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53. THE SIGNING OF THE JOINT DECLARATION, WHICH CONFIRMED THAT THE UNITED KINGDOM WOULD REMAIN RESPONSIBLE FOR THE ADMINISTRATION OF HONG KONG UP TO 30 JUNE 1997, AND WHICH SPELLED OUT THE BASIC POLICIES OF THE PEOPLE'S REPUBLIC OF CHINA REGARDING HONG KONG FOR 50 YEARS AFTER 1997, DID MUCH TO RESTORE THE CONFIDENCE OF THE PEOPLE OF HONG KONG, WHO FOR THE PREVIOUS TWO YEARS HAD FELT UNCERTAINTY AND ANXIETY ABOUT WHAT THE FUTURE HELD IN STORE. FOLLOWING THE ANNOUNCEMENT OF THE DRAFT AGREEMENT THE FUTURE LOOKED MUCH MORE ASSURED. ONE YEAR FORWARD FROM THAT DATE THERE ARE STRONG INDICATIONS OF A RETURN OF CONFIDENCE IN ALL SECTORS OF THE
COMMUNITY.
54. OVER THE NEXT 12 MONTHS, THAT CONFIDENCE IS LIKELY TO BE MAINTAINED. SO FAR AS THE DEVELOPMENT OF REPRESENTATIVE GOVERNMENT IS CONCERNED, FOLLOWING THE RECENT CHANGES IN THE COMPOSITION OF THE LEGISLATIVE COUNCIL, THE COMING YEAR WILL BE A PERIOD OF CONSOLIDATION RATHER THAN NEW INITIATIVES. ON THE ECONOMIC FRONT, THE INDICATORS ARE REASSURING, NOTWITHSTANDING THE POSSIBILITY OF CONTINUING REDUCED DEMAND FOR DOMESTIC EXPORTS IN HONG KONG'S MAIN EXPORT MARKETS SEMICOLON EMPLOYMENT IS EXPECTED TO REMAIN STABLE AND THE RATE OF INFLATION LOW SEMICOLON THE RECOVERY OF THE PROPERTY MARKET IS LIKELY TO CONTINUE SEMICOLON AND THE PROSPECTS FOR A RETURN TO A BALANCED BUDGET IN 1986-87 ARE GOOD. HONG KONG IS ONCE ABLE TO LOOK TOWARDS THE FUTURE CALMLY AND CONFIDENTLY.
3. WE SHOULD LIKE TO ISSUE THE TEXT OF THE REPORT TO EXCO ON 22 NOVEMBER FOR CONSIDERATION AT ITS NEXT MEETING ON 26 NOVEMBER. GRATEFUL THEREFORE IF YOU COULD LET US KNOW DESKBY 22010OZ WHETHER YOU HAVE ANY FURTHER AMENDMENTS TO TEXT AS PROPOSED IN PARAS. 1
AND 2 ABOVE.
YOUDE
HONG KONG AGREEMENT: RESTRICTED
LIMITED
HD/HKD
HD/FED
RESEARCH D (FE)
D/HD PUSD
COPIES TO:
MR FIFOOT, LEGAL ADVISERS MR WOOD LEGAL ADVISERS
MR WILSON
2.
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