TNAG-0845-FCO40-1055-Visits-of-Foreign-and-Commonwealth-officials-to-Hong-Kong-1979 — Page 67

CONFIDENTIAL

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NOTES OF MEETING HELD WITH MR PETER BLAKER MP, MINISTER OF Witham siz STATE FOR FOREIGN AND COMMONWEALTH AFFAIRS, AT GOVERNMENT HOUSE ON MONDAY 24TH SEPTEMBER 1979 AT 9.30 AM

Present:

Mr Peter Blaker MP Mr D F Murray CMG

Mr C A

Munro

02-ի Hek.ooch.

24 OCT 197

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HE The Governor

Sir Jack Cater - Chief Secretary

Mr F K

Mr D G

Mr D H

Mr E P

-

Li Secretary for Home

Affairs

Jeaffreson - Financial

Secretary (Acting)

Jordan - Director, Trade

Industry & Customs Ho Secretary for Social

Services

Mr M C Morgan - Secretary for

Mr D R

Dr D C

Security (Acting) Ford Secretary for

Information

Wilson - Political Adviser

Mrs Shelley Lau - Private Secretary

Government House

1. The Governor opened the meeting by welcoming Mr Blaker back to Hong Kong. He was particularly pleased that the new British Minister responsible for Hong Kong had personal knowledge of the colony.

THE ECONOMY OF HONG KONG

2.

Mr Jeaffreson explained recent trends in the Hong Kong economy. Last year was Hong Kong's third year of double-digit growth in real terms. As a result of the general affluence affecting all levels of society, there was a substantial growth in domestic demand to the extent that the growth rate was clearly exceeding the economy's ability to produce. The consequence was a money supply growing faster than other economic aggregates, a substantial growth in imports, a growing visible trade deficit and a depreciating Hong Kong dollar. The Hong Kong Government had responded with a cut back in the growth of public expenditure in the 1979 budget and with increased interest rates. These measures were beginning to show results. The trade deficit was reducing; the money supply was now growing in line with money GDP; the HK dollar was stabilising. Nevertheless, domestic demand was still growing too rapidly, as evidenced by an increase in consumer prices in excess of 10%. So next year, the Government would have to look particularly carefully again at the growth rate of public expenditure. And the prospect of increasing exports was limited by quantitative restrictions under bilateral textiles and clothing agreements with Hong Kong's major trading partners, as well as by question marks over the international trading scene.

TEXTILES

3.

Mr Jordan said that Hong Kong had been badly treated by

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