CONFIDENTIAL
Civil Aviation
in
14. Talks on the UK/Chinese air services took place
Peking in early September. Our
a im was to
partially right the huge imbalance in favour of the
Chinese airline (CAAC) on services between the
mainland and Hong Kong.
The Chinese appeared
initially receptive,
receptive, but then changed tack and raised
difficulties with Our proposals. Further talks will
take place in November. Chinese failure to offer
further routes
to Hong Kong's own airline (Cathay
sensitive political issue in Hong Kong.
Pacific) is a
15. At the same t ime we are beginning to unscramble
Hong Kong Air Service Agreements from existing UK ASAS
with other countries, with the aim of securing
securing their
continuation after 1 July 1997.
Economic and Financial Position
16. Hong Kong suffered during 1982 from the world recession, compounded in Hong Kong's case by political
concern over the territory's future. Recovery began
during the second
second half of 1983 and GDP growth that
year amounted to over 5%. During 1984 the conomy
performed strongly with a remarkable growth rate of 9%
(some 3% above Hong Kong Government forecasts).
Although growth has not been sustained at this high
level during the first half of 1985 this appears to be a temporary setback and the long term outlook for the
economy remains good.
17. The growth in domestic exports during the first
six months of 1985 has been lower than the budget
estimate of 11% but total exports have risen,
reflecting the rapid expansion in re-export trade.
Much of this trade has been fuelled by demand in China
but the rate of increase in this sector could also now
be slowed by the PRC's tighter foreign exchange policy. The property and land markets show continuing
CONFIDENTIAL
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