TNAG-0937-FCO40-1156-Visits-of-Sir-Murray-MacLehose--Governor-of-Hong-Kong--to-th-1980 — Page 109

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The FS pointed out that the volume of Chinese exports to Hong Kong liad increased by 50% in 1979 while Japan's share had increased by only 25%. The gap was therefore narrowing although, of course, the composition of the trade was different. He agreed with the Vice Fremier that the quality of products supplied and geographical proximity were important factors in building up China's exports to Hong Kong but the most important factor was that demand for goods and produce from China, Farticularly Guangdong, should remain high. This depended on the rate of economic growth in Hong Kong. After

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allowing for inflation Hong Kong had averaged a growth rate of 9% per annum for the past 20 years. During the last four years since the recession, the rate lad been even faster at around 13%. The main reason why the Hong Kong economy had been able to grow at such a fast rate had been the high rate of investment in industry, in commerco and in the infra-structure. The Hong Kong Government had unde a contribution to this investment, particularly in the infra-structure, 'but it was mainly the responsibility of the private sector. In order to maintain a high rate of investment from the private sector it was necessary that confidence remained high. In the short term investment was influenced principally by the world trade situation, since Hong Kong was an export-oriented economy. But, in the longer term, the underlying determinent of investment was the degree of confidence that businessmen had in Hong Kong's future.

It was therefore, the constant pre-occupation of the Hong Kong government- to create an atmosphere of confidence in which businessmen could operate. On way the Government did this was to pursue budgetary and fiscal policies which encouraged investment. The Hong Kong Government also sought at all times to achieve monetary stability and to protect the exchange value of the Hong Kong dollar. He knew that the growth rate of the Hong Kong economy and, thereby the market for Chinese exports as well as the strength of the Hong Kong dollar, were watched closely by all concemed in China: particularly the Bank of China.

lir. Gu said that the Chinese Government had indeed followed very closel The development of the long kong economy in recent years. Since the energy crisis Hong Kong's economy had in fact fared quite well in comparison with other regions in the capitalist world. He considered that the continued prosperity of the Hong Kong economy including the growth of trade with China was Lutually beneficial. The VS agreed but said that the question was now the growth rate could be maintained. Over the next 18 months it was likely to slow down due to the international economic situation, but the growth rate of world trade would eventually recover and it was imperative to maintain confidence to ensure growth in the longer term. The important question was how the confidence of both local and foreign investors could be maintained in the future of Hong Kong. The Hong Kong Government would certainly continue with policies designed to achieve economic stability, would follow sound fiscal and budge stary policies, woulá attempt to ensure that the Hong Kong dollar remained strong and stable on the foreign exchanges and would continue to plan and implement capital works programmes. There was, however,

There was, however, a difficul ty here. Mars

yery large and expensive products, such as the ext nsion of the Transit Railway, the bridge to Lantao and the new airport could