TNAG-2989-FCO40-3575-Future-of-Hong-Kong-constitutional-development-talks-betwee-1992 — Page 6

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MDHIAN 297

{

ACTUAL BUSINESS BEING DAMAGED OR HELD BACK. CLOUDED

TWO SECTORS ARE

?

A.

B.

INTEREST IN LAND SALES IN HONG KONG HAS SLUMPED:

BANKS CANNOT DECIDE POST 1997 FINANCING FOR NEW, PRIVATE SECTOR PROJECTS IN HONG KONG.

THESE ARE NOT AREAS WHERE BRITISH INTERESTS ARE AFFECTED. ONLY BRITISH BANKS WERE INTERESTED IN PROJECT FINANCE..

6.

17 A

IF

THE COROLLARY IS THAT FINANCING OF CHINA RISK IS MORE ATTRACTIVE AND THERE IS SOME EVIDENCE THAT CHINA IS BENEFITING. (THIS SEEMS TO BE THE CASE WITH THE LI KA SHING'S EMPIRE: GORDON WU, ON WHOM WE ARE REPORTING SEPARATELY, IS PARTICULARLY HAPPY).

7.

LAST WEEKEND'S MEDIA STORY WAS THAT MAINLAND CHINESE WERE REFUSING TO ATTEND SOCIAL GATHERINGS WITH HONG KONG OFFICIALS. THIS WAS NONSENSE. ON THE CONTRARY, NCNA OFFICIALS HAVE BEEN ACTIVE IN GETTING AROUND THE COMMUNITY, MAINTAINING BUSINESS AS USUAL AND PEDDLING THEIR LINE.

8.

THE HARDEST BLOW HAS BEEN TO JARDINE'S, WHO WERE REPORTEDLY (THEY WERE NOT ACTUALLY NAMED) ATTACKED ON 17 DECEMBER IN A BROADSIDE FROM THE NCNA IN PEKING. ACCUSED OF BEING THE QUOTE BLACK SHEEP OF THE BUSINESS COMMUNITY AND WORKING COVERTLY TO SUPPORT THE GOVERNOR, THEIR SHARE PRICES FELL BACK 6.2 PERCENT. OLD SORES WERE RE-OPENED (OPIUM, MOVE TO BERMUDA).

9.

BUT UNDERNEATH THE BLAST AND COUNTER-BLAST BUSINESS IS FLOURISHING. NERVES HAVE BECOME STEADIER AS THE SITUATION BECOMES CLEARER. THERE IS A GENERAL VIEW THAT IF THE STAND-OFF CONTINUES AFTER MARCH OR APRIL, SERIOUS CONSEQUENCES COULD BEGIN BUT THE MAJORITY EXPECT A COMPROMISE. THE AIRPORT IS TO APPEAR EXPECTED TO PROCEED, THOUGH PERHAPS AT A RATHER SLOWER PACE: THAT IS SEEN AS NO BAD THING, AUTUMN BEING REGARDED AS THE CRITICAL PERIOD.

10. LEAVING ASIDE THE POLITICAL ARGUMENTS, BUSINESSMEN ACCUSTOMED TO NEGOTIATING WITH MAINLAND CHINESE BELIEVE THE GOVERNOR AND HMG ARE RIGHT TO STAKE OUT A FIRM POSITION (QUOTE THE ONLY WAY YOU GET ANYWHERE WITH THOSE B......S IS BY BEING TOUGH UNQUOTE WAS THE OBSERVATION OF ONE). FAMILIAR WITH CHINESE TACTICS OF GIVING A DISTORTED INTERPRETATION OF AN AGREED DOCUMENT.

2

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THEY ARE ALSO

SO THE TONE OF THE CHINESE