CONFIDENTIAL
Civil Aviation
Our
took place
14. Talks on the UK/Chinese air services
in Peking in early September.
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, but then changed tack and raised
difficulties with our proposals. Further talks will
take place in
further routes
Pacific) i s a
November. Chinese failure to offer
to Hong Kong's own airline (Cathay
sensitive political issue in Hong Kong.
15. At the s ame t ime we are beginning to unscramble
Hong Kong Air Service Agreements from existing UK ASAS
with other countries, with the aim of securing their
continuation after 1 July 1997.
Economic and Financial Position
from the world
16. Hong Kong suffered
suffered during 1982
recession, compounded in Hong Kong's case by political
concern over the territory's future. Recovery began
during the second half of 1983
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
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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