CRS-11
II. BRITISH, HONG KONG CONCERNS
If implemented smoothly, this stated Chinese policy might lead to a
transition that would not substantially disrupt Hong Kong's social and eco-
Such an orderly process remains a paramount goal for the
Great Britain has only
nomic system.
British Government in the current negotiations.
6/
a modest economic stake in Hong Kong it trails far behind the United
States, China and Japan as Hong Kong's leading trading partners, and it ac-
counts for only a modest share of foreign investment in the territory.
Moreover, officials in London have clearly differentiated between the legal
status of Hong Kong and other contested British territories (e.g. the
Falkland Islands and Gibraltar), recognizing, in particular, the legality
of the second convention of Beijing, 1898, which calls for the New Territories
to revert to China in 1997. Without that land, Hong Kong would appear to
be unviable as a British possession.
Leaders in Hong Kong, meanwhile, have a much greater interest in the
colony's future and have yet to be reassured by pledges of British and
Chinese concern. As a result, there were signs of a serious decline of
confidence in the colony coincident with Prime Minister Thatcher's visit
to China and the publicized Sino-British differences over the status of the
territory. The stock market index dropped about 30 percent in the last four
months of 1982, and the Hong Kong dollar declined about 15 percent in the
same period relative to the U.S. dollar and other major currencies. Property
values in the colony continued to fall so that by late 1982 they were about
30 percent less than their level at the high point of the real estate market
6/ The British position is reviewed in Far Eastern Economic Review. March 17, 1983.
pp. 43-45.