TNAG-0943-FCO40-1162-Future-of-Hong-Kong-1980 — Page 82

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a time when China has acquired a sufficiently long and satisfactory track record, for investors to feel confident about a Hong Kong managed by China. But in my judgement this will not come for many years.

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No doubt brash ex-Shanghai Hong Kong businessmen who swarm in Peking these days, will explain these facts of life to the Chinese leadership in due course. But I don't suppose any of us want to do so, which seems to me a good reason for going slow in discussion of long term solutions, unless the latter is forced on us by the Chinese.

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A further point made clear by Gu Mu is that the Chinese feel that their room for manoeuvre is limited by both domestic and international considerations (Gu Mu spoke about being able to face Chinese and world opinion). We already have other indications of this, and Liao Chengzhi has more recently made the same point to me. We must not underestimate their problems. No Chinese government, even one in a strong position, will want to take unnecessary risks with domestic opinion on a sensitive issue like foreign presence on Chinese soil, nor make themselves vulnerable to international jibes that they are perpetuating colonies, nor complicate their argument with the Russians over the northern border. pressures on the Chinese are therefore to go slow, to avoid dramatic steps and not to compromise their fundamental position that Hong Kong is Chinese territory and will return to China.

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The

All of this suggests to me that we have to

give time for Chinese thinking to evolve. Should we now engage them in discussion of fundamental decisions, and particularly decisions involving status, it would probably only harden their commitment to ones which were wrong from our point of view. This suggests that we should concentrate for the moment on what Gu Mu class if ied as technical issues", but give them a wider meaning than the water supply/new airport/ electricity category to which he referred, but accepted they involved the question of confidence.

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But some forward movement on the key question of land leases in the New Territories will be desirable before about the end of next year and some would say essential before the end of 1982. This means that

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