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China/Hong Kong : Lord Callaghan's visit, 11-18 May
Lord Callaghan called on the Secretary of State this morning in advance of his visit to Peking. He will be transitting through Hong Kong and staying with the Governor. In Shanghai he will be attending a meeting of the Inter-Action Council, the group of former Statesmen including Helmut Schmidt, Giscard, Lee Kwan Yu, Gerald Ford, Gorbachev, Trudeau and Malcolm Fraser. Lord Callaghan said they would be accompanied during their time in Shanghai by Zhu Rongji and he would be going to Peking later to see Li Peng and Jiang Zemin. He asked the Secretary of State what he might usefully say to the Chinese about Hong Kong.
The Secretary of State briefed Lord Callaghan on the latest position. We were not going to make any great breakthrough in the present talks. The present round would last for three to four days and there would then be a pause before a second round next month. The Chinese would probably want to prolong the talks and there would come a time when we would have to judge whether to take the legislation forward in Legco. The solution might be to dilute the proposals so that, while still unwelcome to the Chinese, they would not be overturned in 1997. This was a matter of fine judgement. There were divisions within the Chinese side There were also other factors at play. The Chinese wanted to get on the right footing with the U.S. Administration. They also wanted to win the Olympics nomination. There was a widely held view that it was not in Chinese interests to stifle the Hong Kong economy. On the other hand, Deng Xiaoping was still uttering negative comments.
Lord Callaghan said that it was pretty clear that the July deadline for completing the legislation process was not really sacrosanct. The Secretary of State confirmed this though urged Lord Callaghan not to reveal it to the Chinese.
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