CONFIDENTIAL
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Subject
HRH Princess Alexandra opened first section of Mass Transit Railway.
Modernisation of Kowloon/Canton Railway.
Hong Kong/UK relations
New Defence Cost Agreement signed. Size of Garrison to be increased to 5 major units.
Hong Kong's relationship with the United Kingdom on good basis. But local storm blew up over U.K. university fee increases, the Nationality Bill, and CAA decision about cabotage route. U.K.
U.K. exports to H.K. over £550 million.
Hong Kong/China relations
Relations with China continue to improve, with official visits a normal feature of life. Widespread local investment in Guangdong and China. Possibility of jointly operated nuclear power station.
Increasing breadth of official and commercial contact is improving mutual understanding and should assist eventual discussion of Hong Kong's future. But Chinese at present preoccupied with own problems.
Postscript
In spite of undoubted success and achievements of year, and of Hong Kong's luck in escaping effects of world-wide recession until recently, concern about incomes, rents and inflation, dominated end of year.
CONFIDENTIAL
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