TNAG-2094-FCO40-2980-Hong-Kong-Civil-Service-1990 — Page 27

Draft for a Dinner Speech to the Harvard Business School Association to be given on Tuesday, 12th December 1989

You have certainly given me a tall order. I have been asked to give you my views on the important political issues which Hong Kong will be facing in

Since obviously one cannot divorce the economy from politics, this means I also have to stick my neck out and tell you what I think the economic problems are going to be.

My goodness, that list is so long, the problems are so manifold and so intertwined that it is difficult to know just where to start.

One thing is sure, we must do everything possible not to fall into what I call "the Chinese trap", that we here consider ourselves the centre of the world and that our problems are everybody's problems. Nothing could be further from the truth. We are very much on the periphery of events and many of our problems arise from actions taken by others in far away places.

Above all, we must keep our perspective. For instance, when you go down to Singapore you will almost certainly hear on the first day of your visit mention of the need of Singapore's survival, the fact that if there is an attack on Singapore they will have to fight on the other side of the causeway, and that they feel themselves in a possible nutcracker between Indonesia and Malaysia, and then they refer back to the time when they had the full scale confrontation with Indonesia. Taiwan's problem is obvious. If the Chinese go on like this they might just take it in their heads and mount a military attack. South Korea has far greater problems than we have, especially with the constant threat of an attack from the North and the internal violence. The Philippines have their communists and Muslim insurrections and political

instability. The Thais have an incipient war with Cambodia and Vietnam. So all of our competitors have problems. And then anyhow who would have forecast a couple of months ago what is now happening in Eastern Europe? So although we have big problems and are probably going to get bigger ones in the next ten years, they are really no worse than those of the competition.

We are now in fact on a voyage of exploration. We are entering terra incognita. Normally, when exploring a new territory one uses a compass, and a compass is a very simple instrument. It has four directions marked and the needle always points only in one direction. But the compass we have for our exploration has many needles pointing in a dozen directions:

There is the needle which points toward the ancient regime in Beijing who have apparently made up their minds that Hong Kong is a political challenge to their leadership and to the stability of the Chinese political system and that therefore the view that China would do nothing that might interfere with its largest single source of foreign exchange may well be wrong because the ancient Chinese gentlemen now in power feel the Hong Kong threat to their type. of Communism outweighs its economic advantages.

There is the second needle which points strongly to the fact that no-one is in charge in China, and because no-one is in charge, no-one dares to do anything because any decision taken may well mean a death sentence when the real leader crystallises out. That there is no-one in charge is obvious from the fact that even such authorative publications as the People's Daily print completely contradictory opinions expressed by the Secretary of the Party, the Prime Minister and the President, sometimes even on the same day.

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