CONFIDENTIAL
FROM:
R A Burns
DATE:
Cc:
8 April 1992
PS
PS/Minister of State PS/PUS
Sir J Coles
Mr Crowe
Mr Broadbent
Heads: FED, PUSD
Mr Cox, HKD
1. Mr Ricketts,
HKD
HONG KONG: FINANCIAL AND MONETARY SUBJECTS
1. During my visit to Hong Kong last week with Mr Broadbent and Mr Cox, we discussed a number of financial and monetary issues.
General situation
2. We did so against a background of economic boom. There is tremendous optimism about the key role which Hong Kong will play in Southern China and the Pacific Rim, and businessmen seem much less inhibited than governments in making their disposition for post 1997.
3. There continues to be some concern about inflation, but general recognition that this was part and parcel of a very dynamic economy. Pressures might ease as the Chinese hinterland opened up and Hong Kong's transformation from a manufacturing to services economy was completed. The Financial Secretary had tackled this issue forthrightly in his budget speech. Mr Gledhill (Swires) noted that Cathay had just redeployed 200 accounting jobs to Canton and Shenzhen where wages were lower than in Hong Kong.
4. Mr Goodstadt (Head of the Central Policy Unit) noted:
i) that Hong Kong's GNP is now higher than GDP, showing how significant is the growth of Hong Kong investment in Southern China;
ii) that Hong Kong is taking in no taxes from the huge services activity which Hong Kong business is generating in Southern China;
iii) and that within Hong Kong the shift from manufacturing to services industries is bound to increase wage differentials and a public sense of income inequality.
EM8AAJ
CONFIDENTIAL
Page 90Page 91