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3. In the first year of the talks, we had attempted to
develop Chinese understanding of what was necessary to
preserve stability; but Mr Luce doubted that the leadership in Peking yet understood this. The people of Hong Kong
needed more than promises; they needed an 'insulator' from
Chinese interference in their affairs. Discussion had been
about the degree of the residual British link which would act as an insulator against the worst effects of a Communist
Chinese regime. So far the UK had made the running in the talks, putting forward its own ideas and explaining how the system
operated. The Chinese had been difficult over the link between sovereignty and administration, and it had been hard to get them to discuss their own ideas, which they had probably not
yet worked out for themselves. The eventual hope was to reach a conclusion giving satisfaction to both sides on both sovereignty/right of administration and on Chinese guarantees for Hong Kong. We had told the Chinese that for us, the impor- tant question was whether Parliament would accept what was proposed. The last round, which both sides had called 'useful and constructive' had produced a considerable change for the better in the atmosphere, and a further round would be held in
mid-November. But the Chinese remained constantly suspicious
of the UK, still believing that we were still milking the colony. This element of distrust was deeply rooted.
4. Mr Wolfowitz agreed. It was doubtless good negotiating tactics for them to put Britain on the defensive in this way, but the Chinese also probably believed it, and felt that they should be the ones to do the milking. In US/Chinese discussions, the Chinese had done little more than rehearse standard positions on Hong Kong. He also believed that they did not understand the factors which created the confidence. His impression was that Hong Kong people were more concerned with their economic prospects; without the freedom to do business their political freedoms did not mean much. If people lost faith in this,
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