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O 270956Z MAR 06
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TO RUEHC/SECSTATE WASHDC IMMEDIATE 5760
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C O N F I D E N T I A L SECTION 01 OF 02 HONG KONG 001284 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR EAP, EAP/CM 
NSC FOR DENNIS WILDER 
 
E.O. 12958: DECL: 03/27/2031 
TAGS: PREL PGOV CH HK
SUBJECT: NPC DELEGATES DISCUSS HONG KONG'S ROLE IN CHINA 
 
 
Classified By: E/P Section Chief Simon Schuchat; Reasons 1.4 (b, d) 
 
 ¶1. (C) Summary:  During a March 24 lunch with the Consul 
General, seven Hong Kong delegates to the PRC National 
People's Congress (NPC) and/or the Chinese People's Political 
Consultative Conference (CPPCC) discussed the role of Hong 
Kong in the PRC's Eleventh Five-Year Plan.  Several delegates 
said that some Beijing leaders believed Hong Kong recently 
had become more of a "problem" than an asset, and they would 
be "happy if Hong Kong could just maintain the status quo" 
and "take care of itself."  If the central government were to 
publicly convey this message to Hong Kong, however, it would 
be attacked in the media for interference in Hong Kong's 
affairs.  While other regions of China would welcome 
additional assistance from the SAR, which it could provide in 
areas such as development of legal and management expertise, 
most Hong Kong entrepreneurs were only interested in sectors 
where investments offered high rates of return.  A recent 
proposal for Hong Kong to become China's "international 
center," which some of the Hong Kong delegates had raised at 
the NPC, was viewed as impractical by other attendees. 
Following a brief discussion of the RMB exchange rate issue, 
one of the NPC delegates suggested that we should not expect 
any "drastic adjustment."  End Summary. 
 
¶2. (SBU) On March 24, seven Hong Kong delegates to the PRC 
National People's Congress (NPC) and/or the Chinese People's 
Political Consultative Conference (CPPCC) discussed the 
recently concluded NPC and CPPCC meetings in Beijing with the 
CG, E/P Section Chief, and poloff.  The guests included 
Executive Council and Legislative Council (Legco) member 
Jasper Tsang Yok-sing, of the Democratic Alliance for the 
Betterment and Progress of Hong Kong (DAB): Asia Financial 
Holdings Chairman Robin Chan; former Liberal Party Chairman 
Allen Lee; Hong Kong Basic Law Committee member Raymond Wu 
Wai-yung; Legco member and Liberal Party founding member 
Sophie Leung Lau Yau-fun; Hong Kong Polytechnics University 
Professor Priscilla Lau Pui-king; and Hong Kong Government 
Central Policy Unit member Tsang Tak-sing (brother of 
Jasper).  All except Jasper Tsang, who is a CPPCC 
representative, serve as NPC delegates. 
 
Eleventh Five-Year Plan 
----------------------- 
 
¶3. (C) The delegates noted several characteristics of the new 
Eleventh Five-Year Plan, which was the focus of the NPC 
meeting in Beijing.  Sophie Leung observed that it "put the 
issues on the table," including the growing income 
disparities in China and the increasing environmental cost of 
rapid economic growth.  She also noted that the FYP process 
recently had become much more transparent; during an October 
2005 visit to Beijing, she was shown the gist of the new FYP, 
and during the congress the deputies were allowed to keep 
their copies of the plan, rather than return them at the 
conclusion.  Jasper Tsang noted that the plan for the first 
time encouraged Chinese private enterprises to invest 
oversees.  Tsang Tak-sing said he had drafted an amendment, 
subsequently adopted, to clarify Hong Kong's role as a center 
for both logistics and shipping.  Since logistics is one of 
the Hong Kong Government's pillar industries, there could 
have been a problem had it been omitted.  Patricia Lau 
discussed the plan's target of four percent of GDP for 
spending on education, with a greater portion of that 
spending by the national and provincial rather than local 
governments. 
 
Beijing's View of HK 
-------------------- 
 
¶4. (C) Allen Lee said he was "somewhat concerned" about Hong 
Kong Chief Secretary Rafael Hui's recent, widely quoted 
remark that Hong Kong faced a danger of being "sidelined" by 
the development of the mainland.  Along those lines, he had 
heard in some of his "side meetings" in Beijing that Hong 
Kong recently had become more of a "problem" than an asset to 
Beijing.  Raymond Wu seconded that remark, adding that 
Beijing would be "happy if Hong Kong could just maintain the 
status quo" and "take care of itself."  Jasper Tsang agreed, 
noting that elsewhere in China the discussion focused on 
"moving ahead," while in Hong Kong people simply wanted to 
"maintain" the city's role and status.  According to Leung, 
however, if the central government were to publicly convey 
this message to Hong Kong, it would be attacked in the media 
for interference in Hong Kong's affairs. 
 
Hong Kong's Role in China 
------------------------- 
 
 
HONG KONG 00001284  002 OF 002 
 
 
¶5. (C) Patricia Lau observed that other regions of China 
would like to receive assistance from Hong Kong, to which 
Allen Lee replied that "its too far, their per capita income 
is still too low."  Wu suggested that, "if Hong Kong wakes 
up," it could usefully provide legal, management, and 
networking expertise to the mainland, and he said the central 
government leaders understood what Hong Kong had to offer. 
Lee, however, replied that "Hong Kong tycoons are greedy" and 
only want to invest in hotels and infrastructure projects 
where they can earn 50-100 percent returns on their 
investment, rather than in industrial projects offering just 
ten percent return.  Leung noted that the first generation of 
Hong Kong investors in the Pearl River Delta had focused on 
manufacturing for export, but this was no longer the case. 
Taiwan companies in the Delta, on the other hand, continued 
to help integrate the mainland into world markets. 
 
Hong Kong as China's International Center 
----------------------------------------- 
 
¶6. (C) Regarding proposals that Hong Kong become China's 
"international center," Lau observed that the city already is 
China's international financial center, but this role could 
be enhanced through expansion of markets for bonds, 
commodities, and currency (renminbi); she said some of the 
Hong Kong delegates had raised this suggestion at the NPC. 
In her view, if Hong Kong did not take on this role, then 
China's financial development would be delayed and Hong Kong 
ultimately would "lose out."  If, on the other hand, the 
proposal were adopted, then Hong Kong would be able to help 
the mainland with its non-performing bank loan dilemma and 
with strengthening its banking sector.  Allen Lee observed 
that this proposal would be extremely difficult for the 
government to implement; if they did so, then it would only 
be for political reasons.  Tsang Tak-sing noted a recent news 
article suggesting that this plan would antagonize 
mainlanders for giving additional preferences to Hong Kong. 
 
RMB Exchange Rate 
----------------- 
¶7. (C) Lau inquired about U.S. pressure on the PRC regarding 
the renminbi (RMB) exchange rate.  She defended the central 
government's maintenance of its managed exchange rate, noting 
that Beijing would adjust the rate in a "reasonable and 
gradual way."  In response the Consul General, noting the 
imminent arrival of Codel Schumer from the mainland, observed 
that the Chinese and U.S. Governments had agreed two years 
ago that the RMB was undervalued and that the exchange rate 
needed gradual readjustment, but that the USG had expected to 
see more rapid change.  Lau agreed that "in principle" the 
RMB should be more flexible, but we could not expect any 
"drastic adjustment." 
Cunningham