CONFIDENTIAL
120015
MDHIAN 4718
POLITICAL ISSUE. SOCIAL SECURITY PAYMENTS ARE INDEXED TO ENSURE THAT THEIR REAL VALUE KEEPS IN LINE WITH CONSUMER PRICES. IN THIS WAY, LIVING STANDARDS ARE PROTECTED FOR THESE MOST AT RISK, IN PARTICULAR THE ELDERLY AND THE DISABLED. NEVERTHELESS, THERE ARE FEARS (DESPITE OUR ASSURANCES TO THE CONTRARY) THAT THE GOVERNMENT'S EFFORTS TO KEEP PUBLIC EXPENDITURE IN CHECK WILL LEAD TO CUTS IN WELFARE SPENDING. THESE ANXIETIES WILL BE INTENSIFIED DURING LORD CAITHNESS'S VISIT BY THE BUDGET DEBATE WHICH START ON 4 MARCH. ALTHOUGH THE GOVERNMENT WILL STAND BY ITS SOCIAL COMMITMENTS, PRESSURE GROUPS AND LEGCO MEMBERS CAN BE EXPECTED TO VOICE COMPLAINTS ABOUT THE LEVELS OF EXPENDITURE AND ANY REALLOCATION OF RESOURCES WHICH REFLECTS NEW PRIORITIES RATHER THAN THEIR SPECIAL INTERESTS.
9.
SOME PARTS OF THE LABOUR FORCE FEEL PARTICULARLY VULNERABLE TO RISING PRICES. THE LATEST AVAILABLE FIGURES SHOW THAT, IN 1991, REAL EARNINGS PER EMPLOYEE FELL SLIGHTLY IN THE SECOND AND THIRD QUARTERS. THIS DECLINE REFLECTED THE STRUCTURAL ADJUSTMENT OF THE ECONOMY WHICH HAS AFFECTED INDUSTRIAL WORKERS MOST AS FACTORIES HAVE RELOCATED TO SOUTHERN CHINA. AGAINST THIS BACKGROUND, LABOUR LEADERS HAVE BEEN ABLE TO GENERATE SOME PUBLIC SUPPORT FOR THEIR CAMPAIGNS AGAINST THE GOVERNMENTS' PLANS TO IMPORT MORE LABOUR.
10. THESE PROBLEMS MUST BE KEPT IN CONTEXT. HONG KONG HAS FULLY EMPLOYMENT: A SERVICES SECTOR WHICH IS GROWING SO RAPIDLY THAT IT CAN MORE THAN ABSORB THE JOBS LOST IN MANUFACTURING: AND ACCESS TO CHEAP LABOUR IN CHINA WHICH MAINTAINS THE COMPETITIVENESS OF OUR EXPORTS. THESE REALITIES HELPED TO PERSUADE LEGCO RECENTLY TO SUPPORT PLANS TO IMPORT MORE LABOUR.
RELATIONS WITH CHINA
11. THE PUBLIC'S ATTITUDE TOWARDS THE PRC HAS BECOME MORE SECURE AND CONFIDENT IN RECENT MONTHS ALTHOUGH THERE HAVE BEEN A NUMBER OF BLIPS ON THIS UPWARD GRAPH. THERE ARE SEVERAL FACTORS BEHIND THIS MORE POSITIVE OUTLOOK. AMONG THE MOST IMPORTANT IS THE RECENT HIGH-PROFILE VISIT OF DENG XIAOPING TO GUANGDONG PROVINCE, AND OUR NEIGHBOURING SPECIAL ECONOMIC ZONES IN JANUARY. THIS WAS CLEARLY AIMED AT ENDORSING THE ''OPEN DOOR'' POLICIES WHICH HAVE BEEN RESPONSIBLE FOR THE RAPID GROWTH OF GUANGDONG (12.5 PER CENT P.A. IN REAL TERMS BETWEEN 1981 AND 1989), LARGELY FUELLED BY HONG KONG CAPITAL AND ENTREPRENEURSHIP.
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