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7. Personally, I find it hard to envisage a significant slide in confidence occurring in the next two or three years even if nothing much comes out of the PM's visit; but we are agreed, I think, that if there is a slide it would quickly become a very slippery slope indeed putting us at a distinct .disadvantage in any subsequent negotiations.
8.
At the end of the day, it seems to me that we have to perform a balancing act between, on the one hand, upsetting Hong Kong's financial and business stability by inaction - or the appearance of inaction - and, on the other hand, upsetting the Chinese by trying to force the pace. Given that we have already received one rebuff (in 1979) and that in Chinese eyes Hong Kong's future is probably lower on the list of priorities that it is for us, I believe the second of the two courses carries with it the greater risk and the more serious
consequences.
9.
Since writing his minute, Mr Mallaby will have had a copy of our Submission on the Future with its updated options. paper. While the paper looks at possible ways of halting, or rather preventing, a slide in confidence, it does not answer Mr Mallaby's question about how well equipped the Hong Kong Government is to cope with the consequences of a slide.
10. Subject to the comments of others, I think we should consider writing to Hong Kong as Mr Mallaby suggests; but I cannot help feeling that there are so many unknown quantities and hyper- thetical questions that it may be impossible for Hong Kong to provide a very satisfactory answer. Subject too to other views, I will draft a short acknowledgement to Mr Mallaby.
سم الله
9 March 1982
W Morris
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