CONFIDENTIAL
Capital transfer from HKG to HMG
This is a red herring which we must now put to rest. The Foreign Secretary has explained in successive minutes on 11 February, 26 February, 11 March and 1 May the political impossibility of forcing Hong Kong to do this. Briefly, the Legislative Council would not agree to vote the funds. HMG
would therefore have to direct the Governor, through an
Order-in-Council, to do so. This would create a political
crisis in our relations with Hong Kong and the Chinese would
see it as a clear case of asset stripping. It could lead
them to repudiate their undertakings on pensions in the
Joint Declaration. We could find ourselves saddled with
paying all Hong Kong pensions for sevice pre-1997.
CONFIDENTIAL