TNAG-1038-FCO40-1288-Future-of-Hong-Kong-1981 — Page 126

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PRIVACY MARKING

CAVEAT..

....In Confidence

Suspicims of

our attempts k deal with individua

land here question

British

administration

Enclosures-flag(s).....

SUBJECT:

FUTURE OF HONG KONG: NOTES ON CONTINGENCY PROPOSALS TO COPE WITH A SLIDE IN CONFIDENCE

Problem

1.

Chinese disinclined to give concrete guarantees on

Hong Kong status quo. Consensus view that without such

guarantees public confidence will before long snap and

disinvestment will cause slide in Hong Kong's economy.

Will almost certainly occur within 5 years. But con-

fidence a brittle commodity. Snap could be soon and

sudden.

Objective

!

pogled possibly

-дsome

2. Longer-term solution some sort of 'special zone'

still far off. Need now to provide contingency proposals

for modus vivendi in medium-term in event of sudden slide

in confidence. Underlying concept: in these circumstances

any deal that preserves status quo can only have positive effect on confidence. For use in approach to Chinese

To lead to or if they change tack and approach us.

exchange of statements.

Assets

SECRET

/Probable

Common Chiness / British interest is

| Slry Kay's stability Good genual relations argue for happing 1x quiet.