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Interjecting at this point Mr. Deng Xiaoping asked what le Prime Minister meant by control. The Prime Minister said that Hong Kong owed its prosperity to the system which it had had during 140 years of British administration. This system was compounded of several different elements a political system
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which was different from that of China; an assured legal system; and an independent currency.
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Mr. Deng Xiaoping asked whether "control" meant rule of a place by a country.
The Prime Minister said that she drew a distinction between sovereignty and administration. There had been examples of one country exercising administration in territory of which another country was sovereign. It could be said that this situation had existed in the New Territories, where Britain had had a lease from China. It was the firm belief of the British Government that unless people believed that the present arrangements for administering Hong Kong would continue for a long time, there would be a most damaging effect on confidence: and if changes in the administrative control of Hong Kong by the United Kingdom were introduced or announced now, the result would be disastrous for Hong Kong confidence.
The Prime Minister emphasised that as she had explained to Premier Zhao Ziyang the immediate issue was not what would happen by 1997 but what people now in 1982 believed would happen: it was that which would determine what they would do with their investments in the coming months and how far they would support the Hong Kong dollar. So the problem was an immediate one. Things would change in China as in the wider world, but people would make their present judgements against the background of recent Chinese history, of a difference between political systems of China and Hong Kong and of a modernisation programme which had only just begun in China. Against this background, if a change in Hong Kong's future status was announced now on the lines suggested by the Chinese Government, those with money and skill would immediately begin to leave the territory, and this would bring about an economic collapse which could be irreversible, if it went fast.
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The Prime Minister
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