4.

SECRET

9.

c)

d)

e)

Even if they already accept that some continuation will probably be necessary, I can see no reason why they should expose themselves to admitting it at this stage, particularly with the succession to Mao still to come.

If against this background we were to press them, they would concentrate on small changes of tactical interest to them in the short term, but avoid explicit commitments about the' long term problem of interest to us. In this way they might finesse from us cards better held to play when the long term problem has to be settled.

Finally, even supposing we did reach an understanding about the long term problem with the present government, there would be nothing to prevent a different regime from overthrowing it in the light of their interests when the time came. that we can be sure of about China in 10 years time is that those men who have supreme influence now will not have it then.

the Chinese in the '80s?

a)

b)

c)

All

What would be the options for

to recover Hong Kong quickly:

to agree to the continuation of something like the status quo (which would mean helping with a formula on the 1997 date) but with some cosmetic change to help the Chinese over the political difficulty of doing so:

agreeing on a transitional period with a fixed term for the handover of power possibly with the prospect of some special

status for Hong Kong under Chinese administa- tion at the end of it.

They could only achieve (a) at substantial economic cost:

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