TNAG-1155-FCO40-1435-Visits-by-Members-of-Parliament-(MPs)-to-Hong-Kong-1982 — Page 295

CONFIDENTIAL

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IL

HONG KONG STOCK MARKET (HANG SENG) INDEX

6. Aware that Hong Kong stock exchange index has fallen recently.

High interest rates and world recession partly to blame. But

speculation about the future, some of it based on reports of

Chinese views, no doubt responsible.

But we accept that we shall

have to work very hard to ensure that confidence is not seriously

damaged by fears of a major change in way Hong Kong is run.

DR OWEN'S SPEECH

7. Hope you will bear the above in mind. Most important for

all concerned, but particularly for Hong Kong, that confidence

is maintained. Any reassurance you can offer - while not raising too

high expectations for Prime Minister's visit

would be welcome.

Could I also ask you to avoid too precise discussion about the

actual nature of any settlement which, from someone in your

position, might be taken as reflecting HMG's line?

]]

The problem

here is that this might provoke the Chinese into public counter-

statements which might limit their own flexibility on subsequent

negotiations. Particularly important to avoid making them feel

that they must counter the idea of continuing British administration.

8. Here are notes on which you may like to draw, together with

some factual background material.

(Defensive only)

9. Sovereignty.

Obviously wrong to consider any concession on

sovereignty without very clear undertakings on continuing British

control. Would need very careful consideration.

CONFIDENTIAL