5.
We must watch carefully for any advance signs of weakening confidence in Hong Kong either by local or foreign investors. When this comes it could come suddenly and be very difficult to reverse. We must also watch carefully for any signs that the Chinese are becoming more willing than now to discuss the issue.
6. In the absence of collapsing confidence or willingness by the Chinese leadership to discuss the matter, we should attempt to ensure Chinese leaders realise the existence of a problem that could become serious at short notice. This could be done through official contacts as well as unofficial intermediaries (e.g. Hong Kong Chinese businessmen who now have widespread and often high-level contacts in China). But we should not force the pace or nag.
7.
If confidence begins to slide, we should discuss urgently with the Chinese.
(a) this process could be started by ensuring that
alarm signals are sent to Peking by official Chinese agencies in Hong Kong, particularly the New China News Agency (the unofficial Chinese embassy) and the Bank of China. This would have to be followed by high-level approaches in Peking and London. The objective would be to set up secret talks with the approval of Deng and the top leadership. These talks could be led on our side by the Ambassador or, as a way of emphasising the unusual nature of the problem, a special emissary of the Prime Minister (cf. the secret Kissenger visits to Peking in 1971).
(b)
8.
At these talks we would aim for one of the solutions
in the attached paper, preferably D (declaration by the Chinese that advance notice of 15 years would be given before any change in the status of Hong Kong), or C (statements by both sides that the treaties are no longer applicable and that Hong Kong is Chinese territory temporarily under British administration with no intention by the Chinese to change this for many years to come). Solution C is technically an abrogation of British sovereignty. The Chinese price for solution D would probably be similar.
If nothing alters meanwhile, and if the Prime Minister
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