CONFIDENTIAL
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However, this is seen by the Hong as being bad for business in the long term, and the Hong prefers to pitch its prices at the highest point such that Hong Kong farmers can still stay in business, so long as they concentrate on supplying those grades of pig the Hong is short of.
12.
For the Hong itself, the logistics of supplying Hong Kong are daunting. They must make all of China south of the Yangtse gather the 3,000 pigs a day required by Hong Kong. Purchase, marshalling, and transport are difficult enough to ensure that 8,000 pigs arrive here every day (and our system, particularly the amount of space available in Hong Kong for keeping pigs awaiting slaughter, demands precisely this), but the Hong would find it difficult to cope with a fluctuating, or irregular pattern of demand. The Hong's over-riding business objective is a stable demand, which can be met by a stable supply. Fluctuations in prices would result in irregular demand trends : the Hong itself, therefore, has a built-in bias in favour of a conservative and stable pricing policy.
Effects of Privatisation on the present situation
13.
It is axiomatic that, in any privatisation situation, Government can only give up, at most, what is currently done by Government. Privatising the abattoirs and accepting the Hong's restructuring proposals would not give the Hong any greater control of the resale price of fresh meat the Hong has this already, and the control by the Hong of the slaughter fee as well as the wholesale purchase price would only increase the Hong's overall control marginally. At the same time, privatisation would not weaken the existing deterrents to prevent the Hong from acting irresponsibly (paras. 9-12 refer). These would remain operative in the new system as in
the old.
14.
The
It should be stressed that the Hong proposes to operate the abattoirs not on its own, but through companies owned by the Hong and the retailers, probably as equal partners, or with the retailers having the dominant share. Hong proposes to keep the existing system where it sells the animal before slaughter to the retailer who alone submits for slaughter. Accepting the Hong's proposals would, therefore, in no way weaken the influence of the retailers.
15.
As to the influence of local pigs and their sales price, the Hong has already indicated that it would accept it as a condition on their taking over of the trade (either as a condition of grant or as a statutory condition) that they would be obliged to accept up to some agreed figure not less than 20 or 25% of animals for slaughter from sources other than China. The details would require further negotiation. This
alternative source of supply of animals will remain outside the Hong's control.
CONFIDENTIAL