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implementing restraint, such as local mayors, were also managers of development corporations which gave them their main income. They also had private interests, so the incentives to act decisively might not be there. However, it was clear that the authorities recognised there was a problem, which was an important first step. We shall be seeing KY Tang, the HKG Economist, in a couple of weeks for a more detailed discussion of these issues. Macleod saw, and valued the Peking Embassy's telegrams and expressed interest in the much larger volume of detailed economic reporting. We will arrange for him to get it.
5. It was bit surprising that outsiders continued to be so happy to invest in China in the absence of clear company law and a reliable legal system. Hong Kong was giving the Chinese a lot of discreet technical assistance in formulating a corporate legal structure, which would thus be modelled on British practice - scarcely a drawback for the UK. The recent spate of large-scale Chinese listings in Hong Kong provoked the thought that, despite improvements in China, Hong Kong might develop not only as a financial centre for China but also an oasis of legal stability and a good centre for corporate headquarters.
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Macleod was much happier about the airport where the Chinese appeared to be coming to realise that it was they rather than HKG and HMG that were the demandeurs. The long period of inaction had helped to convince them that continuing to make difficulties would prevent completion of the airport by 1997, an outcome they did not want. It was already too late to finish the airport railway between Kowloon and Central because the Wachai reclamation could not be completed in time. There was less room for delay in other elements of the project as well, with any one of them potentially on the critical path. Financing for the PAA had been secured until the end of the year, but it was absolutely vital that a financing plan was agreed by then otherwise they really would have to put up the shutters. Rather surprisingly, the uncertainties over the future of the project had not led to any significant defections from the PAA, where the man-management had not been of the best. It was now in the "more solid" hands of Hank Townsend. Prospective investors were not turning away, and would be ready to contribute once the go-ahead was given surprisingly, perhaps, with the much increased equity stake from HKG.
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We also had some discussion of world economic developments and of the reasons for East Asia's relatively buoyant performance in the face of recession elsewhere. I also mentioned the help we were giving to Hong Kong's approach to the OECD, on which Macleod did not seem particularly engaged. He was, however, fired up over some GATT discussion over
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