TNAG-1434-FCO40-1917-Hong-Kong-leading-personality-Sir-Yue-Kong-Pao--businessman-1986 — Page 307

CA TAAJ

CONFIDENTIAL

SIR Y K PAO'S CHEVENING WEEKEND

15-16 MARCH 1986

V. HONG KONG CIVIL SERVICE PAY

Background

1.

Service

Unions

Since late last year Hong

Hong Kong Government and main Civil

have been negotiating over latter's pay claim to

increase non-directorate pay levels by up to 6%. This claim was a

result of a Government pay award to the directorate late last year

of between 6% and 13%, linked to private sector pay trends.

2.

Hong Kong have offered the unions a 2.7% increase, as an

interim award pending a further study of comparable private sector

pay levels this year.

accept this.

I t

is not yet clear whether the Unions will

3.

•

Sir Y K

Pa o recently

unious

expressed concern to senior Hong Kong Government officials about this dispute. Chinese officials present

echoed his concern. Sir Y K Pao advocated a compromise; but

but the

likely basis of his, and Chinese concern, is that Hong Kong Civil

Servants may be becoming too highly paid, and that their views may be establishing a more powerful and aggressive position vis a vis their employer. The Chinese would then be concerned that they would

in 1997 inherit a large and militantly unionised Civil Service absorbing a disproportionate share of Hong Kong's wealth. Although Chinese officials have not yet raised this with HMG or Hong Kong

officials in any

formal way, Sir Y K Pao may take the present

opportunity to fire an early warning shot.

CONFIDENTIAL