The dispute over involvement of the Jardine Matheson group in Hong Kong's CT9 container terminal contract was expected to cast a shadow over the meeting of the JLG, but less sensitive issues also failed to make much progress.
'Frankly I am very discontented that there has been no greater progress made,' the head of the Chinese JLG team said. Mr Davies retorted: 'If ambassador Guo is disappointed, I can only say I am more disappointed.'
Less than three months ago, British officials were optimistic that China had drawn a line between political disagreements and practical aspects of the 1997 handover. It was even thought that a deal on the financing for Hong Kong's new airport was imminent.
The row over CT9 erupted earlier this month when China accused Britain of awarding Jardine Matheson part of the contract in return for political favours. The companies were originally chosen in November 1992; in June this year a director of Jardines abstained on a vote in Hong Kong's parliament, the Legislative Council (Legco), thus allowing the Governor Chris Patten's electoral reform bill to pass into law despite China's attempts to encourage legislators to vote for a rival proposal. Mr Patten firmly denied any link.
Mr Davies said it had 'proved impossible' to make progress on CT9 during this week's meeting. 'The Chinese side are still unable to justify to me their inability to give a political green light on what should be a purely economic matter,' he added. 'The Chinese attitude on CT9 is unequivocably clear,' Mr Guo countered.
The souring of Sino-British relations appears to date back to early August, about a month after Mr Patten's reforms were passed by Legco. Analysts say China reassessed its failed attempt to thwart the Patten bill, and decided to regain the upper hand by blocking all important agreements except those it wanted to go ahead.