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FM HONG KONG
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INFO ROUTINE FCO, PEKING
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050014
MDLIAN 2614
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MIPT: MFN
BEGINS
I AM WRITING TO SEEK YOUR UNDERSTANDING ON THE QUESTION OF THE RENEWAL OF CHINA'S MOST FAVOURED NATION (MFN) STATUS. THIS YEAR, AS IN 1990, THIS IS AN ISSUE OF CRUCIAL IMPORTANCE TO HONG KONG. NO DOUBT YOU WILL BE RECEIVING OTHER REPRESENTATIONS: BUT I WANT TO TELL YOU PERSONALLY OF THE DAMAGE THAT WITHDRAWING, OR MAKING CONDITIONAL THE RENEWAL OF, CHINA'S MFN STATUS WOULD DO TO HONG KONG AND TO AMERICAN BUSINESS HERE.
LIKE OTHER GOVERNMENTS, THE HONG KONG GOVERNMENT SEES ITS MAJOR TASK AS MAINTAINING THE PROSPERITY AND QUALITY OF LIFE OF THE NEARLY 6 MILLION PEOPLE WHO LIVE HERE. TO DO THIS, WE MUST ENSURE THAT THE ECONOMIC DYNAMISM OF THIS UNIQUE CITY IS PRESERVED, UP TO AND BEYOND THE TRANSFER OF SOVEREIGNTY TO CHINA IN 1997. WITHDRAWAL OF CHINA'S MFN STATUS WOULD SEVERELY AFFECT HONG KONG AT A POLITICALLY SENSITIVE TIME.
CHINA IS OUR LARGEST TRADING PARTNER. WE ESTIMATE THAT SOME USD9- 12 BILLION OF OUR TRADE, AND UP TO 43,000 JOBS (ABOUT 1.5 PERCENT OF THE WORK FORCE), COULD BE LOST IF CHINA'S MFN STATUS IS WITHDRAWN. HONG KONG'S CURRENT GROWTH RATE COULD BE HALVED. THIS WOULD ADVERSELY AFFECT ALL SECTORS OF OUR ECONOMY AND CONSTITUTE A MAJOR DISINCENTIVE TO THE FUTURE INVESTMENT ON WHICH WE RELY.
WE BELIEVE WE HAVE A RESPONSIBILITY TO DO EVERYTHING POSSIBLE TO ENSURE THAT, IN 1997, HONG KONG'S CAPITALIST SYSTEM, AND THE RIGHTS AND FREEDOMS ENJOYED BUT ITS PEOPLE, ARE STILL FLOURISHING AND HAVE THE STRENGTH TO SURVIVE THE INEVITABLE SHOCK OF THE CHANGE OF SOVEREIGNTY. US WITHDRAWAL OF CHINA'S MFN STATUS COULD, I FEAR, BRING ABOUT AN ECONOMIC RECESSION THAT WOULD JEOPARDISE ALL OUR EFFORTS.
US BUSINESS INTERESTS IN HONG KONG WOULD ALSO SUFFER. FOR MAY YEARS, THE US HAS BEEN THE LARGEST FOREIGN INVESTOR IN HONG KONG,
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