TNAG-1166-FCO40-1446-Future-of-Hong-Kong-1982 — Page 80

DSR 11C

Redacted under FOI exemption section 27(1)

6.

SECRET

-3-

We therefore need to try to bring the Chinese to agree to

continuing British administration, not indefinitely but for a

sufficient period of time to maintain confidence. They will

not of course agree to this without a price; that is likely

to focus on the question of sovereignty,

Here I think it would be in our

We can only

interests to be as flexible as possible.

maintain sovereign powers in the New Territories up to 1997 in

any case and the rest of the Territory is not viable on its

own. The fact that we entered into a lease on the New

Territories in 1898 was a recognition that ultimate

sovereignty in these areas rested with China. If we could come

to an arrangement whereby we made some sort of recognition

of Chinese sovereignty over the rest of the Territory (ie Hong

Kong Island and Kowloon) while still retaining the right to

administer the Territory beyond 1997, we should get a very good

deal and achieve a real foreign policy success. Without it

we would have little effective bargaining power beyond China's

own perception of its economic interest in the Territory.

I therefore think that it would be sensible for us to clear

our minds on this issue of sovereignty in order to be ready

with a flexible response if the Chinese show themselves ready

for realistic negotiations. At the same time we should of

course avoid making any premature offers on the subject of

which they could take advantage, and we should only use the

sovereignty ploy if we were clearly going to get a

satisfactory undertaking from them on continuing British

administration.

7. There is of course the idea put to you by Sir Y K Pao of

a possible lingkage between loans to China and a solution

SECRET

/on..