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3.9 Another way in which social unrest might develop in China, presenting a problem for the authorities, is because of the success of its Special Economic Zones. The disparity of regional performance between the North of China, with many of the loss-making state-owned companies, and the dynamic South is already marked and will widen. Unrest could develop in the North.because of the growing prosperity gap and calls in the South for greater freedom (having seen the benefits of capitalism).
3.10 Another uncertainty in China is succession to the current leadership. Deng is undoubtedly making strenuous efforts to speed up the process of reform and to ensure as far as he can that sympathetic officials occupy key posts. The most likely outcome is that this process will continue until China eventually has a clearly reform- minded leadership. This should be favourable to Hong Kong's prospects beyond 1997, despite the current negotiating problems over Hong Kong's new airport, provided any movement towards democracy in Hong Kong does not embarrass the Chinese leadership or that the PRC leadership again are sufficiently threatened by domestic pressures for civil liberties that they feel forced to suppress this again. Probably less likely but by no means impossible is a return to a conservative-dominated leadership; this would be beneficial neither
to China or Hong Kong.
Sino-Hong Kong-UK Relations
3.11 Hong Kong's reputation was tarnished by the protracted negotiations over the Airport leading to the Memorandum of Understanding (which at the time depressed the stock market). Subsequently, however, the stock market at least recovered strongly and the international markets seemed to have largely forgotten the original problems over the airport. Nevertheless, following the first democratic elections in Hong Kong last year and with the next set in 1995, no doubt the Chinese authorities will be closely watching the pressure for greater democracy in Hong Kong. If the Chinese foresee too strong a move towards democracy for their taste they will continue to use the airport negotiations, and perhaps other issues, as leverage to influence Hong Kong's political development.
3.12 The, at times, tense atmosphere in relations over Hong Kong is no doubt contributing to individual and corporate decisions within Hong Kong about nationality and domicile.