TNAG-1040-FCO40-1290-Future-of-Hong-Kong-1981 — Page 32

SECRET

5

DSR 11C

include the notion of a relinquishment of sovereignty by HMG,

implicitly or explicitly. We do not know that the Chinese

would in fact demand this but it is a logical move for which

we must be prepared.

A)

B)

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.

#1

(i) Likelihood. Easiest option for Chinese. Harder

as the assurances about no change become firmer.

(ii)

Problems for HMG. None, except:·

(iii) Effect. At best temporary. Such encouragement

and assurances would cause some local Chinese investors

to maintain investments.

Little effect on foreign

Not

investors unless coupled with action on land leases.

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.

Declaration by the Chinese that, because treaties unequal,

Hong Kong would revert to China when the

1997 irrelevant;

time was ripe.

(i) Likelihood.

If as a formal statement a slight but

More

significant change in present Chinese position.

difficult than (A) for Chinese however as it implies

continuing British administration beyond 1997. Becomes

progressively more difficult for them the more that is

said about time not being ripe for many years to come.