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and increased wages and prices would mean a certain amount of dislocation although real wages were rising. People's experience of China in the past made them frightened of rising prices. It was agreed that Hong Kong was in for a period of more steeply rising prices.
5. One development was that China was now under some strain to supply 4 million people with an increasing standard of living. The Chinese were now adopting a cleverer pricing policy looking for maximum returns rather than quantity.
Commercial negotiations
6. Sir David Trench said that people in Hong Kong, including unofficial members of the Executive and Legislative Councils, were concerned about the responsibility, as between London and Hong Kong, for the conduct of commercial negotiations, for instance on textiles. Sir John Cowperthwaite added that local businessmen felt that they knew better than the Hong Kong Government, and certainly better than London, what was in their own interests.
7. Mr. Stewart said that he appreciated this difficulty. Under normal circumstances, Hong Kong would by now have become an independent State. The British Government had to act for the Hong Kong Government in some international negotiations and sometimes had to take decisions where the interests of the two Governments did not coincide. One must bear in mind that the connection between Britain and Hong Kong was a mutually beneficial one, and therefore it should not be expected that conflicts must always be decided in Hong Kong's favour.
8. Sir John Cowperthwaite and Sir Hugh Norman-Walker explained that it was not so much conflicts of interest. Hong Kong industrialists understood the interests of the British textile industry.
9. The trouble was when people in London pretended to know better than those in Hong Kong what was in the best interests of Hong Kong and when Britain objected to Hong Kong's policies on general policy grounds, even doctrinal grounds, such as in recent troubles over sales to Canada. This sometimes meant that Hong Kong's point of view could not even be put in an international forum. On cotton textiles it was accepted that the Hong Kong Government spoke with its own voice in international discussions. This should perhaps be the pattern for other topics. (Rhodesia had had separate status in GATT.)
10. Mr. Stewart said that there was, nevertheless, the constitutional position. He was responsible to Parliament for Hong Kong and Members of Parliament could legitimately ask questions about it. We must see how far we could get with the present guide-lines exercise, but if he appreciated the position correctly it was that the Hong Kong Government were concerned that their point of view should be properly understood in Whitehall. He recognised that it was his own Department that was responsible for seeing to this. Sir John Cowperthwaite said that it was also desirable that where possible the Hong Kong Government should be able to take an independent line in international negotiations.
Labour and social services
11. Mr. Stewart said that he had learnt that there was less disparity than he thought between labour conditions in Hong Kong and the United Kingdom. But he was presumably right in thinking that there was a greater gap in social services and education. Sir David Trench agreed. Some things were impossible,
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