Dave
Reference.
28.....
Mr McQuade
McQuadd A
Mr Williamson
SECRET
МКК 040/1
31 DEC 1981
INDEX
My Man's 30/12
THE FUTURE OF HONG KONG
PRIME MINISTER'S VISIT TO CHINA, HONG KONG AND JAPAN AND
is, Af 15/1
See Hikk adı 1
280
1981
1. Mr Coles' letter of 23 December gives the Prime Minister's agreement in principle to visiting China, Hong Kong and Japan in the second half of September 1982. CACTION Please discuss with FED and ensure that the briefs for the LPS are suitably annotated.
2.
The Prime Minister also agrees that on the Hong Kong problem Lord Carrington should let her have further thoughts in due course. No 10 think that this should be done by a personal minute rather than an OD paper.
I have discussed with Sir E Youde who wishes
us to submit after the LPS's visit to China/Hong Kong putting up a draft minute from the Secretary of State to the Prime Minister and allowing for the possibility of discussion between Mrs Thatcher, Lord Carrington and Mr Atkins.
3.
A new element will need to be injected into the argumentation in the minute on the future. This is the somewhat unclear proposal refabled by Sir Y K Pao for a deal between China and the UK involving soft credit of about $1 billion and substantial export credits. Mr Coles' letter of 18 December implies that the Chinese may have been thinking of some kind of link between such a deal and the Hong Kong problem although Sir Y K was clearly not very explicit on this subject. Indeed the Prime Minister told
Sir E Youde yesterday that she was not clear whether the Chinese had in fact made any such link or whther it was Sir Y K's own idea.
4. In the draft minute from the Secretary of State we shall need to argue out, in consultation with FED, whether some kind of economic assistance to China on these lines could provide an extra lever which would help in getting a solution to the Hong Kong problem. Sir E Youde's initial reaction is that this would be unlikely if it were simply a matter of the straight provision of cash by the UK to China. It is by no means sure that the Chinese would be prepared to make concessions to us on Hong Kong simply in return for financial favours. It would probably therefore be important to look at the idea of soft credit very much on its commercial merits (what contracts might we get in return?) as well as in the context of our relations with China (this is for FED to advise).
5.
However the idea of some kind of economic lever to help over Hong Kong should not be ruled out. It just might become a more credible idea if it were linked with a project involving cooperation between Hong Kong and China. The Guangdong Nuclear Project is the obvious possibility. Ministers will in any case be under quite strong pressure from Kadoorie and others to offer favourable terms. for the supply of equipment for the Nuclear Power Station if it comes off.
We should start work on the submission immediately after we
SECRET
/get
6.
CODE 18.77