CONFIDENTIAL
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to persist for sometime to come.
In the period under review, Hong Kong's domestic exports to China increased by 35%, which may in part be attributed to the input into Joint Ventures, the products of which are then re-exported. Imports of Chinese goods into Hong Kong also increased rapidly, reflecting China's continuing export drive. Two-way tourism has continued to increase, financial links likewise, but Hong Kong investment in China appears to have fallen off a little lately.
In general it was felt that 1986 had been a year of quite significant developments in the Chinese economy, (e.g. labour reform, the new bankruptcy law, development of stock markets, etc), even though the year had been envisaged as one for consolidation. These all had major social and political implications, and to some extent also for the control exercised by the "danwei". Up to now the relatively easy elements of reform had been tackled, so that progress might be slower and more cautious in 1987. This judgement was made before the recent ructions in Peking: we shall no doubt see in due course what the economic impact is.
The meeting considered a paper on the structure and organisation of the Shenzhen SEZ. This led to members again registering their concern about the difficulties experienced in obtaining reliable information from the Chinese authorities, e.g. on traffic projections, and about the need not to be pressured into investing in new infrastructural facilities on the basis of inadequate projections. We are currently under some pressure from the Shenzhen authorities to build Phase II of the new Lok Ma Chau road bridge at the same time as Phase I. A paper was tabled at the meeting, but because it suffered from precisely the problem of insufficient information, it was referred back for further study.
It was generally felt that there was a need to look again at our strategic planning capability in the light of developments across the border. Given this, and in the light of the latest report on the CICC's recent activities, it was felt that we should take another look at the role of the CICC.
c.c.
Watch this space for the next exciting instalment!
Yours ever,
this
(C T Wood)
Assistant Political Adviser I
D G Blunt, Esq., LVO British Embassy, Peking
CONFIDENTIAL