CONFIDENTIAL
021727
MDHIAN 3319
OFFICIALS AND THE PRO-PEKING PRESS IN HONG KONG HAVE INSISTED THAT THE AGREEMENT REACHED ON THE CFA CAN NEITHER BE RE-
NEGOTIATED IN THE JLG NOR REVIEWED BY LEGCO.
4. DESPITE THE ACRIMONY, THERE IS LITTLE APPREHENSION, AS YET, AMONG EITHER THE GENERAL PUBLIC OR THE BUSINESS COMMUNITY, THAT THIS DISPUTE COULD DEVELOP INTO A MAJOR CONFRONTATION WITH CHINA. IN PART, THIS IS BECAUSE THE ISSUE SEEMS LEGALISTIC, REMOTE FROM EVERY-DAY-LIFE AND, UNLIKE THE NEW AIRPORT, HAS NO OBVIOUS IMPACT ON BUSINESS CONFIDENCE. BUT EQUALLY IMPORTANT IS THE COMFORT TAKEN FROM THE SUCCESSFUL OUTCOME OF THE AIRPORT DISPUTE. OPTIMISM HAS BEEN FURTHER ENCOURAGED BY THE SMOOTH START TO THE WORK OF THE AIRPORT COMMITTEE AND THE AIRPORT CONSULTATIVE COMMITTEE. AS A RESULT, THE COMMUNITY AT LARGE BELIEVES THAT A SIMILARLY SATISFACTORY SETTLEMENT CAN EVENTUALLY BE FOUND FOR THE
CFA.
5. HOWEVER, THE PUBLIC MOOD COULD CHANGE FOR THE WORSE IF JLG BUSINESS WERE PERCEIVED TO HAVE SLOWED DOWN SIGNIFICANTLY BECAUSE OF THE CFA CONTROVERSY. SIMILARLY, IF LEGCO INSISTED ON RAISING THE PROFILE OF THIS DISPUTE (E.G. BY DEMANDING THE RIGHT TO PRIOR CONSULTATION ON JLG BUSINESS), THE CPG MIGHT FEEL PROVOKED INTO RETALIATION AT A LEVEL WHICH WOULD UNDERMINE CONFIDENCE. WHAT IS SAID IN THE LEGCO DEBATE ON THE CFA ON 4 DECEMBER, AND CHINA REACTIONS TO THIS, WILL BE A LITMUS TEST OF HOW THE VARIOUS PARTIES CONCERNED WILL PLAY THEIR HANDS.
THE ECONOMY
WE
6. OVERALL BUSINESS SENTIMENT REMAINS CAUTIOUSLY OPTIMISTIC. CONTINUE TO FORECAST A MILD ACCELERATION IN GDP GROWTH FROM 4 PERCENT THIS YEAR TO 5 PERCENT IN 1992. THE POSITIVE IMPACT OF THE NEW AIRPORT IS EAGERLY AWAITED AND HAS CONTRIBUTED TO A GENERAL SURGE IN INVESTMENT CONFIDENCE. EXPORTS HAS BEEN BUOYANT: IN THE FIRST THREE QUARTERS OF THE YEAR, THEY INCREASED BY 20 PERCENT COMPARED WITH THE SAME PERIOD IN 1990, MAINLY DUE TO A CONTINUING RAPID RISE IN RE-EXPORTS TO AND FROM CHINA.
7. OPTIMISM IS TEMPERED, HOWEVER, BY A NUMBER OF EXTERNAL FACTORS, MAINLY RELATING TO CHINA AND THE US. THIS YEAR'S DISASTROUS FLOODS IN CHINA HAD LITTLE IMMEDIATE ADVERSE IMPACT ON HONG KONG'S HINTERLAND IN GUANGDONG PROVINCE. NEVERTHELESS, THERE ARE CONCERNS THAT THE LONGER-TERM CONCERNS OF THE FLOODS AND THE SUBSEQUENT RELIEF AND RECONSTRUCTION PROGRAMMES COULD SLOW DOWN ECONOMIC DEVELOPMENT, EVEN IN GUANGDONG. THE BUSINESS COMMUNITY
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