TNAG-1883-FCO40-2674-Visits-by-Lord-Glenarthur--Minister-of-State-for-Foreign-and-1989 — Page 16

SCENE SETTING TELEGRAM FROM THE GOVERNOR

GENERAL SUMMARY

ANNEX C

Our problems

1. The economy continues to be buoyant.

a tight

labour market and inflation are problems of success. They and the prospect of major infrastructural projects such as the new airport

create a foundation for confidence in future prospects. But underlying concern over 1997 remains strong, based on a general

mistrust of the mainland.

2. Most people still show little interest in the details of the Basic Law. The media takes more interest in the subject than the man in the street. There was initially general recognition that most of the main points of concern in the first draft had been dealt with. This has been overtaken by a row about the pace of constitutional change after 1997: anger from the radicals about the content of, and way of putting forward, proposals for the second draft: and some concern amongst more conservative elements about the use of openly confrontational tactics by those who advocate accelarated democratization.

3. The Vietnamese boat people and their international supporters are widely resented. The HKG's policy is criticised locally for being too soft and internationally as too harsh. Locally much of

the criticism is extended to HMG.