TNAG-2253-FCO40-3237-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-gene-1991 — Page 49

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PROJECT, ITS COST (IN PARTICULAR TO GOVERNMENT FUNDS) AND THE FINANCIAL BURDEN THAT THIS COULD PLACE ON THE SARG AFTER 1997. NATURALLY THIS ALSO INVOLVES THE CONCERN THAT THE C P G MAY FIND ITSELF HAVING TO PROVIDE FINANCIAL ASSISTANCE TO THE SARG TO

FINISH THE PROJECT. THE C P G IS WELL AWARE FROM BITTER EXPERIENCE OF THE COSTS OF OVER-AMBITIOUS PROJECTS. (MOREOVER, ALTHOUGH CHINA IS THOUGHT TO BE ABLE TO HANDLE ITS DEBT SERVICING AND CAPITAL REPAYMENT OVER THE NEXT FIVE YEARS OR SO WITHOUT TOO MUCH DIFFICULTY, THERE MAY BE A NATURAL RELUCTANCE TO RISK INCREASING THAT BURDEN AFTER 1997).

5.

PARTLY THIS IS A PRESENTATIONAL PROBLEM. I STRONGLY SUSPECT THAT WHEN THE GOVERNOR ANNOUNCED THE PADS PROJECT IN OCTOBER 1989 THE CHINESE ASSUMED THAT THE ENTIRE PROJECT HAD BEEN COSTED, AND WOULD GO AHEAD AS ANNOUNCED. THIS IMPRESSION WOULD HAVE BEEN STRENGTHENED BY THE GOVERNOR'S REFERENCE TO 8 CONSULTANCY REPORTS WHEN EXPLAINING TO LI PENG IN JANUARY 1990 THE EXTENT OF THE PREVIOUS RESEARCH CARRIED OUT. SINCE THEN, FOR REASONS CLEARER TO US THAN TO THE CHINESE, A SERIES OF MODIFICATIONS TO THE PROJECT HAVE BEEN ANNOUNCED (E.G. SEPARATION OF THE PORT AND AIRPORT ASPECTS, THE DECISION ON FUNDING OF TSING MA BRIDGE). THESE HAVE, WRONGLY, GIVEN THE CHINESE THE IMPRESSION OF SOME CONFUSION ABOUT THE PROJECT IN THE MINDS OF HKG, AN IMPRESSION WILFULLY PLAYED ON BY SUCH AS THE SIT BROTHERS.

6. THERE IS ANOTHER ASPECT TO THE CHINESE CONCERNS ABOUT FINANCES FOR THE PROJECT: THE LONG-HELD SUSPICION, PARTICULARLY AMONG OLDER LEADERS, THAT BRITAIN WILL INDULGE IN WIDESPREAD ASSET STRIPPING IN HONG KONG BEFORE 1997. IN THIS CASE, THE CHINESE FEAR THAT PADS WILL BE A WAY OF DRAINING HONG KONG'S RESERVES INTO THE COFFERS OF BRITISH FIRMS AWARDED CONTRACTS FOR THE PROJECT. THIS FEAR IS REFLECTED IN CHEN ZUO'ER'S ASSERTION AT THE PRESS CONFERENCE ON 13 JANAURY THAT WORK ON THE PROJECT SHOULD FIRST BE AWARDED TO HONG KONG COMPANIES, AND THEN TO FOREIGN COMPANIES REGISTERED IN HONG KONG (THIS WAS ALSO, OF COURSE, PLAYING TO THE HONG KONG AUDIENCE, AS WAS REFERENCE TO THE C P G PROTECTING THE INTERESTS OF HONG KONG TAX PAYERS). THE GENERAL CHINESE FEAR OF BRITISH ASSET STRIPPING WILL HAVE BEEN STRENGTHENED BY THE RECENT DECISION ON THE FUTURE OF THE HONG KONG SHANGHAI BANK AND REPORTS ON THE INTENTIONS OF JARDINES AND OTHERS.

7.

WHILE CHINESE CONCERNS ABOUT FINANCE ARE NOT INSURMOUNTABLE, AND MAY YET BE ALLAYED BY FURTHER TARGETTED BRIEFINGS, THE

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