TNAG-1040-FCO40-1290-Future-of-Hong-Kong-1981 — Page 57

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DSR 11C

to enter a dialogue without such a threatening incentive. Actions to halt a slide in confidence of to respond to a

Chinese initiative

10.

The following possible actions are graded in a rough order of ascending difficulty for the Chinese. An important feature of most of the proposals is that any action to extend British administration would, to be credible, require amend- ment or replacement of the 1898 Order in Council providing for and defining the length of jurisdiction in the New Territories (Annex B), almost certainly with Chinese agreement or at least their readiness not to object to the legislation if challenged. The Attorney-General shares the opinion of our Departmental Legal Adviser that any

amendment would need explicitly to make clear the intention

of HMG to administer the New Territories beyond 1997. A

number of the proposals also include the notion of a

relinquishment of sovereignty by HMG. 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)

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:-

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