SECRET
future, commercial confidence in Hong Kong is both
fragile and prone to over-reaction.
Abrupt fiscal
24.
action could discourage the retention or attraction of
the capital on which employment depends far more easily
than the mere figures involved might suggest. It is
also necessary to take into account Hong Kong's complete
dependence on exports and consequently on the competitive-
ness of its industrial costs.
24.
To impose taxation or introduce legislation
the Governor requires the support of the Unofficial
members of the Executive and Legislative Councils (he
can of course count on the loyal support of the Civil
Service). There is no reason to suppose that this
support will not continue to be forthcoming as it has
been for the substantial social advances in the last
few years.
But Unofficial and Official members alike must
be sensitive to public pressures, and they have to take
into account the profound resistance of Hong Kong
people at all levels to Government levies of any sort.
This attitude is shared by right wing independents,
employers and workers, and by the communist press and
trades unions who criticise the Government for the
"Three Highs" (high taxes, rents and land prices).
Such
a combination of left, right and centre cannot be ignored
and if imprudently handled could even provoke civil
disturbance. This resistance (a hang-over from Chinese
village attitudes from which the population is only
removed by at the most one and often only half a
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