industry and of our new partners in the European Community. It will cost us something in political terms to maintain the interests of Hong Hong within the Community. But Hong Kong is not a liability to our current relations with China (though the Chinese demand for an "official representative" in Hong Kong remains unresolved). We have a substantial stake in Hong Kong's economy. Two million of the four million Chinese in Hong Kong have British nationality, but while Hong Kong remains a dependency there is no immigration problem, since they have no right of abode here.
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The gist of the matter in 1972/73, therefore, is that China does not want to take back Hong Kong now or to initiate negotiations about its future, that the population continue to want us to stay, and that the material and moral balance of advantage to us is to maintain the status quo.
5. Although the Chinese Government in theory regard all the Hong Kong treaties as unequal and therefore not binding on themselves, in practice they still connect the need for negotiations with the expiry of the lease of the New Territories in 1997. Chou En-lai repeated this to Lord Thomson in October 1972. 1997 therefore remains the target date for the completion of a new understanding on retention or withdrawal.
6. Our current line is that there is no question of a change in the status of Hong Kong in the foreseeable future. With 24 years in hand this is still realistic. A problem which will increase with time, how- ever, will be to avoid damaging public discussion of the future. Hong Kong's prosperity depends on confidence. This relates not only to business confidence, but also to the willingness of the Chinese popu- lation to work for the British. The new Governor has made a good start in developing Hong Kong into a place where people wish to live and work. But as 1997 approaches they will inevitably begin to question their future. In the UK the immigration lobby have already expressed anxiety about the possibility of a massive inflow from Hong Kong while members of the Tribune Group are considering an attack on a policy which they claim lulls the Chinese population of Hong Kong into a false sense of security in the interests of big business. If public discussion led to a serious loss of confidence in Hong Kong the Colony could become difficult to govern.
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7. Moreover confidence and the viability of Hong Kong depend to an important extent on what people think is the policy of China. If, therefore, the Chinese Government again became overtly hostile before 1997, we could be forced by a decline in public confidence to approach them at a time when there would be little chance of an agreement. should therefore not rule out the possibility of opening talks with the Chinese at a comparatively early date, although only if we see a real chance of concluding an agreement or understanding which would give us greater security of tenure.
8. If we approached the Chinese Government now, I judge that we might in the present climate be able to agree on an orderly withdrawal in 1997, but not on our retention of the Colony beyond that date. There is a risk that, by waiting for a more favourable opportunity, we might lose the chance of any agreement. But an agreement now to withdraw in 1997 could itself damage confidence if it became public knowledge, and could therefore defeat its own purpose. A chance of a more favourable
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