TNAG-0610-FCO40-758-Hong-Kong-annual-review-for-1976-1977 — Page 14

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CONFIDENTIAL

though less spectacular growth. The Government's principal aim is to take the fullest advantage of this growth to continue the elimination of the deficiencies which too rapid increase of population has forced on Hong Kong. External economic catastrophe excepted this should be achieved by the early '80s.

2. The credit for this remarkable turn-round goes firstly to the realism and comprehension of the people of Hong Kong, employers and employees alike, and to the financial institutions that supported them. They have reason for gratitude for the lead taken by Her Majesty's Government in resisting the threat of world-wide import restrictions. The Chinese Government also acted with sympathy and restraint. But the Hong Kong Government itself is also entitled to some credit.

3. Against this background of rising prosperity, Hong Kong people took calmly the end of the remarkable epoch of China under Chairman Mao and the prospect of the uncertainties that indubitably lie ahead. Many surprises have followed, but on the whole they have been reassuring ones, and Chinese officials in Hong Kong are patently relieved at the course events have so far taken. All the evidence is that Chinese policy towards Hong Kong remains unaffected, and practical evidence of this is accumulating, but one never knows. In any case we are only at the beginning of a period of adjustment in China that may be prolonged, and whose attendant stresses and changes in personalities cannot be foreseen, and at the end of which some understanding must be reached about the future of the Colony. I am acutely conscious of the need to strengthen the Colony against the strains to come. But all the programmes and policies of the Hong Kong Govern- ment are already directed towards achieving a degree of economic strength, social cohesion and international respectability which will be beneficial to the people of Hong Kong, acceptable to Her Majesty's Government and favourable to China, and this is all that it is within the power of the Government to do. But the death of Mao and the beginning of a new era in China underline the need to do it and do it quickly.

4. In the early part of the year, in preparation for the Secretary of State's visit to Peking, a careful review was undertaken of how the future of Hong Kong should be handled with China. It was concluded that any discussion would be pre- mature and subsequent events have shown the correctness of this view. The comple- mentary proposition was that meanwhile the policies of the Hong Kong Govern- ment, for which Her Majesty's Government must answer, must be understood and defensible in Westminster as well as Hong Kong. A protracted review in depth of what the policies of the Hong Kong Government were and might be resulted in complete identity of view. This was a useful and necessary double exercise.

5. Of course all that must be done to overcome the deficiencies of the past cannot be achieved in a day, and while Hong Kong is still in the process of catching up there are bound to be grounds for criticism. But so long as the Hong Kong Government is able to keep to its timetable of planned improvements and reform- and these have been very carefully mapped out-there will be reasonable answers to reasonable criticisms. The sense of the answers can be that by the early '80s the following will have been achieved:

(a) there will be self-contained homes in a reasonable environment at heavily subsidised rents for all that need them (about 65 per cent of the population);

(b) in labour and social legislation Hong Kong will be broadly comparable with the best in equivalent Asian countries (and incidentally far in advance of them in compliance with ILO conventions);

CONFIDENTIAL