CONFIDENTIAL
114071
MDHIA 360
THE TALKS: GROWING CONCERN
3.
For most of the summer, the community was much encouraged that the two governments were engaged in talks. Although we were unable to report real headway, the community nevertheless continued to find comfort in the belief that negotiations would not have been arranged if no progress were possible. Furthermore, throughout the summer, a clear majority (56 per cent) have blamed the Chinese side for the Lack of progress. However, the community has become more pessimistic as the date of my Address to LegCo has approached without any sign of a breakthrough. The polls suggest that those who expect a positive outcome to the talks now only marginally outnumber those expecting them to fail.
4. Despite the growing pessimism, many still appear to be pinning hope on an expectation that the two Foreign Ministers will be able to reach a settlement of some sort at their New York meeting. However, if their discussions are not followed by a positive announcement, the community is likely to conclude that the Peking negotiations are heading for a breakdown. The atmosphere is then likely to turn gloomy in advance of my Address to LegCo, encouraged by the CPG'S propaganda machine. The Ming Pao poll found that 77 per cent of respondents believed a collapse of the talks would have a negative impact on the territory. Not surprisingly, a majority (a SCMP poll published on 19 September put it at sixty per cent) wish us to keep talking.
5. If, however, the talks break down, the Minister and I shall need to join forces in helping Hong Kong to adjust to the new situation. doubt that the community will (as it has so often before) adopt a sensible and pragmatic outlook. The muted "seen it before" reaction to the CPG's re-release of DENG Xiaoping's threat to take
the territory ahead of 1997 is a useful pointer. Many will take comfort from the way Hong Kong emerged intact from the assaults which followed publication of our constitutional proposals in October last year (and, indeed, recorded very considerable commercial growth despite the Cassandras). But I have little doubt that the brokers of gloom, including those in the stockmarket, will have an initial impact.
6. The community's assessment of Sino-Hong Kong relations has also become complicated by China's Olympic bid. Many were disappointed that the bid failed, and some are susceptible to talk of a "western conspiracy" to deny the games to China on political, economic and
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