TNAG-0123-FCO40-159-Future-of-Hong-Kong-1971 — Page 20

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improve our relations with China in the wider sphere. In Hong Kong we should avoid doing anything which will make it more difficult for us to come to terms with China in the longer run. It is possible that by the 1980s U.S. relations with China may have changed and that the existence of comparatively good

relations between them would exercise restraint on the Chinese

particularly if there were some indication that present markets for Hong Kong products in the U.S. would remain open.

(vi) While Hong Kong in our hands remains of great economic importance to China we can expect some pressure but not so great as in Chinese eyes will sap our will to stay there. As its economic importance to China declines (as seems likely in the 1980s) we

must anticipate that the Chinese will exert the maximum

leverage to exploit our predicament.

(vii) We cannot at any time make an overt approach to China. Confidence

in Hong Kong is fragile and would not survive the knowledge that we were discussing possible terms for withdrawal. Moreover we cannot predict the Chinese response and could not run the risk of

a rebuff. The only course that might conceivably be open to us if more favourable circumstances emerged would be a confidential approach and preferably disavowable approach aimed at a tacit understanding.

(viii)

(ix)

(x)

(xi)

Meanwhile we need to keep a firm front about our intentions to remain in Hong Kong, both for the sake of maintaining confidence in the Colony and because any sign of weakening resolve on our part

would lead to increasing Chinese pressure.

At the same time we need to consult with the Governor on the shaping of future domestic policy given that, in the long term, the Colony will return to China. This faces us with a real dilemma, since if the population are accustomed to liberal Western-style social policies they will be less easily re-absorbed in a communist China; yet to deny those policies would be both morally repugnant and provide fertile ground for communist exploitation.

In any case, since the opportunity to lay down our responsibility may not occur for a decade or more, it would be prudent to under- take some preliminary study of the steps we might have to take to prevent a premature decline in confidence in the Colony.

In this context Hong Kong's prosperity is of major political importance to the UK and account must be taken of this in situations where the economic interests of the UK and Hong Kong appear to clash in the short term (e.g. sterling balances and textiles).

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