TNAG-2353-FCO40-3423-Visits-by-Lord-Caithness--Minister-of-State-for-Foreign-and--1991 — Page 163

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MDHIAN 3319

ALSO REMAINS NERVOUS THAT HONG KONG MAY YET BECOME THE VICTIM OF US POLITICAL AND TRADE DISPUTES WITH THE CPG, WHICH COULD THREATEN THE MFN STATUS OF EXPORTS TO THE US FROM THE CHINA SUBSIDIARIES OF HONG KONG FIRMS.

8. INFLATION REMAINS A MAJOR PUBLIC CONCERN. THE LATEST STATISTICS SUGGEST THAT INFLATION HAS PASSED ITS PEAK. (THE CONSUMER PRICE INDEX (A) ROSE BY 13.9 PERCENT IN APRIL BUT BY ONLY 11.3 PERCENT IN OCTOBER.) PRICE PRESSURES, HOWEVER, REMAIN UNCOMFORTABLY HIGH. THIS MONTH, THE FINANCIAL SECRETARY ANNOUNCED FURTHER MEASURES TO COUNTER INFLATION. A KEY GOAL IS TO WIN PUBLIC SUPPORT FOR INCREASED IMPORTATION OF LABOUR IN THE FACE OF STRONG RESISTANCE FROM LABOUR SPOKESMEN. THE INDICATIONS ARE THAT OPPONENTS OF THIS POLICY ARE BEGINNING TO RECOGNISE THE STRENGTH OF THE ANTI-INFLATIONARY ARGUMENT AND TO SHIFT THEIR ATTENTION TO OTHER MEASURES WHICH WOULD PROTECT THE WORKFORCE'S WELFARE (E.G. RETRAINING FOR OLDER OR REDUNDANT STAFF, COMPULSORY RETIREMENT

BENEFITS).

9. ANOTHER IMPORTANT GOAL HAS BEEN TO CHECK THE INFLATIONARY PRESSURES CREATED BY PROPERTY SPECULATION. COPINION POLL EVIDENCE SHOWS A SUBSTANTIAL INCREASE IN THE PUBLIC'S CONCERN OVER THE COST OF HOUSING.) THE FINANCIAL SECRETARY ALSO ANNOUNCED, THEREFORE, THAT SPECULATOR'S PROFITS FROM NEWLY-CONSTRUCTED DOMESTIC FLATS WOULD BECOME LIABLE TO STAMP DUTY. FIRST INDICATIONS ARE THAT SOME OF THE INFLATIONARY STEAM HAS ALREADY BEEN SQUEEZED OUT OF THE PROPERTY MARKET, WITHOUT LEADING TO A DANGEROUS SLUMP IN THIS SENSITIVE SECTOR OF THE ECONOMY.

POLITICAL DEVELOPMENTS

10.

HONG KONG IS STILL MAKING UP ITS MIND ABOUT THE NEW POLITICAL ENVIRONMENT. THE SWEEPING SUCCESS OF THE LIBERALS' (PARTICULARLY THE UDHK) IN THE DIRECT ELECTIONS TO LEGCO AND THE CRUSHING DEFEAT OF PRO-PEKING AND BUSINESS GROUPS WERE WIDELY WELCOMED (EVEN BY MANY SECTORS OF THE BUSINESS COMMUNITY). HOWEVER, THE HONEYMOON PROVED SHORT-LIVED.

11.

THE CHANGE IN PUBLIC ATTITUDES BEGAN WITH THE UDHK'S CLAIMS TO A MAJOR ROLE IN THE NOMINATION BOTH OF APPOINTED LEGCO MEMBERS AND OF EXCO MEMBERS. ITS DEMANDS WERE NOT GENERALLY SUPPORTED, AND WERE PERCEIVED, INSTEAD AS CLUMSY AND ARROGANT. IN THE EVENT, THE ACTUAL APPOINTMENTS WERE GENERALLY WELL RECEIVED (AND EVEN THE UDHK'S CRITICISM'S WERE RELATIVELY RESTRAINED).

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