CONFIDENTIAL

Government had decided to turn large numbers of Hong Kong Chinese residents into British nationals without consulting China. This was

not conducive to the stability and prosperity of Hong Kong and was a divisive action which would affect the community; the Chinese

Government had made clear that it would reserve the right to take

measures accordingly.

23.

the

The Hong Kong Economic Journal commented on 9 May that the

basic principle of the Chinese hard-line response would be that beneficiaries of the British scheme would enjoy less political rights; one of the options being considered would be to deny the

status of permanent residents to beneficiaries after 1997;

Chinese would launch programmes aimed at uniting people in preparation for 1997;

they would groom future leaders and

encourage pro-Chinese elements to participate in politics; and

they were unlikely to play the "economic card" or try to undermine

the Port and Airport Development Scheme.

24. According to the Far Eastern Economic Review (circa 19 May)

Qiao Zonghuai commented to the Hong Kong Law Society that if one

million Hong Kong people left the territory, there would still be

some 5 million left; it would be better for those who wanted to go to leave as soon as possible. When the PA asked for clarification, NCNA subsequently denied that Qiao had made these comments.

25. The Hong Kong Economic Times of 29 May quoted a "Chinese source" as saying that the Chinese would not announce their measures immediately after the British nationality package passed through

Parliament; the measures would be targeted at the problems of

allegiance of SAR civil servants, would not affect the general

public and businessmen and would not undermine stability. The

Chinese were said to be worried that if key officials had British nationality they would leave Hong Kong as soon as emergencies arose.

KW2AAU

CONFIDENTIAL

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