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They could opt for a policy of wider

non-cooperation. Within that broad approach there would be considerable scope for

calibration, on a spectrum from passive

resistance (no answer to our requests for

agreement on specific matters in the JLG, no agreement on airport financing, or land disposals above the 50 hectares a year laid down

in the JLG) to active harassment (not accepting

return of illegal immigrants, a blind eye to

cross-border criminal activity, harassment of

shipping etc). This would probably be combined

with efforts to undermine the loyalty and

effectiveness of the Civil Service eg by

threatening to weed out in 1997 those who are

associated with controversial HKG policies.

This would be part of a broader effort to marginalise HKG, and build up the widest possible coalition of groups (including the

business community) who saw their interests as lying with the future sovereign power. Even in these circumstances, the Chinese side would

probably maintain contact over financial issues,

and others where it was clearly in their

interest to do so. They would also step up the pressure on HMG though retaliation against

British business in China.

11.

On the evidence so far, the third option at present looks the most likely. The prospect is for a difficult four years, with HKG facing a series of decisions as to how far it can proceed on specific issues in the absence of

Chinese agreement (the airport saga is a foretaste).

HMG

HongKongissuesahead/BRIEFS/NJH

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