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4. The Secretary of State's visit to Peking will be the
first real substantive encounter at that level since Sir G
Howe's negotiation of the joint declaration. My fear is that the Chinese think that they have got us on the run and are determined to use the airport project to extract maximum
concessions from HMG on the wider question of consultation.
It would be helpful to have your assessment, and those of Sir A Donald and Mr Galsworthy,
off Chinese motives.
Redacted under FOI Exemption Sec 23
5.
Whatever the interpretation this may be a deadlock which
can only be resolved at the highest level. We we must be
ready to take the Chinese to the brink making it clear that if they stick to their present demands (on the question of guarantees as well as of the sums involved) it will not be possible for the airport project to proceed, with all the consequential damage both to business confidence in Hong Kong
and to our own bilateral relations. I tend to agree that the
first step should be an instruction to Sir Alan Donald to
convey to the Chinese deep Ministerial concern in London (see
MIFT for possible language). In the light of the Chinese
response we would consider whether a personal message from the Secretary of State might be advisable. Unless these approaches shift the logjam however we must expect the
Secretary of State to have to speak bluntly to the Chinese
when he reaches Peking. In the event of failure I am sure
that he would wish to spell out clearly to the press what had happened and why.
6.
The logic of this is that while we would seek to use
the imminence of the visit as a lever over the Chinese, we
should