TNAG-1167-FCO40-1447-Future-of-Hong-Kong-1982 — Page 16

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HONG KONG: OPTIONS FOR ACTION TO DEAL WITH A SLIDE OF CONFIDENCE OR A CHINESE INITIATIVE ON THE FUTURE OF HONG KONG

Introduction

1. This paper considers possible action by HMG to meet two contingencies:

a) a collapse of public and business confidence in Hong Kong;

b) readiness by the Chinese to discuss more concrete ways of

bolstering confidence.

It starts by looking at the Chinese attitude to the problem and the actions which they might be prepared to take. It then considers joint actions and unilateral actions on the British side with tacit Chinese concurrence. In each case the likelihood of the action being taken, its effects and residual problems are considered briefly.

2.

The Prime Minister's visit to Peking in September 1982 will in itself be an important factor. We can expect confidence in Hong Kong to be maintained until then. There will be strong expectations that Hong Kong's future will be discussed, it not decided. Definite agreement is in fact most unlikely but there might be an undertaking by both sides to start serious discussions. Public knowledge of this would keep confidence up but there would be two problems. Once embarked upon, talks must succeed. A collapse (or public believe that they were failing) would hit confidence badly. On the other hand, the Chinese are unlikely to be ready to hurry; therefore it would be equally risky to set a time limit for conclusion of the talks. Opinion in Hong Kong would need to be prepared for a long haul during which strictly confidential contacts might continue.

The Chinese View

3. The full picture of Chinese attitudes and long-term policy on Hong Kong remains conjectural. There is considerable evidence of ignorance and misunderstanding of the Hong Kong problem among the Chinese, particularly the question of investor confidence, and even among those officials who might be expected to be well informed. Certain elements, however, seem clear. The Chinese see Hong Kong in its present form as useful to them now and in the immediate future. But there are serious political inhibitions on their accepting indefinite continuance of the status quo. They neither accept nor have they abrogated the 19th Century Treaties on Hong Kong. Technically, it is open to them to disregard 1997, but to do so would be politically difficult as it would expose the leaders involved to the accusation of 'selling out' China to foreigners. In practice, and because of the public attention focussed on 1997, they could not risk acquiescing in any formal or legal action that would prolong British administration without a major political concession on our part.

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