CONFIDENTIAL
3.
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To start with a truism, the visit reminded me of the importance of seeing Hong Kong at first hand. Not least because of the pace of change I was struck by the extent to which Hong Kong's economic success over the last decade
has been translated into infrastructure improvements of
benefit to all: the MTR, new roads and tunnels, the second
harbour crossing, universities etc. But also because of the
dichotomy between the economic and political worlds. The political class not surprisingly is absorbed by the issues of democracy and confidence. Meanwhile the economy is
surging and the manufacturers and traders are taking
practical measures to reinsure against 1997 through the explosive development of Guangdong Province. The two worlds rarely intersect (CFA is an exception) and the international
press concentrates on the politics. Going there gave me a
more rounded view of the whole.
The Economy and the Airport
4. Growth is picking up well (forecast up to 5% for 1991).
But business is worried about inflation. Mr Heap organised
an interesting discussion around his dinner table among senior businessmen and bankers about the causes of and
remedies for the current double-digit inflation. Most economists believe that Hong Kong's inflation is wage-led, and therefore blame labour shortages and the government's failure to introduce a large-scale importation of labour
scheme. Edward Chen made a good speech in LegCo on these lines. David Gledhill and other businessmen agree with this
line. But the Trade Unions and some of the UDHK are
opposed.
5. Leo Goodstadt suggested that another way of easing the
pressure on Hong Kong's labour force would be to agree with China on the lifting of exchange controls in Guangdong
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CONFIDENTIAL