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SECRET
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5.
The reasons for the Chinese response are still not entirely
clear. But they seem to believe that general assurances are all
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that is needed to maintain investors' confidence.
They have
apparently failed to understand the need for action to deal with the
short-term problem. They also appear to be very concerned about the
implications for their frontier dispute with the Soviet Union of
anything that might be construed as recognition of the 19th Century
"unequal treaties".
ба
Our present line is to let matters rest for a while. But we cannot
leave the problem for too long. It is possible that either the
Prime Minister or the Secretary of State will be visiting China later
in 1980; this may provide an occasion.
7.
It would be helpful to have the Governor's views on:
a) our best tactics in the next few months. Do we need to
prepare the ground for another Ministerial approach? Should
this be done in Peking or Hong Kong (eg through NCNA)?
b) the substance of a further initiative. Is it worth trying
to explain to the Chinese that our earlier proposal would in
fact help them by playing down an official reference to an
"unequal treaty"? Or should we consider another tack? What
other ways are there of solving the problem which the Chinese
would accept?
Hong Kong and General Department
4 January 1980
SECRET
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