TNAG-1631-FCO40-2247-Visits-by-members-of-the-Executive-Council-and-Legislative-C-1987 — Page 8

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FROM: PS/LORD GLENARTHUR

DATE: 30 JULY 1987

cc: Mr Gillmore

(verored).

CALL ON LORD GLENARTHUR BY SIR S Y CHUNG

1. Sir S Y Chung called on Lord Glenarthur earlier this afternoon for 50 minutes. You and I were also present.

2. Sir S Y Chung spoke with animation and at length and Lord Glenarthur had little opportunity to use any of the "points to make" you had kindly provided. Sir S Y Chung's main themes were:

(a) The economic scene was healthy and confidence high. He

referred to the apparent contradiction between a 100% increase in domestic exports since 1981 and a reduction in the manufacturing sector labour force from 905,000 to 800,000 during the same period. He attributed this to the siting of an increasing number of Hong Kong industrial concerns in China. He was worried that when the recession came there was a danger that Hong Kong's more expensive labour force would be paid off first.

(b)

(c)

The pattern of the exodus of skilled labour was still not clear. A Hong Kong Government survey would be ready in about a year's time. Partly due to an expansion of educational and training facilities, the loss of high calibre manpower was not having dramatic effects at present.

Sir S Y Chung delivered a lengthy homily on representative government. His view was that Hong Kong's system worked because the Government did not have to respond to the electors or pressure groups. It was therefore able to take decisions for the general good of the community. The Chinese wanted to preserve this sort of system. They would be prepared to see Executive open to criticism from and responsive to the Legislature, but not controlled by it. The people of Hong Kong, buoyed by economic success, wanted full democratic rights, and did not understand that this might have an economic cost. The Chinese were concerned that their appetites should not be whetted until the future structure of government had been drawn up. The granting of direct elections was their trump card, which in no circumstances would they want HMG to play until the entire structure had been decided. Sir S Y had injected a note of realistic

CONFIDENTIAL

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