TNAG-1762-FCO40-2516-Economic-situation-in-Hong-Kong-1988 — Page 67

CONFIDENTIAL

CALL BY THE FINANCIAL SECRETARY ON LORD GLENARTHUR: 16 MARCH 1988

Talking points

1.

Hong Kong budget

Congratulations on achieving a budget which combines tax reductions with increases in public expenditure.

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Would nevertheless be interested to know a little more about the basis for the forecast assumptions underlying the budget for example estimated 5% growth in 1988 seems on the cautious side: will experts believe that a much higher growth rate is likely in the coming year?

Does Mr Jacobs expect to make significant revisions in

the mid-year review?

2.

Prospects for Hong Kong economy

Any worries about the dangers of overheating, higher inflation

rates, as a result of excessive demand and labour shortages?

Note that budget is cautious in its forecast of export growth in coming year. But while Hong Kong dollar remains internationally competitive, export prospects will presumably remain bright.

3.

Hong Kong's inter-relationship with China

Mr Jacobs' views on the prospects for an ever-closer economic

inter-relationship with the mainland?

Note that budget suggests that China labour market may have been tapped to its full capacity. As we see it, considerably more potential remains to be tapped.

Mr Jacobs' views about recently announced Chinese plans to open up the entire coastal area of China from north to south.

Implications for Hong Kong?

CONFIDENTIAL