TNAG-2625-FCO40-3816-Visit-by-Douglas-Hurd--Secretary-of-State-for-Foreign-and-Co-1992 — Page 78

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16. There continue to be problems of morale among civil servants and police, who are worried about 1997. But wastage is not bad, particularly in view of the current very low unemployment in Hong Kong.

Her Majesty's Overseas Civil Service (HMOCS)

17. The Hong Kong Government are aware of the outcome of the Secretary of State's and Mr Patten's meeting with the Chief Secretary to the Treasury on 2 July: that officials should undertake further work over the summer and produce a range of possible costed packages for consideration by Ministers later

in the year.

We are producing an options paper, which will cover various forms of sterling guarantee including private sector capitalisation; a compensation/incentive scheme; Supplementary Pension for Overseas Service (SPOS).

18.

and

At this stage, the HMOCS Association have not asked for a meeting with the Secretary of State during his visit.

China's Most Favoured Nation Status (MFN)

19. MFN enables Chinese imports into the US to benefit from

preferential tariffs. President Bush renewed China's MFN for a further year on 2 June 1992. The Democrats have introduces a resolution seeking revocation of MFN for 1992 and a bill

seeking to attach conditionality on MFN status for 1993. Voting on both will take place on 21 July. In previous years the President has had to use his veto to block such bill, and

MFN opponents have failed to muster the two-thirds majority in

the senate necessary to over-ride the veto.

20. Revoking MFN or making its renewal conditional would

severely damage HK's economy. Two thirds of China's exports

to the US pass through Hong Kong. A revocation of MFN would cause a loss of up to 60,000 Hong Kong jobs, a halving of GDP

growth, and a loss of income in Hong Kong of HK$12-16bn.

con.iss.PR.SLM

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