(b)
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CONFIDENTIAL
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40..YEARS UNDER FOI EXEMPTION NO....2761) 4062)
What approach would be adopted at the talks to break the apparent deadlock over differing views on sovereignty? On (a) Mr Luce considered that the Chinese genuinely wanted a negotiated settlement on Hong Kong Hong Kong was economically valuable to them. Moreover, Deng Xiaoping was himself subject to various pressures Most important, from the Chinese point of view, a satisfactory solution to Hong Kong could induce Taiwan to reunite with China. Mr Luce added that there was, however, little doubt that, if forced to choose, the Chinese would sacrifice economic considerations for national pride, ie the recovery of Sovereignty over Hong Kong was their most important consideration.
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It seemed to us that at a high political level, the Chinese had only an incomplete grasp of how Hong Kong works and is integrated into the international system. We hade therefore concentrated in the talks on trying to educate them. In this context it was helpful when influential people in the region (og Lee Kuan Yew, whom Mr Luce had recently met) could point out to them some of the basic truths about Hong Kong.4 Mr Parsons suggested that Hong Kong people and investors needed guarantees against interference in their affairs. Hong Kong's economic success derived substantially from conscious decisions taken by individual companies. Mr Luce agreed. From HMG's point of view the ultimate safeguard would be a settlement acceptable to Britain, China and the people of Hong Kong.
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5. On (b) Mr Luce said that an in-depth study of the basic ingredients of Hong Kong's stability and prosperity was required. If there was common agreement on what these ingredients were, it should be possible to devise a package which all concerned could accept. There were grounds for confidence that such a package could be worked out. Recent newspaper reports indicated, for example, that the Chinese had welcomed the measures recently taken to stabilise Hong Kong's economy. If true, such reports showed that China had genuinely been worried about the prosperity of Hong Kong.
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There was some discussion about ASEAN affairs and then about
Brunei.
NFIDENTIAL
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