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6. Most people in Hong Kong highly sceptical of what they have heard of China's Hong Kong plan. Evidence suggests Chinese have not thought through most of detailed issues involved. They seem to assume that by saying Hong Kong will continue to be
financial/commercial centre or that currency will continue to be internationally tradeable, this will just happen. Hong Kong people and investors need proof of effective guarantees against Chinese
interference.
7.
Central issue is to devise package in which Hong Kong people will have confidence. Must therefore agree arrangements which will reassure them. Given joint Sino-British aim of maintaining Hong
Kong's stability and prosperity, confident such an arrangement can
be worked out.
8. Any collapse of Hong Kong economy through lack of confidence would reflect badly on Britain and China. We attach much importance to maintaining good relations with China. Our aim remains to seek settlement on Hong Kong acceptable to Britain, China and people of
Hong Kong.
British Government obtains no revenues from Hong Kong, other
than those of normal trading partner, contrary to what the Chinese
seem to think.
9.
[DEFENSIVE]
10. Sovereignty: Chinese and British positions well-known. We fully realise importance of sovereignty issue to China. We are not inflexible. Are willing to consider any solution to Hong Kong's
future which would be acceptable to Britain, China and Hong Kong.
11. Acceptability: We are taking views of people of Hong Kong fully
into account. Made known to us through variety of official and
unofficial channels. In this context, Governor and unofficial
members of Hong Kong's Executive Council visited London early July
for consultations with Ministers. I intend to visit Hong Kong soon myself [Not yet announced].
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