3. There was some discussion of the balance of power in China between the centre and the provinces and its consequences for Hong Kong. Several of the businessmen present argued that real economic power lay with the southern and coastal provinces and that Hong Kong should try and build relations with them rather than Peking. The liberalisation programme was continuing in China, all be it more surreptitiously than before, and consequently economic centres outside Peking were continuing to develop. Indeed, in some respects Hong Kong had economically already subsumed parts of Guandong province. Others pointed out that Governments had to deal with Governments (ie in Peking) and Lord Derwent argued that if Hong Kong appeared to be actively developing links with provinces which were in conflict with Peking this would simply exacerbate Peking's suspicions of Hong Kong.
4.
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Several speakers referred to the fundamental Chinese suspicion of British motives in Hong Kong. The Chinese genuinely believed that HMG was trying to milk Hong Kong dry before 1997. The only way to breakdown suspicion was through constant contact and reassurance from British Ministers. might involve a closer relationship than either UK or Hong Kong public opinion would like. Mr Yahuda's argument that this suspicion reflected infighting between political factions within Peking rather than genuine mistrust of British motives was not generally accepted. Sir Adrian Swire thought that one way of breaking down the barriers would be for the Hong Kong Government to resurrect the practice current 10 or 15 years ago of using emissaries. Sir Peter Blaker asked whether Hong Kong Chinese businessmen did not have a role to play. Lord Derwent and others observed that the businessmen tended to tailor their tune to the audience and to speak less robustly to Peking than in Hong Kong.
5. Turning to British business interests Mr Simmons stressed the importance of keeping key employees in place in Hong Kong. He felt that the British nationality package had made an important contribution to achieving this. He thought that given the historic hostility between the Cantonese and the centre there was no realistic possibility of overcoming Chinese suspicions of Hong Kong and that Hong Kong would be best advised to develop its links with neighbouring provinces. Mr Wolfers said that it was vital that Hong Kong and China be treated as separate markets under the new Portfolio Management System for ECGD. Sir Robert Davidson (who was virtually alone in trying to focus the conversation on China rather than Hong Kong) stressed the importance of clear guidance from HMG on trade with China. The position on ATP and ECGD had been unclear for several months. British business needed a clear steer from HMG.
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