TNAG-1036-FCO40-1286-Future-of-Hong-Kong-1981 — Page 32

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INDEX

TELEGRAM NUMBER 171 OF 20 FEBRUARY

INFO PRIORITY PEKING

FOF YOUDE FROM GOVERNOR.

PEKING TELNO 99: FUTURE OF HONG KONG.

1. THERE ARE SOME POINTS OF MISUNDERSTANDING AND I CLAIM A SECOND

AND I PROMISE LAST BITE.

2. PARA 2: '' IF THE S OF S SO READILY CONCEDES*'.

MY IDEA WAS THAT HE WOULD HAVE A PROPER BASH. BUT IF UNABLE TO GET POSITIVE RESPONSE FROM DENG, NOT TO FALL BACK ON SUGGESTION OF OFFICIAL TALKS AGAINST SUCH UNPROMISING BACKGROUND, BUT RATHER TO WARN OF DANGERS OF INACTION AND THAT REVERSION TO THE PROBLEM FAIRLY SOON WAS INEVITABLE. THEN LEAVE PRESSURE OF EVENTS TO PRODUCE MORE FAVOURABLE BACKGROUND FOR A FURTHER APPROACH WHETHER AT A

MEETING OR BY MESSAGE.

3. PARA 2 :

....WAIT UNTIL CONFIDENCE BEGINS TO SLIDE...... NEGOTIATE IN GREAT HASTE UNDER POLITICAL AND FINANCIAL PRESSURES

MORE ACUTE FOR US THAN CHINESE'':

(A) OF COURSE THERE COULD BE A SUDDEN CRISIS OF CONFIDENCE AT ANY TIME WHICH WE WOULD HAVE TO DEAL WITH AS BEST WE COULD. WE ARE DEALING WITH UNPREDICTABLES, AND THIS IS ONE POSSIBLE SCENARIO. AGREED ALSO THAT WE MUST NOT WAIT DELIBERATELY UNTIL AN IRREVERSIBLE CRISIS IS UPON US. BUT, HAVING REDISCUSSED WITH HADDON-CAVE WHAT MIGHT HAPPEN AS A RESULT OF THE SLOW APPROACH

OF 1997 WITH NO APPARENT SOLUTION IN SIGHT, I THINK A GRADUAL

DETERIORATION IS MORE LIKELY THAN A SUDDEN DROP OVER THE EDGE.

THERE WOULD BE GROWING CONCERN ABOUT THE FUTURE EXPRESSED BOTH

IN THE PRESS AND IN REPRESENTATIONS TO THIS GOVERNMENT, HMG AND PEKING. IF OTHER FACTORS WERE FAVOURABLE THIS PROCESS MIGHT

GO ON FOR SOME TIME, PERHAPS AS LONG AS A YEAR OR MORE. IT COULD OF COURSE BE LESS IF PUBLICLY EXPRESSED CONCERN SNOWBALLED. BUT, IN ANY CASE, THE PROCESS WOULD BE LIKELY TO PROVIDE TIME, BEFORE A DRASTIC SLIDE OF CONFIDENCE, TO FORCE THE ISSUE ON THE ATTENTION OF THE CHINESE IN A WAY WHICH THE PRESENT SITUATION DOES NOT. (B) ASSUMING ACCEPTANCE BY CHINA OF MUTUALITY OF INTEREST IN MAINTAINING ECONOMIC STABILITY IN HONG KONG (AND WITHOUT THIS WE CAN GIVE UP) PRESSURES ON TWO GOVERNMENTS WOULD BE MORE OR LESS EVEN - THOSE ON PEKING BEING MORE FINANCIAL THAN POLITICAL AND ON HMG MORE POLITICAL THAN FINANCIAL. BUT I THOUGHT WE WERE AGREED THAT AN ELEMENT OF ANXIETY ON BOTH SIDES WOULD BE BENEFICIAL TO THE NEGOTIATION. PROBLEM IS THAT AT THE MOMENT CHINESE, WITH THEIR OTHER PREOCCUPATIONS, HAVE NO SENSE OF ANXIETY ABOUT HONG KONG AT

ALL.

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