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11.
We are under no illusions about the toughness of the Chinese line but aim to continue to emphasise the importance of the confidence factor. Chinese propaganda (stepped up significantly before the September round of talks but recently less strident) is directed at pressurising us. We do not accept any deadline for the talks though it is clear that confidence in Hong Kong will not hold up indefinitely against uncertainty. The cumulative effect of the Chinese propaganda campaign has brought about sharp falls in the
But the Hong Kong Hong Kong stock market and dollar exchange rate. Government have taken measures to stabilise the Hong Kong dollar. The stock market and currency are so far responding well.
12.
At the latest round of talks on 19/20 October we sought to induce the Chinese to put to one side matters of principle and to concentrate on discussion of practical measures designed to ensure Hong Kong's continuing stability and prosperity. This approach (agreed with EXCO Unofficials during their latest visit to London) was, well received.
Defensive Line to Take
13.
Future of Hong Kong essentially a matter for Foreign and Commonwealth Secretary. Encouraging that second phase of talks under way with common aim of maintaining Hong Kong's stability and prosperity. This common aim gives grounds for confidence that a satisfactory negotiated settlement can be reached.
4 November 1983
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