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DSR 11C
of the public attention focussed on 1997, they could not
risk acquiescing in any formal or legal action that would
prolong British administration without a major political
concession on our part.
3. Any initiative on Hong Kong might also have consequences
for their policy on unification with Taiwan: they will do
nothing over Hong Kong that would make this more difficult.
Increasingly, the Chinese see a connection between policy
towards Taiwan and Hong Kong. When Lord Carrington was in
Peking in April 1981, Deng Xiaoping said that we should
study Chinese policy towards Taiwan when considering Hong
Kong. The essentials of present Chinese policy (see Annex
A for details) are that Taiwan must give up its claim
to statehood and its flag but will then be allowed a large
degree of local autonomy, including its own armed forces.
The parallel for Hong Kong would be, as a minimum, the
relinquishing of sovereignty in return for a negotiable
degree of autonomy.
4. Current pressures on the Chinese leadership are such that
they are likely to do the minimum necessary to preserve the
advantages they gain from Hong Kong. They will avoid
specific agreements if they can. They may even be prepared
to suffer severe economic loss rather than take political
risks. Moreover we clearly cannot rely on the leadership
in Peking remaining constant. We cannot exclude the
emergence of a more ideologically and less pragmatically
inclined power group.
5.
The Chinese apparently believed in 1979 that Deng's
general assurances about the interests of investors being
safeguarded would be sufficient to deal with the problem
of confidence for some time to come. This formula allowed
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