TNAG-0569-FCO40-702-Planning-paper-on-Hong-Kong-1976 — Page 94

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23 March

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FLANKING PAPER ON HONG KONG

SUMMARY

1.

Hong Kong is a difficult political problem which is likely to become more acute as 1997 approaches. There are some advantages and some disadvantages to Britain in the present connection. The British interest in the long term is to disengage but the overriding consideration is that without careful handling disengagement could risk a mass exodus of Chinese/British subjects with humanitarian, if not legal, claims to entry to Britain. There is also the risk of the collapse of one of the world's leading financial centres,

2.

There is an element of political embarrassment for the CPR in the Colony's existence but it is of great practical value to them. They have publicly declared that Hong Kong is Chinese territory and that the problem will need to be settled when the time is ripe. They are likely to be satisfied with the status quc for the foreseeable future. This could change as a result of political events in China but, in any event, we shall need to discuss the future of the Colony with them well before 1997.

This presupposes a well ordered government in China in succession to that of Mao se-tung and we cannot determine the best negotiating posture for us until the new government emerges and its character is assessed. This points to a date in the mid-1980s and we cannot at present speculate on the best options for us. There is no advantage, and real disadvantage, in seeking to engage the CPR in discussion of internal policies in Hong Kong meanwhile.

3.

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On these assumptions the paper suggests a policy for institutional, fiscal and social reform, some aspects of which have been suggested by the Governor and some of which need further discussion with him. On institutions the paper suggests an enlarge- ment of the Legislative Council and a broadening of its social base (by the appointment not the elective process), and a greater differentiation of its functions from those of the Executive Council. On fiscal reform the paper argues in favour of a more broadly based and progressive system of direct taxation and an expansion of public sector spending to 25% of GDP. On social and labour questions the paper argues in favour of further acceleration of development in the housing, educational and health fields; contributory social security system and improvements in terms and conditions of employment.

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4.

This policy presupposes a greater degree of direction from London and accountability from Hong Kong which may create friction between Britain and the Colony. There is a need for more dialogue over a greater surface of policy, partly to relieve the burden on the Governor. There is also a need for a greater British information effort in Hong Kong; greater effort to reduce friction over matters where British and Hong Kong interests clash; and a need to contime strongly to advocate Hong Kong's case publicly here.

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