TNAG-0461-FCO40-526-Exchange-of-newsletters-between-Foreign-and-Commonwealth-Off-1974 — Page 12

PERSONAL AND CONFIDENTIAL

One senior Government official told me recently that he was far from happy about the way the negotiations were going and said he only wished there was a little competition, the implication being that the Japanese are being difficult. Henry Keswick still seems confident that the Japanese will sign a contract and said he assumed that the British consortium were not particularly fussed at not getting it. I said that if this had to be at the fixed price being negotiated with the Japanese, then the answer was undoubtedly 'yes'; but that there would be a good deal of annoyance if the scheme was radically modified to save costs to suit the Japanese. He assured me there would be no question of this I am not so sure myself, however, and will do a bit more delving.

4.

·

Otherwise things have been pretty quiet.

The main problem is to try to decide just what the present state of the economy is. Generally the feeling seems to be that Hong Kong is in for a difficult year or so, but that its adaptability and flexibility will enable it to survive present world conditions better than most. There have been a couple of spectacular, but comparatively minor, bankruptcies and there are reports of one or two larger firms having cash flow problems. There has also been a flurry of reports in the Press about short order books and redundancies, but Hong Kong industry is so fragmented that it is extremely difficult to get a correct picture, more particularly as there are few reliable statistics. I find it a little difficult to accept the official prognosis that there is likely to be a four percent growth rate this year. Some factories are hard hit. Some retail stores are reported to be overstocked and undoubtedly experiencing a considerable fall off in sales. However, other factories are doing as well as ever and Dodwells sales of Larks and Spencer goods are a record. But while the trade figures are still good in value terms, according to the shipping people there has been a very considerable fall off in the volume of exports to the United States and to Europe. Perhaps Peter Williams of Dodwells put it best when he said to me the other day that when Hong Kong is doing well, it is doing very well indeed; and when it is doing badly, it is doing pretty well by other people's standards.

5.

So far, there does not seem to have been any difficulty in absorbing the reduction in output without noticeable unemployment. The larger factories operate their own social welfare system by keeping people on on short time rather than sacking them; and the Hong Kong worker (Government servants excepted) is prepared to take a cut in real wages without creating a fuss.

6.

One matter on which I would appreciate some information is the £900,000 grant for technical education. I see that books for Xthe Polytechnic are agreed. Is there going to be any difficulty

with machinery for the Technical Institutes?

Encl:

Үлин мин

Timm

I A C Kinnear

Senior British Trade Commissioner

PERSONAL AND CONFIDENTIAL

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