TNAG-0370-FCO40-416-Visit-of-Edward-Heath--UK-Prime-Minister--to-Hong-Kong--12-1-1973 — Page 5

CONFIDENTIAL

basis. As an example Hong Kong's Executive Council have

recently decided not to validate the Anglo-Italian bid for

their Underground Railway system. Instead they will negotiate

only with the Japanese.

3. Discontent with Britain is focused in Hong Kong's largely

Chinese business community and in Legislative and 1xecutive

Councils. Their fears are not wholly irrational. As a

successful and expanding economy, Hong Kong's direct interests

and ours are often different. But the underlying problem is

insecurity arising from political impotence and concern about

the future. There is an official majority in Legislative

Council, and Executive Council is advisory to the Governor.

But he cannot use his powers to override Chinese public and

business opinion without risking a crisis of confidence in the

British administration.

4. The constitutional position also makes it difficult to

argue the full British case in Hong Kong. The Governor is the

Queen's representative; but he and his administration have to

remain sensitive to the local situation, and cannot be seen to

argue with themselves. Nor could we set up an independent

mission in Hong Kong for this purpose, since this would under-

mine the Governor's position.

5. The Prime Minister's visit will provide an opportunity to

put the record straight. The aim should be:

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