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39. There will almost certainly be a wide gap between the
positions of the two sides. This is likely to be reflected in
seriously divergent views on the purpose of follow up talks.
On our side we will want talks about arrangements for the
continuation of British administration. To that end the Prime
Minister may wish to propose the early start of discussions
through diplomatic channels aimed at reaching agreement on
mutually acceptable arrangements for the future. For their part,
the Chinese will no doubt want talks directed to the modalities
of resumption of sovereignty probably involving a transition
to Special Administrative Region status. They may well push hard
for this.
40. The Prime Minister will not wish to agree that the Chinese
position should be accepted as the basis on which future talks
should be conducted; nor will she wish to make any substantive
concession on sovereignty without a clear indication from the
Chinese that they would be prepared in return to contemplate
the continuation of British administration after 1997. In order
to avoid an impasse it is for consideration whether the Prime
Minister should indicate willingness in the course of talks,
without prejudice to the positions of either side, to discuss
ways in which the Chinese position on sovereignty might be
protected, provided this was on the strict understanding that
in return the Chinese were prepared to accept that no changes
should be made in present arrangements for administering the
territory for a long time to come. Depending on the course of
the discussions, the Prime Minister might go further and hint at
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/willingness