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situation in which we were trying to get China to the conference table particularly since China's assessment is probably that we would not use it even in defence of Hong Kong against a military
take-over.
€
66.
The strength of our negotiating position lies in the economic Our value of Hong Kong to China as a source of foreign exchange. strongest card would be the possibility of handing over a buoyant Hong Kong economy for which we could hold out prospects that it Our would continue to earn foreign exchange in Chinese hands. ability to play this card postulages a very different attitude to trade with China on the part of the U.S.A. (which takes 37% of all Hong Kong's exports) and some understanding with our other Western allies and friends who trade with China and Hong Kong that they would not regard the change of administration as an opportunity to reduce drastically or cut off altogether their trade with the latter.
If we cannot make use of this card then we shall be reduced to such economic counters as continuing to give access to Hong Kong products in our own markets (which take only 17% of all exports) and the use of Hong Kong assets held in London (which are equivalent to only one and a half times China's annual earnings of foreign exchange through Hong Kong).
67. Overt American involvement in negotiations for handing-over Hong Kong seems out of the question given present U.S. policies towards China. In this situation the best we could expect would be that fear of American reaction to a forcible take-over might be a factor inclining China to seek a negotiated solution and, On the other hand, if in doing so, not to press us too hard. American attitudes were to change to the extent of lending their weight to a negotiated transfor, the value of Hong Kong's trade with the U.S.A. would exercise a restraining influence on Chinese attitudes in the negotiations.
68. It is unlikely that we could make much play with the fact that in international law Hong Kong Island and the tip of Kowloon peninsula were ceded to us in perpetuity (see paragraph 1 of Annex A), in the face of China's attitude that these were "unequal treaties" - an attitude for which there could be consider- able support from other countries, particularly those disputing ceded areas with us. (Russia would however be reluctant no doubt to accept the proposition that treaties with China involving the
The ceded areas of transfer of territory are all "unequal").
/ Hong Kong
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