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PARTLY BECAUSE OF THE RELATIVE STRENGTH OF THE US DOLLAR.
3. SO FAR WE HAVE NOT ATTEMPTED TO REPLY PUBLICLY TO THE
CHINESE CAMPAIGN OF PROPAGANDA. WE ARE STRESSING THAT IT IS THE
TALKS THAT COURT, AND NOT WHAT IS SAID OUTSIDE THEM. THIS MAKES
IT ALL THE MORE IMPORTANT THAT IN SPITE OF THE DIFFERENCES OF
VIEW ON MAIN ISSUES OF PRINCIPLE WE GET DOWN TO PURPOSEFUL TALKS
ABOUT MAINTAINING STABILITY AND PROSPERITY WITHOUT FURTHER
DELAY.
4.
IF THE QUESTION OF HONG KONG COMES UP IN DISCUSSIONS WITH
CHINESE LEADERS SHULTS MIGHT CARE TO DRAW ON ANY OR ALL OF THE
FOLLOWING THEMES:
(A) WAS ENCOURAGED TO HEAR SOME FOUR MONTHS AGO THAT AGREEMENT
HAD BEEN REACHED TO HOLD CONFIDENTIAL TALKS BETWEEN CHINA
AND BRITAIN ON HONG KONG AND THAT A COMMON AIM TO MAINTAIN
THE TERRITORY'S STABILITY AND PROSPERITY HAD BEEN EXPRESSED:
(B) MANY RUMOURS GOING AROUND ABOUT HONG KONG'S FUTURE. THESE
MUST BE WORRYING FOR HONG KONG PEIPLE AND FOR ALL THOSE
ABROAD WHO INVEST THERE. AS YOU KNOW, THE US AND OTHER
COUNTRIES HAVE CONSIDERABLE ECONOMIC INTERESTS IN THE
TERRITORY:
(C)
(D)
(E)
CONFIDENCE IN HONG KONG IS BASED ON TRUST IN CONTINUITY OF
POLICY, FREEDOM FO ENTERPRISE, AND ABSENCE OF OUTSIDE
INTERFERENCE. THE IMPORTANCE OF THE EXISTING SYSTEM, WHICH
IS TRIED, TESTED AND RECOGNISED INTERNATIONALLY, IS THAT IT
GUARANTEES THAT HONG KONG WILL NOT BE SUBJECTED TO SUDDEN
CHANGES AND RESTRICTIONS IMPOSED FROM OUTSIDE:
UK GETS NO DIRECT REVENUE FROM HONG KONG. THE AUTHORITIES
IN HONG KONG ARE FREE TO DO AS THEY WANT WITH TAX REVENUE
AND BUDGET SURPLUSES:
ANY BENEFITS WHICH ACCRUE TO CHINA'S MODERNIZATION POLICY
FROM HONG KONG WOULD BE LOST OR AT LEAST GREATLY REDUCED
IF THERE WAS A CHANGE AWAY FROM THE PRESENT FREE MARKET
ECONOMY BASED ON A FULLY CONVERTIBLE CURRENCY. SUCH A
CURRENCY, WHICH IS PERMITTED TO FLOAT IN RESPONSE TO
SUPPLY AND DEMAND, DEPENDS ULTIMATELY ON CONFIDENCE
WITHIN THE TERRITORY. PYM
FUTURE OF HONG KONG
TIMIRED
HD/HI=&S)
HD/FED
HD/PLANNING STAFF
HD/PUSD
PS
PS/LORD BELSTEAD
PS/PUS
MR GIFFARD
MR DONALD
FC04011584
COPIES TO
SIR I SINCLAIR LEGAL ADVISER
MR ROBERTS
MR COLES
MR MARTIN
PS/MR HURD
NEWS D
NO 10 DOWNING STREET
ASSESSMENTS STAFF
CABINET OFFICE
2 SECRET
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