The Governor asked if the Chinese really appreciated the economic and strategic value of Hong Kong. Mrs Chan thought they

did but nevertheless thought they might not be able to resist the

temptation of bringing a recalcitrant child to heel even to the

extent of damaging their own economic interests.

9 Mrs Chan thought that Hong Kong people were in a difficult

position. They had a strong sense of their Chinese nationality and

cultural links; but at the same time they enjoyed the freedoms and

values that had been left to them by the British and did not want

to lose them. As Chief Secretary she herself was going to be in a difficult position. If things went wrong the Chinese would blame.

her since as a Chinese they would claim that she ought to be able

to understand the Chinese position. On the other hand, if

relations between the UK and China break down over Hong Kong and

the Chinese refuse to deal with the Governor, Mrs Chan thought she

might be well placed to act as a bridge.

10 Mrs Chan thought that Hong Kong could live with a lack of

agreement over democratisation so long as the Chinese did not interfere in the economy. But if they insisted that, eg franchises

would only be honoured after 1997 if approved by them before 1997, that would be dangerous. They had set up, with great publicity, a

Preparatory Working Committee for the potential leverage it could

afford them, but not all, including Mrs Chan, thought that such leverage would necessarily be usable.

11 The Governor admitted to some sympathy with the view that

Britain had come rather late to favour democratisation. Mrs Chan

explained that up till about the last five years there had been

little pressure for democratisation from the community. If HMG had

sought to introduce it earlier it could have induced the Chinese to

seek to resume sovereignty earlier. If HMG had foreseen that they

would be signing the Joint Declaration in 1984, they might well

have given a harder push to democratisation earlier. The point on people's minds was that even without democracy in Hong Kong there was the backing of democracy in the sovereign power. After 1997

this will not be the case. Hence the pressure now. But it would

be tactless to make this point to the Chinese.

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