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the war arrived at Kai Tak. The previous day an agreement for a regular hoverferry service between Hong Kong and Canton had been signed. Many people were clearly somewhat bewildered by the pace of developments, but I detected no symptons of euphoria among senior Government officials and businessmen, who seemed to me to be taking a properly balanced view. I heard a good deal of talk about the involvement of Hong Kong firms in projects in China (eg for hotel building and management, and the establishment of fac- tories in "export zones") but no one seemed to have a very clear idea how much of this was going on. I suggested to the Political Adviser that the Hong Kong Government ought to establish machinery to see that information on the increasingly complicated economic links between Hong Kong and China is properly collected, collated and assessed. Dr Wilson said that he had this very much in mind and we have now received a useful first report.
5. The 1997 problem cropped up frequently in my discussions, both with officials, with memebrs of ExCo and LegCo and with lead- ing businessmen. It is clearly not seen as a problem now - the Managing Director of Hong Kong Land told me that his company had recently made a very large rights issue involving "1993 money" which had all been taken up within 24 hours - but many people expected it to assume serious proportions within the next few years. The Chairman of Jardines thought that the 1997 deadline would fairly soon be a real disincentive to American companies interested in investing in longterm projects in the Colony: what- ever the commercial judgement of managers, lawyers and auditors would make difficulties over non-renewable leases with less than 15 years to run. The Governor shared that view and stressed the importance which he attached to reaching early agreement on how to handle the problem of land leases in the New Territories.
Relations with the United Kingdom
6.
Unlike some former visitors, I was not subjected to barrages of complaints about UK attitudes. But there is still a good deal of bitterness in the Trade and Industry Department, and to some extent outside it over UK behaviour during the Multi-Fibre Negotia- tions at the end of last year. There were mutterings from UMELCO about Mr Cryer, and feeling was running high on British Airways' alleged failure to maintain a decent service on the Hong Kong- London cabotage route. I was warned by officials that the Hong Kong Government might feel obliged to press for rights for CPA on this route. Some UMELCO members also complained about the way in which they and other leading Hong Kong Chinese are treated by immigration officials at Heathrow.
The Economy
7. I had a long tete a tete dinner with Mr Haddon-Cave, called on the Secretary for Economic Services and the Chairman of Jardines (an old friend) and had opportunities to talk with a number of bankers and businessmen at social functions. The general impression was in line with the Governor's statement in his LegCo speech, namely that the economy is in reasonable shape but that there are some worrying trends, particularly over-heating caused by the rapid
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