TNAG-2679-FCO40-3876-British-Trade-Commission--Hong-Kong--and-China-Trade-Unit-re-1993 — Page 150

CONFIDENTIAL

067705 MDHIAN 1451

RESERVES FOR THE FUTURE SARG.

18. THE BASIC FORMULA FOR HONG KONG'S GROWTH REMAINS UNCHANGED: A COMPETITIVE EDGE FOR OUR GOODS AND SERVICES ON WORLD MARKETS, PLUS AGGRESSIVE EXPLOITATION OF PRC OPPORTUNITIES. EXTERNAL TRADE FLOURISHES. TOTAL EXPORTS GREW 21 PER CENT IN 1992 AND 18 PER CENT IN THE FIRST QUARTER OF THIS YEAR. RE-EXPORTS (REFLECTING VERY STRONGLY THE PRC RELATIONSHIP) GREW 29 PER CENT IN 1992 AND 25 PER CENT IN THE FIRST QUARTER OF THIS YEAR. IMPORTS GREW 23 PER CENT IN 1992 AND 18 PER CENT IN THE FIRST QUARTER OF THIS

YEAR.

19. THE PUBLIC HAS BEEN ENCOURAGED BY THE EVIDENCE THAT CONSUMER PRICES ARE UNDER BETTER CONTROL. OUR FORECAST IS FOR THE CONSUMER PRICE INDEX (A) TO REMAIN UNDER TEN PER CENT THIS YEAR. THE INDEX WAS DOWN TO 7.8 PER CENT IN MARCH, WHICH WAS ENCOURAGING BUT UNLIKELY TO BECOME THE TREND. (IN THIS CONTEXT, IT HAS BEEN USEFUL THAT INFLATION IN MAJOR CHINESE CITIES WAS ALMOST 16 PER CENT DURING THE FIRST QUARTER OF 1993, REDUCING THE SCOPE FOR CPG CRITICISM OF OUR ECONOMIC POLICIES.)

20. AS EVER WITH HONG KONG, THE FUTURE IS NOT WITHOUT ITS ANXIETIES. THE BUSINESS COMMUNITY CONTINUES TO WORRY ABOUT THE CONDITIONS WHICH THE CLINTON ADMINISTRATION WILL ATTACH TO RENEWAL OF THE PRC'S MEN STATUS, DESPITE THE COMBINED LOBBYING EFFORTS OF LONDON AND HONG KONG. THE BUSINESS COMMUNITY IS ALSO BEGINNING TO FEEL CONCERN ABOUT OVERHEATING WITHIN THE PRC ECONOMY. IF THE CPG USES ITS TRADITIONAL STRATEGY OF A SEVERE CREDIT SQUEEZE LEADING TO PAINFUL DEFLATION, HONG KONG'S PRC SALES AND INVESTMENTS WOULD SUFFER.

UK-RELATED ISSUES

21.

THE NATIONALITY QUESTION HAS GAINED A HIGHER PUBLIC PROFILE AS A RESULT OF LEGCO COMPLAINTS ABOUT THE PROPOSAL TO PHASE IN BNO PASSPORTS RATHER THAN ALLOW APPLICATIONS TO BE MADE RIGHT UP TO THE LAST MINUTE. LEGCO IS, OF COURSE, VERY SENSITIVE TO NATIONALITY ISSUES AND ANXIOUS TO DEMONSTRATE THAT THEIR VIEWS MUST NOT BE TAKEN FOR GRANTED. (MEMBERS ARE LIKELY TO LOBBY MR GOODLAD. HOWEVER, THE DISPUTE HAS NOT YET AROUSED SIGNIFICANT PUBLIC CONCERN. (IT SERVES MORE AS A REMINDER OF PAST DISAPPOINTMENTS.)

22. BY 17 MAY, THE VIETNAMESE MIGRANT POPULATION WAS 39,500

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