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becoming involved in joint ventures in China. Rail, air and
sea links between Hong Kong and the neighbouring Chinese
province have greatly improved over the past year. The present
Chinese leadership freely acknowledge that Hong Kong has an
important part to play in the achievement of their modernisation
programme.
6.
These developments have been matched by a steady improve-
ment in relations between the Hong Kong Government and the
Chinese authorities, culminating in the Governor's official
visit to China in March and April this year, the first since
the Communists came to power.
7.
Immigration from China is the most immediate current
problem. In the last 21 months Hong Kong has absorbed 230,000
legal and illegal immigrants and they are still coming at a
rate equivalent to at least 125,000 a year. Hong Kong cannot
continue to absorb numbers of this order without damage to its
economy and social programmes.
8.
Illegal immigration has been the major worry.
A combination of diplomatic representations and the reinforcement of the Hong Kong garrison led the Chinese to impose effective control measures in July. But the improvement was shortlived
and the numbers are again causing serious concern.
9. A less immediate but potentially more serious problem is that of property leases in the New Territories, which are all due to end in 1997. After initial soundings by the Governor during his visit to China, HM Ambassador proposed in July that the leases should be converted into indeterminate leases, and that
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