problem of political control. Neither is true. Hong Kong's prosperity, and its value to China, depends on it having: (a) a different currency from China and one that is readily convertible; (b) a legal system which gives
confidence to investors, i.e., at present, a non-Chinese
legal system; and (c) access to world markets based, at present, on international agreements to which Hong Kong is a party as a British dependency. Of these three conditions, (a) could theoretically be achieved without British administration, just conceivably (b), but not possibly (c). Furthermore, until Chinese policy has been
seen to be consistent and stable over a considerable period
investors will have no faith that conditions (a) and (b)
would be met under Chinese rule. If investors are not
reasonably confident that all three conditions will
continue to be met after 1997, disinvestment will start
well before 1997 and probably by 1985 at the very latest and possibly any time from 1982 onwards. For this not
to occur there will have to be a reasonable expectation
at least that the essentials of British administration
will, and at least can, continue after 1997 with the
concurrence of the Chinese.
7.
The latter would not be possible, nor would
expectation of it be credible, without amendment or
replacement of the 1898 Order in Council providing for,
and defining the length of, jurisdiction in the New
Territories.
Actions to halt a slide in confidence
8.
The following possible actions to halt a slide of confidence are graded in a rough order of ascending difficulty for the Chinese.
SECRET