BRIT EMB HASHINTON 1
TUE 04 MAY 93 20:21
PG.13
CONFIDENTIAL
The Governor agreed that it was difficult to secure rapid progress on such issues with China. He asked whether Congressional pressure focused more on the trade imbalance with China than on human rights and proliferation issues. trade issues were a
Mr. Bentsen said that concern across the board though individual human rights and proliferation concerns were given a high profile by small and committed groups of Congressmen.
Mr. Bentsen asked about progress on constitutional issues. The Governor said that the argument was about two propositions: (i) Should Hong
chief (i) Should Hong Kong have free
free or elections in 1995? (ii) Should those elected in 1995 be able to or rigged LegCo continue in LegCo beyond 1997 or should Martin Lee and his liberal colleagues be required to get off the through train.
The Governor explained that the business community did not always understand the relationship between a free press, the rule of law and other aspects of a free society on the one hand, and continued prosperity on the other. The Bank of America had $4.5 billion tied up in Hong Kong. If Hong Kong became no different from Shanghai or Shenzen, it was unlikely that they would continue to invest there, rather than in Taipei or Seoul Similarly China did not seem to understand that Hong Kong's success or Tokyo. depended on more than the simple capitalist allocation of resources. A very important aim would be to seek to prevent the major problem of corruption in China seeping into Hong Kong.
Mr. Bentsen asked whether China itself was taking a tough line in punishing those involved in corruption. The Governor said that only those up to a particular level were punished. Car theft in Hong Kong was largely orchestrated by the security forces over the border. Many senior cadres had relatives and contacts in Hong Kong and, for example, benefitted considerably from pre- knowledge of rises and falls in the Hang Seng Index determined by Chinese Government pronouncements. On China's economic prospects, the Governor said that the country had managed to move adroitly to market-based economics. But it faced serious problems with inflation. When coupled with corruption and the problems that would arise from adjusting to generational changes leadership, it meant that the economic future would not be plain in the sailing for China.
Mr. Bentsen asked about long-term infrastructure investments in Hong Kong. The Governor said that these were still in the pipeline and considerable progress was being made, step by step, on the airport for example. However, the Chinese were trying to hold up overall financing agreements on a number of major projects such as the airport and Container Terminal 9 as a means of economic leverage over constitutional issues. Ultimately this would work to China's disadvantage since Hong Kong had a real need for these infrastructure improvements for the future. China was also trying
CONFIDENTIAL
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