TNAG-1965-FCO40-2797-Despatch-by-Sir-David-Wilson--Governor-of-Hong-Kong--Life-Af-1989 — Page 12

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18.

to

HMG has proved

an easy target for local frustration and anger. It was initially criticised for reacting too slowly and weakly to the military crackdown, and then (unfairly) for the perceived lack of help given to Hong Kong residents by the British Embassy in Peking. But the main issue has been that of nationality. This has been the subject of protracted discussion and correspondence that I do not wish to repeat here. But it is important to emphasise two points:

a)

b)

that the

demands for a right of entry or right of abode in the UK reflect a genuine loss of confidence in the future that it will not be easy to restore; and

that,

rightly or wrongly, HMG's inability to respond in the way that many people in Hong Kong would have liked has severely damaged local perceptions of its commitment to the territory. This is not likely to make the next eight years any easier to manage.

Impact on the Hong Kong Economy

19.

The Chinese domestic economy still faces serious problems. But recent events in Peking have in themselves had a less immediately damaging effect on Hong Kong, particularly on our economic links with Guangdong Province, than might have been expected. Internally, the tourism and property sectors have suffered most. Arrivals in June have been 10-15% lower than expected, largely because of the widespread cancellations of tours to China. Travel agents and transport operators largely dependent on China have been badly affected. As might be expected at a time of political nervousness, property prices have fallen, though not yet to the extent they did in 1982. Retailers and restaurants have also been hit by a decline in consumer spending, partly due to the reduced number of tourists but partly also to an emotional response to the military crackdown. It has been a time when, instinctively, the population has avoided anything which seemed like celebration.

20.

On the other hand, the manufacturing industry has been little affected. The operations of some subsidiary plants in Guangdong Province suffered initially from transport disruption. But this was short-lived. More of a problem has been an unusual lack of motivation among the workforce. The stock market fell sharply,

particularly on 22 and 25 May and 5 June, but the

CONFIDENTIAL

/reformed