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The Governor asked for Xu's views of other
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developments in Hong Kong. Mr. Xu said that some new developments deserved attention. These had an impact on developments on the mainland, and vice versa. warned Peking of the need to handle the latter carefully. His main concerns at the moment were the labour issue, the emigration of the professional/managerial classes, and the present high property prices. Chinese economic policies would give Hong Kong a new importance in the region as a high technology/service centre port. Professional and managerial people would be especially important in such circumstances, and he hoped we could take measures to resolve the problem of emigration by this group. His contacts with the American and British Chambers of Commerce indicated concern about the high price of property. Increasing costs were making some companies move into industrial areas, and some might even move out to Singapore and elsewhere. While not serious now, this trend would affect Hong Kong's prosperity if it continued. He wondered if we could use economic measures to control the level of the property market. As a separate issue, he also hoped we could allow Chinese students returning from US education to work in Hong Kong. He recognised this was a British matter
but he believed a limited number would have no adverse effect in Hong Kong and would actually be beneficial.
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now.
The Governor said that property prices were high In the early 1980s they had been higher still, and had then suddenly dropped sharply. There were some signs of an adjustment now. The supply of land was also an important factor in preventing price rises: if land supply was too restricted prices would increase. On Chinese
students working in Hong Kong the Governor said he had agreed with Lu Ping that a small number would be acceptable: a large number would however create a bad effect here. Mr. Xu said he was studying the land situation: this was in any event constrained by the 50 ha limit. He had some suggestions as to other methods. In line with Hong Kong's low tax policy, he wondered if the tax structure might be adjusted to reduce the burdens on property. Also, he noted that separate taxation of husbands and wives had been a good measure to attract middle-class support, and he wondered if we could do more in this area: tax exemption for millionaires meant nothing, but for the middle classes it might gain more support for the government. The success of our Home Ownership Scheme had been another effective measure in this regard. On property, we must beware of another sudden drop as 1997 approached, similar to that in 1982. The Governor
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