TNAG-1167-FCO40-1447-Future-of-Hong-Kong-1982 — Page 136

DSR 11C

SECRET

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in particular, who has put much-stress on the question of

sovereignty--would-react-badly-if tackled on-the-British

however

-administration point It might be best to feed our ideas

in at a high level in London, possible in a meeting between

the Secretary of State or the Prime Minister herself and

the Chinese Ambassador.

9. A further aspect concerns the possibility suggested by

Sir Y K Pao of linking some form of economic assistance to

China with the search for a solution to the Hong Kong

}

problem. We have already (at the prompting of Sir P

Cradock) been examining the possibility of a substantial

increase in aid to China, a field in which we have been

falling behind our competitors. It is very unlikely that

the Chinese would be prepared to offer concessions over

Hong Kong in return for economic inducements of this kind.

But progress over Hong Kong may be difficult if the Chinese

have reasonable grounds for criticising our aid performance

This will need further discussion in Whitehall.

/ 10.