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6.
The paper will shortly be sent to Sir P Cradock and Sir M MacLehose (who have seen an earlier version) for comments and for their views on how best to approach the Chinese should confidence begin to slide. The paper will then be put to FCO Ministers and, if they think it appropriate, to OD.
7.
The Prime Minister's probable visit to China in the autumn of next year is relevant. If she goes, expectations will be aroused in Hong Kong that the problem of the future is to be settled and there will be disappointment if (as is likely) there is no significant advance on previous Chinese assurances. This aspect will need careful consideration by Ministers before they advise the Prime Minister whether or not to go ahead with her trip.
8.
When the Governor saw the Secretary of State in June he was not pessimistic about the future. He took the view that relations with China were good and progressing, and that it was too early to put further proposals to the Chinese without some indication that they were prepared for a discussion. But he also took the view that we should be ready to act quickly should there be a slide in confidence.
9.
Given the Chinese response to the Secretary of State, it would probably not be appropriate for Mr Ridley to raise this matter during his own visit to Peking in the autumn. But he may wish to discuss this with the Ambassador.
Smuluade
H McQuade
Hong Kong and General Department
26 August 1981
copied to: Mr McLaren, FED
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