TNAG-1038-FCO40-1288-Future-of-Hong-Kong-1981 — Page 4

Reinforcement of existing assurances

The Chinese would talk at a high level to major local investors in Hong Kong to encourage them to retain

and increase their investments. They would do the

same with selected foreign investors, banks,

industrialists and developers. They would reinforce

assurances about capitalism continuing in Hong Kong

well into the next century and imply that a change of

status in 1997 was unlikely.

(i) Likelihood.

Easiest option for Chinese.

Harder as the assurances about no change become

firmer.

(ii) Problems for HMG.

None, except: -

B)

(iii) Effect. At best temporary. Such pressure and assurances would cause some local Chinese investors to maintain investments. Little effect on foreign investors unless coupled with action on land leases.

Not sufficient to halt a serious slide of confidence

for long, if at all, because unsupported by either firm and 'bankable' description of conditions under

Chinese law, or assurance of continuance of British

jurisdiction.

T

Declaration by the Chinese that, because treaties unequal, 1997 irrelevant; Hong Kong would revert

to China when the time was ripe

(i) Likelihood. If as a formal statement a slight but significant change in present Chinese position.

Becomes progressively harder for Chinese the more that is said about time not being ripe for many years

to come.

(ii)

Problems for HMG. Presumably legal implications

SECRET