CONFIDENTIAL
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been in Hong Kong in 1937 on his way back to China from Malaya to take part in the anti-Japanese war. Hong Kong had changed out of all recognition since then.
3.
Mr. LIANG said that there were traditional close relations between Hong Kong, Macau and Guangzhou. Recently, Guangdong and Fujian provinces had been given special autonomy in their commercial and economic relations with the outside world. The three special economic zones of Guangdong province were designed to attract investment and technical expertise from abroad. Guangzhou city was also free to adopt flexible measures in promoting modernisation. It accounted for 40% of Guangdong province's industrial output. Mr. LIANG agreed that economic cooperation between Hong Kong and Guangzhou was going well and that there was plenty of room for a further influx of Hong Kong capital, technology and management techniques.
4.
HE asked whether Whampoa came within the authority of Guangzhou municipality. Mr. LIANG explained that the port management, including the new port construction, was handled by the Ministry of Transport but that Whampoa was in other respects under municipal control.
5.
In reply to a question from HE, Mr. LIANG said that the Guangdong Enterprises' Office in Hong Kong had been beneficial to the province's foreign trade and that Guangzhou would also like to open an office. HE said that he believed an agent in Hong Kong able to negotiate contracts on behalf of the municipal authorities would be of great value in ensuring that opportunites of mutual benefit were not missed.
6.
HE said that he was pleased with the rapid development of the Shenzhen Special Economic Zone. Some people in Hong Kong had been sceptical when the zones were created, but the idea had been a success. As a result of an invitation issued by Mr. LIANG Xiang who had accompanied Party First Secretary, REN Zhongyi on a visit to Hong Kong in late October, HE would be visiting Shenzhen Special Economic Zone on 30 and 31 December. HE said that Hong Kong had plenty of expertise and capital but was critically short of land, of which Shenzhen had plenty. Hong Kong was going through a process of revising its outlook. For many years it had looked outwards towards the United States, Europe and Australia for its markets and for some of its investment. Hong Kong was now learning to look north to China. This process depended partly on confidence: some of China's recent history had not been happy and potential investors were worried by this. Others were showing the way. The Hong Kong Government was encouraging people to invest in Shenzhen if they felt that there was a sensible opportunity for starting some profitable enterprise. Because Hong Kong had been so concerned with external trade, its communications with China were deficient. This was now being remedied.
7.
HE then gave Mr. LIANG a general briefing on major development plans in Hong Kong including the satellite towns and
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