TNAG-1040-FCO40-1290-Future-of-Hong-Kong-1981 — Page 188

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FUTURE OF HONG KONG

1.

Please see Mr Rushford's minute below. and useful.

2.

This is interesting

The contingency paper is just that. It tells us what to do in a contingency but we should be planning for more than that. The future of Hong Kong is likely to be resolved in one of four ways: the Chinese suggesting a solution, a crisis in confidence in Hong Kong forcing them to the discussion table, the Chinese taking it back, or our taking a unilateral initiative to remove the impediment of blue bound leases in the New Territories.

3.

For present purposes we can ignore the Chinese taking the Territory back because that is the ultimate solution. Our contingency paper covers the first two possibilities and we have rather ignored the fourth one because of our experience in 1979. But waiting for the Chinese to come to the discussion table is a great gamble. Present indications are that the Chinese will not be able to come voluntarily and I think this solution should not be relied on. Sir P Cradock certainly does not think the Chinese are liekly to be able to discuss it.

4.

We must consider then the possibility of a crisis of confidence forcing the Chinese to the discussion table. But this is gambling with the whole of Hong Kong. Chinese difficulties over discussing Hong Kong's future beyond Deng's assurance are already enormous. There must therefore be a very real danger that they would not get to discussions until irreparable damage flight of capital

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and people, total breakdown of law and order had been done. this is a possibility, and I believe it to be a very real one, then we must weigh the implications very carefully.

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If

This leaves the solution of HMG taking an initiative such as that suggested by Mr Rushford. I believe it to be worth considering. The worst result would be public rejection by the Chinese of the initiative and a collapse of confidence. But this is not likely. It is more likely that the Chinese have difficulties in holding discussions because they understand that any agreement would have to be made public to be of any real value. We know their difficulties relate to Taiwan, Russia, etc, that they want Hong Kong to continue to prosper and that they want the problem of the future to go away. Why then should they object to our saying that Hong Kong is one unit and will continue to be administered as such until such time as a fundamental change becomes necessary?

6.

To solve the problem of the future we are almost certainly going to have to gamble. To bet on the Chinese taking an initiative is more risky than betting on their not pulling the house down as a result of a British initiative. I suggest therefore that we agree to Mr Rushford showing his minute to Mr Steel to see what he thinks.

20 October 1981

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P J WILLIAMSON

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