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Administrative Region (SAR) of China. Main points:
(a) government to be drawn from local people of Hong Kong.
(b) Hong Kong's economy and basic freedoms would be protected and laws basically unchanged.
(c) Financial autonomy. Independent convertible currency would be
retained. Hong Kong would remain a free port. Existing external
relations would be maintained in economic/cultural fields.
8.
Most Hong Kong people sceptical of this idea. Do not believe it
can provide effective guarantees against PRC interference. Such an
"insulator" currently provided by British administrative link.
9. In July/September meetings we concentrated on trying to educate
Chinese about Hong Kong's complexities and basis for confidence. Chinese response suspicious. Clear that Chinese incorrectly regarded this as attempt to justify continuing British
administration for own sake.
10. In October meeting sought to induce Chinese to set aside basic
principles and concentrate on detailed discussions of practical measures which might ensure stability and prosperity. Made some headway towards achieving this. Ready to explore any ideas, including the Chinese ones, to see whether arrangements might be agreed which would be of lasting value. This is entirely without prejudice to any final agreement, which would of course be subject
to Parliament's decision. This approach (agreed with Hong Kong's
Executive Council (EXCO) during visit to London 6-8 October)
well-received.
11.
Maintaining close contact with Hong Kong opinion. Prime Minister has said this will be taken into account. Made known to us
through many channels but role of EXCO central. Continuing
consultation with EXCO. Are Governor's Advisers and broadly representative of Hong Kong feeling on the future. Recently in London. Richard Luce in Hong Kong 24-28 September.
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/Chinese Propaganda