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that in the FCO we should clear the details of what we wish to do, and obtain Ministerial approval in principle, as soon as possible.
13.
However subject to Percy Cradock's view I think we should wait until approval in principle on details has been obtained from the FCO, and we have been able to see how things develop in China meanwhile, before considering further precisely when an approach should be made. In view of (d) and (e) above I am inclined to think that a wait of about a year would be the maximum and that we should be ready to seize an opportunity before then if an obvious one presented itself.
14. During the months ahead we should watch very carefully the development of what could be a contrary factor. This is the extent of credit extended to China. While no doubt this will be limited in comparison to China's ultimate needs it could be quite sufficient particularly given normalisation with the US, to cover China's ability to absorb new investment over the next few years at least. There might therefore be a period in which Hong Kong's contribution to China's foreign exchange earnings might not seem quite so important as it has been hitherto or probably will do again when the time to start repaying the loan falls due.
15.
Two final points on timing:-
a)
b)
It would be absolutely essential to discuss with the Executive Council before making a move. They would take the advice of HMG, the Ambassador and the Governor. But to move without involving them or consulting them at all could have really serious consequences. a matter of this sort they could be relied on to maintain secrecy.
In
In view of the uncertainty about the Chinese attitude described in para 11 (a) and (b) above (eg other preoccupations of the CPG, and the lack of apparent urgency) it is just possible that the Chinese might consider a move in, say, 1979, premature and inconvenient, and we do not want to risk a rebuff.
The move proposed is also complicated to explain and there would be real room for misunderstanding. I do therefore suggest that when we start, it is done tentatively and at a level at which
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