TNAG-0278-FCO40-314-Visit-of-Secretary-of-State-for-Foreign-and-Commonwealth-Aff-1970 — Page 69

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CONFIDENTIAL

movement forward. In 1969 there had been considerable

progress in the filed of labour legislation, public

assistance, etc.

The responsibility, as berween London and

Hong Kong, for the

HKK 6/18

paras 66 10

4. Sir John Cowperthwaite

said that the 1967 troubles

4

then

had not affected the economy. With growth confidence

since this and the world inflaqtion the economy was in

vigorous

a very healthy state with high exports, increased demand f

for labour and rising wages. The fiscal effect had

Thermal

been a fast rise in income and a slow rise in expenditure,

producing large surpluses. There was now some secondary

inflation, and increased wages and prices would mean a

although real wages, were resing

certain amount of dislocation.

Peoples' 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.

(HOW

One development was that China was/under some strain

to supply 4 million people with an increasing standard

Chinese

of living.

The

were now adopting a cleverer prising

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 conducting 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

Some

to act for the Hong Kong Government in international

negotiations and sometimes had to take decisions where

the interests of the two Governments did not coincide.

connection

One must bear in mind that the communication between

/Britain