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would improve confidence in Hong Kong, eg on the land
lease issue. We should not agree to Chinese participation
in the administration of the Territory;
c) in the longer term we should not take any unilateral
initiative to leave Hong Kong. We should do everything
possible to preserve confidence there;
d) It is too early to forecast what form a long-term solution
would take. For HMG the best option would be the
continuance of the status quo beyond 1997 by agreement
with the Chinese but the latter are most unlikely to
agree to this. The Chinese may have a general long-term
aim of establishing Hong Kong as a 'special zone' under
their administration but with separate economic status.
This would be unlikely to provide sufficient reassurance
to the international business community. The solution
may be somewhere between the two extremes;
e) Any change from the status quo would raise serious
problems for HMG. The most difficult would probably
be pressure for Hong Kong people to come to the UK;
f) The position should be kept under continuous review.
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}