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(b)
iii) Effect on Hong Kong
The inhabitants of the colony would soon realise that HMG would not be able to protect their interests, and there would be a flight of persons and capital.
iv) Legal Implications
HMG are legally obliged to relinquish the New Territories in 1997. In the unlikely event that we would hang on until then we would have to make eleventh-hour attempts to make the best arrangements we could for the benefit of the inhabitants of the colony and the protection of British interests from a position of great weakness.
Independence
If its political circumstances were different
Hong Kong could be another and economically
more powerful Singapore. But independence would
be completely unacceptable to the PRC, who regard
Hong Kong as an inalienable part of Chinese
territory. It is therefore not worth detailed
consideration.
(c) Renewal of 1898 Lease of New Territories
Legally the simplest solution for HMG but
politically ruled out. The PRC regard the
original lease as the result of an 'unequal
treaty' and are determined on the recovery
of sovereignty over the New Territories
and the rest of Hong Kong in, if not before,
1997. The extension of the Lease would not
in Chinese eyes be compatible with this and
we see no prospect of achieving it.
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/ (d)