CONFIDENTIAL
1457521 MOHIAN 82
THE INTERNATIONAL CAPITAL MARKETS. THERE ARE TWO ANGLES WE NEED
TO WATCH:
MOST RELEVANT TO YOUR MEETING WITH QIAN IS THE NEED FOR QUICK CHINESE AGREEMENT. THE TIMETABLE IS ALREADY VERY TIGHT IF THE AIRPORT IS TO BE UP-AND-RUNNING BY JULY 1997 (FOR EXAMPLE, IF THE AIRPORT PLATFORM IS TO BE READY IN TIME, THE CONTRACTORS WILL NEED TO MOVE 250 TONNES OF MATERIAL EVERY MINUTE, 20 HOURS A DAY, 7 DAYS A WEEK FOR 31 MONTHS IF THEY GET THE GO AHEAD TO START ON TIME IN MAY: ANY SLIPPAGE WOULD INCREASE THE PRESSURES FURTHER). THE CHINESE HAVE ALREADY BEEN TOLD ABOUT THE FINANCING PLANS FOR THE AIRPORT RAILWAY AND WILL GET THE REST OF THE PICTURE SOON WHEN THE PROVISIONAL AIRPORT AUTHORITY'S FINANCING
PLAN IS READY ALTER THIS MONTH. THESE ARE COMPLEX PACKAGES
INCLUDING SOME DIFFICULT POINTS FOR THE CHINESE SUCH AS CONTINGENT LIABILITIES BEYOND 1997. THE IMPORTANT THING FOR QIAN TO UNDERSTAND IS THAT THEY ARE BASED ON CAREFUL THOUGHT AS TO HOW TO SECURE THE MOST COST-EFFECTIVE DEAL FOR THE PEOPLE OF HONG KONG, AGAINST THE BACKGROUND OF A BUOYANT ECONOMY HERE. CHINA SHOULD MAKE GOOD ON ITS COMMITMENT OF SUPPORT IN THE AIRPORT MOU AND ENSURE THAT THE PROJECTS GET THE GREEN-LIGHT AS SOON AS
POSSIBLE.
THERE IS ALSO THE QUESTION OF HOW BANKS AND NATIONAL CREDIT AGENCIES CAN BE RE-ASSURED THAT CHINA SUPPORTS THE FINANCING PLANS, WHICH OF COURSE RUN BEYOND 1997. THIS IS NOT SOMETHING WHICH YOU NEED TO DISCUSS WITH QIAN NOW. BUT WE ARE GOING TO HAVE TO DO SOME CREATIVE THINKING OF OUR OWN. THE FINANCIAL EXPERTS HERE WHO ARE CLOSE TO THE PROJECT ALL BELIEVE THAT THE BANKS WILL WANT MORE THAN THE GENERAL EXPRESSIONS OF CHINESE SUPPORT FOR THE PROJECT RECORDED IN THE MOU. BUT GOING BACK TO THE CHINESE FOR MORE SPECIFIC BITS OF PAPER COULD, UNLESS VERY CAREFULLY HANDLED, GIVE THEM AN OPENING TO CHARGE AN EXTRA (PERHAPS POLITICAL) PRICE. AND IT COULD LEAD TO DEMANDS FOR SIMILAR BITS OF PAPER FROM BANKERS LENDING ON OTHER PROJECTS. IN THE END, THE MARKETS WILL DICTATE HOW MUCH EXTRA REASSURANCE IS NEEDED. I SHALL BE CONSIDERING THIS FURTHER ON MY RETURN.
POLITICAL ISSUES
4. ON ONE POINT THERE IS GENERAL AGREEMENT HERE: THAT HANDLING THE POLITICS OF THE TRANSITION WILL BE MUCH EASIER IF THE ECONOMY CONTINUES TO PERFORM AS IT IS NOW DOING. BUT WITHIN THE HOT HOUSE OF LEGCO THE POLITICAL GROUPS HAVE BECOME MORE SHARPLY DEFINED -
PAGE
2
CONFIDENTIAL