4. I VERY MUCH AGREE WITH ROBIN'S COMMENTS IN HIS PARA 5 ON THE LIST OF ADMINISTRATIVE POWERS. ANY ATTEMPT TO NEGOTIATE SUCH A LIST WOULD SOON RUN INTO DIFFICULTIES. WE SHOULD CONCENTRATE ON GETTING THE CHINESE TO ACCEPT A CONTINUATION OF THE PRESENT ADMINISTRATION WITHOUT FURTHER DEFINITION OF POWERS. IF WE GET TO THIS POINT THE CHINESE MAY WELL ASK US FOR SOME ASSURANCES ABOUT THE WAY THEY ARE EXERCISED.
5. MY DETAILED COMMENTS ARE AS FOLLOWS:-
OPTION A: THIS HAS SURELY BEEN OVERTAKEN BY EVENTS. THE CHINESE ARE ALREADY IMPLYING IN THEIR STATEMENTS THAT THERE WILL BE A CHANGE OF STATUS IN 1997. I UNDERSTAND THAT IT WAS INCLUDED BECAUSE WHEN THIS EXERCISE WAS STARTED, IT SEEMED TO BE A POSSIBIL- ITY IN THE SHORT TERM. I THINK IT IS MISLEADING TO SUGGEST THAT IT STILL IS A POSSIBILITY.
6. OPTION B IS NOW SURELY RULED OUT. DENG AND OTHER CHINESE LEADERS HAVE MADE IT CLEAR THAT THE CHINESE CANNOT IGNORE 1997 AND THAT SOVEREIGNTY IS THE KEY. IT IS NOW INCONCEIVABLE THAT THE CHINESE WOULD ACCEPT CONTINUING BRITISH ADMINISTRATION COUPLED WITH CONTINUING BRITISH ASSERTION OF SOVEREIGNTY OVER KOWLOON AND THE ISLAND.
7. OPTION C REMAINS THE MOST LIKELY STARTER OF OUR PREFERRED OPTIONS, AND OPTION D IS REALLY ONLY AN EXTENSION OF IT. WE AGREE THAT THE LATTER IS MORE DIFFICULT FOR THE CHINESE THAN OPTION C.
8. WE DO NOT THINK THAT OPTION E SHOULD BE ALTOGETHER RULED OUT. WE DO NOT ENTIRELY UNDERSTAND THE REMARKS UNDER THE HEADING ''LIKELIHOOD''. ANY OPTION IN WHICH BRITISH ADMINISTRATION CONTINUES INVOLVES GIVING AUTHORITY IN CHINESE TERRITORY TO A FOREIGN POWER. THE CHINESE HAVE ALSO MADE IT CLEAR THAT RECOGNITION OF CHINESE SOVEREIGNTY OVER THE WHOLE OF HONG KONG IS A MAJOR OBJECTIVE, AND IT IS THEREFORE PRESUMABLY ATTRACTIVE TO THEM. WE BELIEVE THAT THE MAIN DRAWBACK IS THAT A FINANCIAL LEASE WOULD BE A GROSSER VIOLATION OF THE SACREDNESS OF CHINESE SOVEREIGN TERRITORY THAN A PURELY POLITICAL ARRANGEMENT.
SIR P CRADOCK
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