CONFIDENTIAL

Philippines/China contacts

Philippines investment important to Hong Kong's economic stability and success. Also a vital ingredient in maintaining confidence.

Much Philippines can do in its dealings with China to promote better understanding of Hong Kong in Peking, eg emphasise to the Chinese the importance of maintaining confidence. They do not always appreciate the link between

political developments and businessmen's willingness to

invest.

- Chinese may ask Philippines about British intentions:

useful to remind them or our political and economic interest

in making a success of Joint Declaration and "one country

two systems".

- Work of Joint Liaison Group also of real interest to investors: will ensure smooth transition in legal and

economic framework of business.

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Import of Labour (Defensive if raised)

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This is a matter for the Hong Kong Government.

TEDAEF/3

CONFIDENTIAL

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