? Civil Sovice
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MAJOR HONG KONG ISSUES DOES NOT REST WITH THE MFA BUT WITH A SPECIAL UNIT UNDER THE COUNCIL OF STATE. THEREFORE THE QUESTION MUST BE PUT TO DENG XIAOPING, OR POSSIBLY ZHAO ZIYANG NOT HUANG HUA).
6. I RECOMMEND THAT THE S OF S POINTS OUT TO DENG THAT WITHIN THE NEXT YEAR OR TWO HE CANNOT SAY EXACTLY WHEN (SEE PARAS 9 AND 10 BELOW) - CONFIDENCE WILL NOT BE MAINTAINED BY GENERAL ASSURANCES AND, BECAUSE OF LEGAL RESTRAINTS ALONE, WILL START TO SLIDE IN DEFAULT OF CONCRETE NEW MEASURES. ONCE STARTED THE SLIDE MIGHT BE DIFFICULT TO STOP AND RESULT IN UNNECESSARY LARGE MUTUAL LOSS. IT SEEMS SENSIBLE TO ACT BEFORE RATHER THAN AFTER THE SLIDE STARTS. WHAT DOES DENG THINK. IF DENG MAINTAINS THE ADEQUACY OF GENERAL ASSURANCES AND POINTS TO HONG KONG'S CURRENT PROSPERITY, THE S OF S SHOULD AGREE THERE IS STILL TIME, BUT WARN THAT SOONER OR LATER THIS ATTITUDE WILL BOOMERANG, AND THEN DROP THE SUBJECT.
7. IF, AND ONLY IF, DENG AGREES AND SHOWS GENUINE POSITIVE INTEREST, S OF S SHOULD SUGGEST THAT TALKS SHOULD BE OPENED WITHOUT PUBLICITY.
8. IF DENG MAINTAINS THE ADEQUACY OF ASSURANCES GIVEN, WE SHOULD PERSIST WITH DEGREE 1 TACTICS. THE QUESTION IS HOW LONG WE CAN RISK DOING SO BEFORE PASSING TO DEGREE 2.
9. WHILE IT IS HIGHLY DESIRABLE TO HAVE SOMETHING ARRANGED BY THE END OF 1982 (PARAGRAPH 4 OF CRADOCK'S LETTER OF 18 DECEMBER), AND INDEED AS SOON AS POSSIBLE, WE SHOULD NOT DEVELOP A FIXATION ABOUT THIS DATE AS A BASIS FROM WHICH ANY NEGOTIATING SEQUENCE MUST
BE CALCULATED. COLLAPSE OR MAINTENANCE OF CONFIDENCE COULD BE AFFECTED BY MANY UNPREDICTABLES, AND CONFIDENCE COULD START TO EBB EITHER SOONER OF LATER THAN 1982. WE MUST NOT UNDERRATE THE INGENUITY OF THE MARKET HERE IN MAINTAINING CONFIDENCE, NOR FOR THAT MATTER ITS ABILITY TO PANIC AND ERODE IT (SEE M.I.F.T.).
10. THE SHORT ANSWER IS THEREFORE THAT AT PRESENT WE DO NOT KNOW WHEN THE RIGHT MOMENT WILL BE TO PASS TO DEGREE 2. WE CANNOT FOR INSTANCE BE SURE NOW THAT THE TIME WILL HAVE COME BY THE END OF THIS YEAR. OBVIOUSLY IT HAS NOT COME YET. IN DEFAULT OF DENG REACTING FAVOURABLY TO THE S OF S WE MUST ACCEPT THAT THE TIME OF THE NEXT STEP WILL DEPEND ON DEVELOPMENTS HERE. IT FOLLOWS THAT WE SHOULD PREPARE PROPOSALS THAT COULD BE MADE AT COMPARATIVELY SHORT NOTICE. THESE SHOULD PREFERABLY BE CONFINED TO THE VALIDATION OF LEASES PASSING 1997 (THIS MIGHT BE ENOUGH TO HOLD THE SITUATION FOR SOME YEARS): BUT IT WOULD NOT GET TO THE HEART OF THE MATTER, WHICH IS THE FUTURE OF THE ADMINISTRATION, SO WE SHOULD ALSO BE READY WITH OPTIMUM AND MINIMUM REQUIREMENTS IN THIS FIELD. SINCE THE CHINESE MAY NOT BE PREPARED TO CONSIDER A CHANGE WITHOUT A CORRESPONDING POLITICAL ADVANTAGE WE MUST BE READY WITH RESPONSES TO THE POSSIBLE PROPOSITIONS.
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