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5. But if the Chinese worries have temporarily subsided, I have no doubt that they will reappear. However much we talk together of not paying too much attention to newspaper comment and careless talk in Hong Kong, the Chinese will continue to be riled and made suspicious by it. I think there will be a difficult period at least for the next 15 months until the 1987 electoral review is published in Hong Kong and, depending on what this review contains, perhaps thereafter until the Basic Law is published in 1990. The Chinese will doubtless try to influence the review, and the 1988 LegCo elections, as much as they can.
6. In this the position of the Governor and of Hong Kong Officials is going to be crucial. If Officials, more or less encouraged by the Governor, (as they have been over the nationality and passport issues) are going regularly to take a position that is difficult for HMG, in regard to its relations with China, our house is going to look divided indeed. This is an issue that should be discussed in depth with the Governor when he is here in February. I would myself favour our Ambassador from Peking being in London at the same time; it is important that the latest Chinese views should be heard.
7. Much pleasure was expressed at the provision of soft loans but I was appalled by what I saw of the bureaucracy that exists to deal with the establishment of joint. venture companies and technology transfer. Our one meeting with the State Economic Commission reminded me of trading with Bulgaria and Romania in the 1960's. Many UK companies will lose heart because of the time, expense and difficulties involved. However, I suspect that the planners at the top have decided that the four leading European countries - ourselves, the FRG, France and Italy should all be encouraged to get a slightly larger share of the market in order to modify Chinese dependence on Japan and the USA and to open up the country to more European sources of ideas and technology. This decision, coupled with soft loans, will help us where the really big contracts such as Guangdong are involved.
Hong Kong
To
8. I was in Hong Kong for an eventful 20 hours, comprising a meeting with EXCO, a discussion and dinner with the Unofficials and a lengthy press conference. me the most surprising element of the protest in Hong Kong over our apparent refusal to allow full British citizenship for the non-ethnic Chinese is that it had the full backing of Officials and Unofficials in LEGCO, of a wide variety of trade bodies and District Councils
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