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HUCK 040

FM PEKING 15063AZ MAY 81

TO PRIORITY FCO

TELEGRAM NUMBER 356 OF 15 MAY

RECEIVED SY

02 JUL 1981

INFO PRIORITY HONG KONG (PERSONAL FOR GOVERNOR)

INDEX

9.51

VANISTRY

Taken

FOR YOUDE

(26)A

fee (131

дея

f

126

केली 101217

ENCLOSURE TO THE GOVERNOR'S LETTER OF 5 MAY: FUTURE OF HONG KONG

}

1. I THINK THIS A USEFUL PAPER AND HAVE NO MAJOR DIFFICULTIES

WITH IT.

2. PARAGRAPH 3 ON THE CHINESE VIEW SHOULD BEGIN WITH THE REMINDER THAT THE FULL CHINESE POSITION REMAINS CONJECTURAL, THOUGH

CERTAIN ELEMENTS SEEM CLEAR. THE PARAGRAPH SHOULD BRING OUT THE

EXTREME POLITICAL DIFFICULTIES FOR CHINA OF PERMITTING THE PRESENT

STATUS TO CONTINUE BEYOND 1997. FOR THIS REASON, ALTHOUGH TECHNICALLY "IT IS OPEN TO THEM TO DISREGARD 1997'', IN

PRACTICE AND ALSO BECAUSE OF THE PUBLIC ATTENTION FOCUSSED ON

THAT DATE, THEY COULD NOT RISK DOING SO WITHOUT A MAJOR POLITICAL

CONCESSION ON OUR PART. THE REFERENCE TO TAIWAN ALSO COMES IN AT

THIS POINT AND SHOULD BE EXPLAINED, IE THE CHINESE CAN AFFORD TO DO NOTHING OVER HONG KONG THAT WOULD, AS THEY SEE IT, MAKE THE RECOVERY OF TAIWAN MORE DIFFICULT. THE PARAGRAPH SHOULD ALSO MENTION

THE IGNORANCE AND MISUNDERSTANDING OF THE HONG KONG SYSTEM AND PROBLEM PREVALENT EVEN AMONG CHINESE OFFICIALS WHO SHOULD BE WELL INFORMED, EG NCNA.

3. PARAGRAPH 6 LAST SENTENCE AND PARAGRAPH 7 REPRESENT A CHANGE IN

THE HONG KONG ASSESSMENT. UNTIL RECENTLY IT WAS ARGUED THAT

VALIDATION OF LEASES GOING BEYOND 1997 MIGHT BE SUFFICIENT TO

HOLD THE SITUATION FOR A NUMBER OF YEARS. I ASSUME WE ARE CLEAR

THAT PARAGRAPHS 6 AND 7 ARE NOW THE IRREDUCIBLE MINIMUM IN OUR REQUIREMENTS. THIS WILL OF COURSE MAKE NEGOTIATION OF A COMPRO 41 SE HARDER. IT WILL ALSO HAVE THE EFFECT OF MERGING THE IMMEDIATE AND LONGER TERM PROBLEM.

4. PARAGRAPH 8. OPTION B WOULD BE DIFFICULT FOR THE CHINESE UNLESS COUPLED WITH A CONCESSION ON SOVEREIGNTY, SINCE IT WOULD IMPLY CONTINUING WITH THE PRESENT STATE OF AFFAIRS BEYOND 1997.

5. OPTION C WOULD ALSO BE DIFFICULT FOR THE CHINESE WITHOUT THE CONCESSION ON SOVEREIGNTY. AS THE PAPER RECOGNISES, THERE WOULD BE THE FURTHER PROBLEM FOR THE CHINESE IN COMMITTING THEM- SELVES TO A SPECIFIC PERIOD OF NOTICE.

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