TNAG-0566-FCO40-699-Implications-for-Hong-Kong-of-change-in-Chinese-leadership-1976 — Page 14

CC:

HKD

Mr Cortazzi Mr Male

SPEAKING NOTE

in Duffed alio hir Davich

Ry.

(9)

Speaking mole for the 805- atturday's bassingt

tals

2/10

CHINA

1. Recent dramatic developments in China have led me to consider

what implications this could have for Chinese policies world-wide. 2. The new Chairman, Hua Kuo-feng, appears to be well in control. He retains the Premiership for the time being, and has a key say in military affairs and in the interpretation of Mao's writings. There is now little doubt that the four leading radicals, including Mao's widow, have been purged.

3.

The new leadership under Hua Kuo-feng is likely to place more stress on economic objectives rather than ideological ones. (They will probably seek to increase production through the use of material incentives.) There have already been indications that

we can expect some modest expansion of foreign trade, particularly in advanced technology, to accelerate China's modernisation. (The resolution of the leadership crisis has probably removed the uncertainties which, during the first 9 months of this year, had prevented the scheduled launching of the latest 5 year plan.) The Chinese have stressed the continuity of their foreign policy since Mao's death, and we do not expect any fundamental changes in Chinese external relations, including those with the

Soviet Union or with the United States. We would not, however,

discount the possibility that a pragmatic leadership from which radical ideological influence had been removed would be prepared in due course to contemplate a limited form of accommodation

with the Russians. We do not expect recent events to have any significant effect on Anglo-Chinese relations: pragmatic leader- ship will, if anything, be more likely to wish to maintain the status quo in Hong Kong.

4.

4. In sum,

we see China embarked upon a more moderate course in the coming years. In so far as any changes in foreign policy and foreign trade policy are likely to occur, they should be to our advantage. We are seeking our Ambassador's views on how best we

can make use of any new opportunities on the trade front. The internal situation, and its implications for us, will of

course continue to need very careful watching.