTRY
2 3 OCT 1985
235
CEOL
MR RENTON'S VISIT : THE HONG KONG SCENE
INDER
PA
Action Taken
1. WHEN HE ARRIVES NEXT WEEKEND MR RENTON WILL FIND AN AIR OF
**BUSINESS AS USUAL'' IN HONG KONG. THE SIGNATURE OF THE JOINT DECLARATION REMOVED A LARGE ELEMENT OF UNCERTAINTY ABOUT THE INTENTIONS OF THE CHINESE AND BRITISH GOVERNMENTS AS REGARDS THE FUTURE OF HONG KONG. IT CONFIRMED CHINESE ACCEPTANCE OF BRITISH ADMINISTRATION OVER HONG KONG FOR THE NEXT TWELVE YEARS AND THEIR AGREEMENT THAT THE SOCIAL AND ECONOMIC SYSTEMS SHOULD REMAIN UNCHANGED THEREAFTER. THIS HAS ENGENDERED A SUBSTANTIAL DEGREE
OF SHORT TERM CONFIDENCE AND PROVIDED A BASIS ON WHICH LONGER TERM CONFIDENCE CAN BE BUILT:
2. ECONOMICALLY THE RATE OF GROWTH HAS NOT BEEN AS HIGHT AS IT WAS
LAST YEAR BUT IS STILL EXPECTED TO REACH BETWEEN 4.5 AND 5 PERCENT. UNEMPLOYMENT STANDS AT ONLY 3 PERCENT WITH 1 PERCENT UNDEREMPLOYMENT,
IN EFFECT THE WORKFORCE IS FULLY EMPLOYED. INFLATION IS RUNNING AT
3.3 PERCENT. DOMESTIC EXPORT PATE'S HAVE FALLEN BY 6 PERCENT
COMPARED WITH LAST YEAR BUT A STRONG RISE IN RE-EXPORTS, PARTICULARLY
TO CHINA HAS MAINTAINED HONG KONG'S PERFORMANCE IN INTERNATIONAL
TRADE. THE LINK WITH. THE U.S. DOLLAR HAS HELD WELL IN SPITE OF
THE GYRATIONS OF THE FOREIGN EXCHANGE MARKET EARLY THIS YEAR.
3. THE PROCESS OF EXTENDING THE ELECTED MEMBERS OF THE DISTRICT
BOARDS, OF CREATING A NEW REGIONAL COUNCIL AND OF INSTALLING A
PARTLY ELECTED CENTRAL LEGISLATURE (LEGCO) HAVE ALL, WITH A FEW SHORT HICCUPS (AS OVER THE POWERS AND PRIVILEGES BILL), GONE VERY
SMOOTHLY. THE RESULTING COMPOSITION OF THE LEGISLATIVE COUNCIL
IS NOT ALL THAT DIFFERENT FROM THAT PRODUCED BY THE APPOINTED
SYSTEM. AND BECAUSE OF THIS HAS GAINED SUPPORT FOR THE INDIRECT
ELECTIVE SYSTEM.
4. ALL THESE FACTORS HAVE COMBINED TO CREATE SOCIAL STABILITY AND
AN ABSENCE OF IMMEDIATE TENSION IN THE COMMUNITY.
5. UNDERNEATH THIS PICTURE OF STABILITY LIE THE CONSTANT FACTORS OF VOLATILITY AND VULNERABILITY. THE VULNERABILITY IS TO EXTERNAL
TRADE FACTOPS. AS A COMMUNITY WITHOUT RESOURCES HONG KONG LIVES BY
MANUFACTURING AND TRADE. ANY LIMITATIONS ON ACCESS TO OVERSEAS
MARKETS THREATENS HONG KONG'S ECONOMY. A STRONG ECONOMY IS ESSENTIAL
TO SOCIAL STABILITY. THENCE THE DEEP AND INSISTENT PUBLIC CONCERN EXPRESSED ABOUT PROTECTIONISH IN THE UNITED STATES. THE EXISTENCE
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