TNAG-1040-FCO40-1290-Future-of-Hong-Kong-1981 — Page 200

SECRET

I

(d)

(e)

(f)

and may be intended in part to be read as such. Deng Xiaoping hinted to Lord Carrington in April that Chinese thinking on the future of Hong Kong was on similar lines to their proposals for Taiwan. Certainly what is now proposed for Taiwan would sit well with Deng's assurances over Hong Kong that 'investors should put their hearts at ease'. Taiwan, like the newly established Special Economic Zones in south China (and presumably like Hong Kong in the future) is envisaged as playing an important economic role in China's modernisation while enjoying a considerable degree of administrative autonomy;

as Sir P Cradock says, the last paragraph of the statement reveals some nervousness about the prospects of an independent Taiwan. The old KMT leaders and mainlanders are rapidly departing from the scene. The commitment of the younger generation even those of mainland origin towards China must be severely limited. The majority

-

indigenous population have no ties with or love for China. The Chinese are therefore appealing to the patriotism

of the old guard KMT before it is too late;

the KMT response has been predictable. They have repeated that nothing less than a renunciation of communism by Peking would be acceptable to them as a basis for reunification. Whether this totally excludes future secret contacts to explore possible room for manoeuvre remains to be seen;

there is undoubtedly an American angle. The Chinese are continuing to show great sensitivity about the Reagan Administration's equivocal position towards China/Taiwan. It suits the Chinese book to cast themselves as ultra-responsible and to put the KMT on the defensive. Inter alia it will give the Americans pause before embarking on any major defence sales to Taiwan. Previous reports

SECRET

/that

}