TNAG-0522-FCO40-617-Discussions-with-Sir-Murray-MacLehose--Governor-of-Hong-Kong-1975 — Page 95

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CONFIDENTIAL

LORD GORONWY ROBERTS & MEETING WITH THE GOVERNOR OF HONG KONG:

2 DECEMBER 1975

BRIEF NO 10

HONG KONG ECONOMY AND SOCIAL PROGRAMMES

Line to Take

1. We would find it useful to have the Governor's own opinion of Hong Kong's economic outlook, and the likely effects on the social programmes. Other more detailed points which may be raised are:-

(a) does the Governor foresee further increases in

taxation next year?

(b) does the Governor consider that further cuts in his social programmes will be necessary and, if so, where are these likely to fall?

(c) how is the Hong Kong public reacting, first to the

recession and, secondly, to the cut-back in the social programmes?

Back-round

2.

The Hong Kong economy has been badly hit by the world economic recession. In 1974 the volume of Hong Kong's domestic exports declined (by about 7%) for the first time since 1950. As a result, manufacturing employment also declined in that year by 10%, and unemployment increased significantly. Against this background money wage rates in 1974 hardly increased at all, although consumer prices rose by about 14%.

3. Since the beginning of 1975 the evidence suggests that the Hong Kong economy may have bottomed out though this, of course, cannot be asserted with any degree of certainty. Much depends on the outlook for the United States economy which takes some 35% (by value) of Hong Kong's domestic exports. The Financial Secretam

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CONFIDENTIAL

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