VZCZCXRO8840
RR RUEHCN RUEHGH RUEHVC
DE RUEHHK #1587/01 2341138
ZNR UUUUU ZZH
R 221138Z AUG 09
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC 8374
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHUL/AMEMBASSY SEOUL 3568

UNCLAS SECTION 01 OF 02 HONG KONG 001587 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/CM 
 
E.O. 12958: N/A 
TAGS: PREL PGOV OREP HK
SUBJECT: CODEL BERMAN COURTESY CALL ON CHIEF EXECUTIVE 
DONALD TSANG 
 
(U) Sensitive but unclassified -- please protect accordingly. 
 Not for dissemination outside USG channels. 
 
¶1. (SBU) Summary: In a wide-ranging courtesy call with CoDel 
Berman August 22, Chief Executive (CE) Tsang expressed 
concern about legislation under consideration in the United 
States which would list Hong Kong as a tax haven and plans to 
restore the Hong Kong Policy Act (HKPA) reporting 
requirement.  Chairman Berman and the delegation undertook to 
look into the issue of the tax haven listing, which bill is 
not under the purview of the Foreign Affairs Committee.  On 
the HKPA Report, while the Chairman agreed many of the 
concerns held in Congress at the time of the handover had not 
come to pass, there was still an interest in Congress in 
following Hong Kong's democratic development.  While Hong 
Kong's economic and financial fundamentals have weathered the 
crisis well, CE Tsang is skeptical a real recovery can occur 
without a rise in demand from Hong Kong and China's 
traditional overseas markets.  Secretary for Constitutional 
and Mainland Affairs Stephen Lam also updated the CoDel on 
Hong Kong-Taiwan relations.  End summary. 
 
-------------------- 
Two Areas of Concern 
-------------------- 
 
¶2. (SBU) In an August 22 courtesy call, Chief Executive (CE) 
Donald Tsang warmly welcomed the Congressional Delegation led 
by House Foreign Affairs Committee Chairman Howard Berman, 
and stressed the long-standing and broad U.S.-Hong Kong 
relationship.  While overall relations are excellent, CE 
Tsang noted, he did want to raise Hong Kong concerns 
regarding two pieces of pending legislation, one which would 
declare Hong Kong a tax haven and another which would restore 
the Hong Kong Policy Act (HKPA) reporting requirement.  Tsang 
found it ironic given the transparency of Hong Kong's 
economic and financial system that Hong Kong could be 
declared a tax haven.  He told the CoDel Hong Kong was 
actively legislating to ensure all its disclosure 
requirements would be in line with OECD standards, a process 
he expected would conclude in a few months' time.  On the 
HKPA Report, CE Tsang noted that Hong Kong's democratic 
progress since the handover is far greater than what occurred 
under the British, yet there was no reporting requirement 
when Hong Kong was a colony.  Hong Kong is an open society 
where events are easily monitored, Tsang stressed, so there 
is no need to put it "under a microscope." 
 
¶3. (SBU) Chairman Berman and members of the delegation 
concurred in CE Tsang's assessment of Hong Kong's transparent 
financial system, and undertook to look into the issue of 
Hong Kong's listing as a tax haven.  With regard to the HKPA 
reporting requirement, Chairman Berman recalled that, when 
the initial requirement was set, there were concerns whether 
key institutions such as human rights and the rule of law 
would endure following the handover.  Those fears had not 
come to pass.  However, the Congress remains interested in 
the pace of democratic development in Hong Kong.  He noted 
that the language to restore the report came after a 
perception that the democratic development of Hong Kong had 
been delayed. 
 
¶4. (SBU) CE Tsang recalled that universal suffrage was not 
mentioned in the Sino-British Joint Declaration, but the PRC 
had nonetheless written it into the Basic Law.  A timetable 
has been set for Hong Kong's democratic development, which 
Tsang feels represents a firm commitment by the central 
government, and now the issue is reaching consensus within 
Hong Kong.  Within LegCo, this means reaching a two-thirds 
majority including the sectorally-elected functional 
constituencies, which will effectively need to vote 
themselves out of existence.  Secretary for Constitutional 
and Mainland Affairs Lam noted that the 2007 National 
People's Congress Standing Committee had stipulated that 
universal suffrage elections for the Chief Executive was 
defined as participation by all of Hong Kong's registered 
voters.  In sum, Tsang suggested that restoring the HKPA 
reports was not only unnecessary, it "would be an irritant in 
Sino-U.S. relations in the long run." 
 
---------------- 
Financial Crisis 
---------------- 
 
¶5. (SBU) While Hong Kong has weathered the financial crisis 
better than its regional neighbors, CE Tsang remains 
cautious.  Although there are positive indicators, until and 
unless trade figures and ship and plane movements through 
 
HONG KONG 00001587  002 OF 002 
 
 
Hong Kong increase, he will not believe a full recovery is 
underway.  The Chairman noted, and CE Tsang agreed, that Hong 
Kong stock and real estate markets were both doing well. 
However, Tsang believed the key element is a revival in 
foreign demand in Hong Kong and China's overseas markets. 
The Chairman asked whether Beijing concerned itself with the 
regulatory and economic management of Hong Kong.  This is our 
business, CE Tsang replied.  We are in contact with Chinese 
regulators and counterparts much as Hong Kong is in contact 
with U.S. Fed Chairman Bernanke and other counterparts. 
 
------ 
Taiwan 
------ 
 
¶6. (SBU) Secretary Lam, whose bureau manages relations with 
Taiwan, briefed the delegation on recent developments in Hong 
Kong-Taiwan relations.  Gambling on the possibility of a Ma 
Ying-jeou presidency, Hong Kong began making preparations for 
a change in relations in 2007.  In October 2008, the Hong 
Kong Trade Development Council opened an office in Taipei, 
the first formal presence by a Hong Kong statutory body in 
Taiwan.  The two sides are also developing an Economic 
Cooperation Committee, which while meant to promote 
business-to-business relations, will have government 
officials as "advisers".  In this unofficial context, Lam 
explained, contacts can occur between the two governments. 
CE Tsang noted there had also been a steady exchange of 
official visitors between the two sides, including a visit by 
Secretary Lam to Taiwan. 
 
¶7. (U) Participants: 
 
United States 
------------- 
Chairman Howard Berman 
Hon. Eni Faleomalvaega 
Hon. Jack Kingston 
Hon. Diane Watson 
Acting Consul General Christopher Marut 
Consulate and Congressional Staff 
 
Hong Kong 
--------- 
Chief Executive Donald Tsang Yam-kuen 
Secretary for Constitutional and Mainland Affairs Stephen Lam 
Sui-lung 
Raymond Tam Chi-yuen, Director, Chief Executive's Office 
HKSARG staff 
 
¶8. (U) This message was cleared by CoDel Berman. 
MARUT