US embassy cable - 05HONGKONG4611

C O N F I D E N T I A L  HONG KONG 004611 
 
 
DEPARTMENT FOR EAP, EAP/CM 
NSC FOR GREEN/WILDER 
 
E.O. 12958: DECL: 10/03/2030 
TAGS: PREL, PGOV, PINR, CH, HK 
SUBJECT: HONG KONG CHIEF EXECUTIVE DONALD TSANG LOOKS AHEAD 
 
Classified By: CONSUL GENERAL JAMES CUNNINGHAM.  REASONS: 1.4 (B,D). 
 
1.  (C) At lunch with me on October 3, Chief Executive (CE) 
Donald Tsang looked ahead to the Government's Policy Address 
on October 12, its upcoming proposals for political reform, 
and his visit to the U.S. at the end of October.  With the 
policy and political reform issues out in the open, he hopes 
to discuss with the president and the secretary the 
importance of Hong Kong's role, both in this region and with 
respect to the international community's interaction with 
China, and Hong Kong's need for U.S. support. 
 
2. (C) Tsang is tired, and says he hasn,t had a day off in 
more than a year.  His doctor has told him he needs to find 
more time to relax and to exercise.  But he is clearly 
enjoying the political fray.  He and his team have skillfully 
controlled the unfolding political debate over the past 
months.  The popularity of his government is acknowledged 
both by the general public and by Beijing.  As one of the 
major newspapers here put it several weeks ago, in many 
respects the political forces are dancing to Tsang,s tune, 
and he is proud of his Government's success. 
 
3. (C) He told me that his basic charge from Beijing is to 
show that his team can run Hong Kong as efficiently as did 
the British, and to solve problems before Beijing becomes 
involved.  He credited Vice President Zeng Qinghong with 
giving strong support, adding that Zeng is very well informed 
about Hong Kong developments, down to the details.  He added 
that President Hu and Premier Wen Jiabao are also 
knowledgeable about Hong Kong affairs, and that Beijing has 
been "supportive" when he asked. (Comment: the Zeng visit to 
Hong Kong, and the invitation to all Legislative Council 
members to visit the mainland, were key elements in the Tsang 
strategy for improving the prospects for acceptance of the 
Government's political reform package.  End comment.) 
 
4. (C) Tsang confirmed that the political reform package will 
be unveiled after the Policy Address.  In the Policy Address, 
Tsang will raise many of the social and governance issues 
vital for Hong Kong's future.  He will seek to broaden 
political debate beyond focus on universal suffrage, for 
which, he repeated, Hong Kong's immature political structure 
is not well prepared. 
 
5. (C) I commended him on his skillful handling of the 
gradual emergence of the elements of the Government's 
political reform proposal.  His opponents across the 
political spectrum are obviously feeling that they are being 
backed into the corner of having to accept elements they 
don,t like.  He said that Chief Secretary Raphael Hui, his 
right hand, is the master of that process.  When I suggested 
that dropping the inclusion of appointed District Council 
members would ensure its acceptance, he agreed but said 
flatly there is no more flexibility from Beijing.  He said 
Beijing has, from its point of view, been quite forthcoming 
by agreeing to inclusion of the directly elected district 
representatives in both the Legislative Council and Election 
Committee.  Exclusion of the appointed reps would "kill the 
deal." 
 
6. (C) The proposal will be "take it or leave it."  He is 
committed, he said, to get the best result possible to 
advance democracy, and "no one could do any better."  He 
personally could support direct elections in 2007/2008.  But 
that would have created huge problems which aren't even being 
discussed, such as Hong Kong's extremely narrow tax base. 
(Comment:  only 1.5 percent of the population account for 60 
percent of all salary tax revenue, and only 18 percent of the 
population pay any tax on salary. End comment.)  This is an 
unstable basis for democracy, he argued.  The great fear in 
Hong Kong is not taxation without representation, but 
"representation without taxation" in which the non-taxpaying 
majority would dictate to the taxpayers.  He concluded that a 
proposal which is disliked by both the democrats and the 
pro-business, pro-Beijing elements probably strikes the right 
balance. 
 
7. (C) Tsang hopes he can use his visit to the U.S. at the 
end of October to discuss with the President and the 
Secretary the unique and vital role Hong Kong has to play in 
this region's future, and with China itself.  He is committed 
to the preservation of Hong Kong's distinct character, 
without which "we might as well be in Shanghai."  Continued 
U.S. support will be crucial, he said.  In a speech to the 
Washington Asia Society he will tackle "head on" the issue of 
democracy, and in New York he will meet with the business 
community and "The New York Times."   He would be willing to 
meet with anyone we suggest on the Hill. 
 
8. (C) I told him that in some respects Hong Kong is a 
barometer of China,s intentions toward the international 
community and its ability to abide by its commitments.  Thus, 
how Hong Kong acts, and how China acts toward Hong Kong, are 
important political and economic indicators.  If things start 
to go wrong in that dynamic, the reaction will be quick and 
negative.  He agreed, adding that Hong Kong ways and 
standards must be preserved, or it will wither.  Hong Kong's 
success, on the other hand, has much to offer the 
international community, and the rest of China as well. 
 
CUNNINGHAM