TNAG-1310-FCO40-1667-Future-of-Hong-Kong-1984 — Page 153

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FROM: K C Walker

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DATE: 11 April 1984 KK040

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Dr Wilson Mr Orr, FED

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Mr. Clift

TALK BY DEREK DAVIES, EDITOR OF THE FAR EASTERN ECONOMI REVIEW, ON THE FUTURE OF HONG KONG

With Mr Ashton of FED I attended the talk given by Mr Davies at Chatham House on 5 April.

1.

2.

Mr Davies began by saying that apart from any personal observations he had no objection to his talk being regarded as on the record. He was critical of the handling of the question of the future by the British and Hong Kong Governments. He claimed that the Prime Minister in 1982 had disregarded good advice given her by the Japanese not to adopt a legalistic approach. While acknowledging that doubts based on earlier Chinese behaviour in Shanghai were Junderstandable, he said that the Hong Kong government was

unduly influenced by the Chinese members of EXCO who gravely misunderstood China's present attitudes. He was also critical of the present directors of Jardines, who he said had reversed the clearsighted policies put in hand by Jardine's former chairman, Mr Newbigging.

3. Mr Davies drew a distinction between the attitude of EXCO and that of the business community in Hong Kong as illustrated by the behaviour of the stock market, which had risen in response to reports in 1983 that the British government had agreed, albeit conditionally, to relinquish sovereignty. As factors which augured well for the future he adduced the opening to the West and more liberal economic policies launched by Deng; also China's strong need for Hong Kong as a source not only of foreign exchange earned from trade but of large investment funds (eg for the Guangdong nuclear project and future offshore oil development). Mr Davies said that he had indications that even such a novel idea as a joint venture between Cathay Pacific and the Chinese airline, whereby Cathay would reorganise its Chinese counterpart on efficient lines, was not totally out of the question. He said that if China's present pragmatic policies continued, Hong Kong would have a tremendous future.

On the other hand, Mr Davies also pointed to "dark forces" in China which continued to threaten her stability. He was particularly concerned about the tendency for

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