TNAG-0753-FCO40-957-Future-of-Hong-Kong-1978 — Page 19

SECRET

So

investments such as the KESKO Power Station or the MTR could be quoted against us. here again I feel that ideally we should wait a little longer.

However since this correspondence in July much has happened, and there are now new factors to be taken into account:

c)

d)

e)

-

It has become much clearer that the Chinese Government sees Hong Kong as playing an important part, under its present status, in the four modernisations. For instance Li Chiang was very definite on this, and spent several days here encouraging businessmen to play a part in helping. The Chinese will

realise that this involves investment and that the shadow of 1997 is or could be a deterrent to it. In their present mood of pragmatic

and energetic economic planning they might take the point that it would be in our mutua 1 interest to dispose of this problem well before it begins to do damage.

We know much more than we did of the dominant role of Liao Ch'eng-chih in the direction of Hong Kong and Macau affairs in Peking, of the fact that he is well disposed to Hong Kong, and of his close relationship with Teng Hsiao-ping. For the sort of move we wish to make we need a Chinese leader who would not misunderstand our motives, and would wish to help, and one in supreme power with the decisiveness to back him. We appear to be as near having this combination in Liao and Teng as we are ever likely to get. But both men are in their 70s and certainly Liao's health has not been good.

The speed of development and change in China is a little bewildering, and certainly has elements which are disconcerting as well as encouraging for Hong Kong. Amidst this rush of movement and adjustment, it would be valuable to have a bankable sign from the CPG about the foreseeable future of Hong Kong.

12. I think that (c), (d) and (e) suggest that the time for action should be earlier than somewhere in the early 80s as I think most of us had previously envisaged and could be quite soon. I suggest that this means at least

/ that

SECRET