TNAG-1896-FCO40-2690-Calls-on-Francis-Maude--Minister-of-State-for-Foreign-and-Co-1989 — Page 42

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ROBAUY ( 4 )

13. Dr Sohmen said there was much sympathy in the international community for Hong Kong. The US, Japanese and even Singapore had been helpful. Overall Hong Kong was in not so bad shape but the

shortage of labour was a real problem.

14.

Mr Maude agreed that labour was a problem but noted that it

seemed to have been solved by investing in Southern China. What was

the position post June? Dr Sohmen replied that many companies were

now looking at South East Asia in general. He thought that this was

probably no bad thing diversification. But there was clearly a

A

need to maintain Hong Kong's economy, both the service and

manufacturing sectors.

15. Mr Maude said that he detected a great synergy between Hong

Kong and Southern China. Dr Sohmen said there was but the

succession the leadership problems in China could pose a problem.

In the worst case there might be Civil War and Guangdong province,

would become a battlefield because of its economic importance. it made sense to spread the risk. It was difficult at this stage to

judge who would assert themselves when Deng went.

-

So

16. Mr Maude said that previous experience suggested that it would

take some time for things to settle and for a new leader to appear. It was still necessary to maintain business confidence but perhaps

this was not as difficult as it might seem business seemed to be

fairly confident already. Dr Sohmen agreed and said that if there

had been one positive aspect to the events of early June it had been to make people deal realistically and in a businesslike way with

China, instead of with the previous starry-eyed type of attitude.

Distribution

PS/Mr Maude

Mr McLaren

Miss Marsden

News Dept

Mr Stone

24 October 1989