TNAG-0941-FCO40-1160-Visit-by-Lord-Carrington--Secretary-of-State-for-Foreign-and-1980 — Page 24

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CONFIDENTIAL

Subject

Rapid improvement in economic relations and communications with China. Widespread small scale Hong Kong investment in Guangdong. New economic zone across the border at Shenzhen. Substantial CPG investment in Hong Kong. Object in either case to maximise earnings from Hong Kong. Political implications, if any, not clear.

Striking improvement in relations at political level at Chinese initiative. Visits. Deng Xiaoping's "put your hearts at ease". Chinese acceptance of the value of capitalist Hong Kong. The start of a friendly dialogue about its future. Some interim arrangements must be made within the next 2 or 3 years.

CONFIDENTIAL