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get China to the conference table - particularly since China's assessment is probably that we would not use it even in defence of Hong Kong against a military take-over.
77. The strength of our position lies in the economic value of Hong Kong to China as a source of foreign exchange.
Our
strongest card would be the possibility of handing over a buoyant Hong Kong economy for which we could hold out prospects that it would continue to earn foreign exchange in Chinese hands. Our ability to play this card postulates a very different attitude to trade with China on the part of the U.S.A. (which takes 37% of all Hong Kong's exports) and some understanding with our other Western allies and friends who trade with China and Hong Kong that they would not regard the change of administration as an opportunity to reduce drastically or cut off altogether their trade with the latter. If we cannot make use of this card then we shall be reduced
to such economic counters as continuing to give access to Hong Kong products in our own markets (which take only 17% of all exports) and the use of Hong Kong assets held in London (not all of which could be handed over and which are in any case equivalent to only one and a half times China's annual earnings of foreign exchange through Hong Kong). 78,
Overt American involvement in a mutual arrangement with China to hand over Hong Kong seems out of the question given present U.S. policies towards China. In this situation the best we could expect would be that fear of American reaction to a forcible take-over might be a factor inclining China to seek an agreed solution and, in doing so, not to press us too hard. On the other hand, if American attitudes were to change to the extent of lending their weight to such a transfer, the value of Hong Kong's trade with the U.S.A, would exercise a restraining influence on Chinese attitudes in our exchange with them.
79. It is unlikely that we could make much play with the fact that in international law Hong Kong Island and the tip of Kowloon peninsula were ceded to us in perpetuity (s.e paragraph 1 of Annex A), in the face of China's attitude that these were "unequal treaties" an attitude for which there could be considerable support from other countries,
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/particularly