TNAG-1168-FCO40-1448-Future-of-Hong-Kong-1982 — Page 40

RECORD OF MEETING

SECRET

Enter

Mwiluaran J24.3 TheQuade

of

CALL ON THE SECRETARY OF STATE BY SIRY K PAO: 16 MARCH 1981

11 A.M.

when

2813

124

Present:

See (167) (182)

Lord Carrington

Sir Y K Pao

HL Davies, Far Eastern Dept

HKK

040/1

JE Holmes, APS

floo3013

1.

Welcoming Sir Y K Pao, Lord Carrington recalled that they had last met in Manila when they had talked about Hong Kong and what happened next. He enquired about the upshot of Sir Y K Pao's talks in China.

See (274

2. Sir Y K Pao said that since his meeting with Lord Carrington he had met both Mrs Thatcher and the Chinese Prime Minister.

He had told the Chinese Prime Minister that China must purchase more from the UK to help the British economy in order to support Mrs Thatcher at a crucial time for the Government. Secondly, he had discussed the question of a possible loan. The Chinese had obtained a loan from the Japanese Government and had enquired about a similar arrangement from the UK. As to Hong Kong, Vice Premier Huang Hua, whom he had seen following the latter's operation (which had prevented him meeting the Lord Privy Seal), had asked him for suggestions for a few formulae to solve the Hong Kong problem. Sir Y K had told Huang Hua that he had no suggestions himself and hoped that the Chinese Government would have some. He had also discussed the question of the invitation to Vice Premier Gu Mu.

3. Lord Carrington said that we had invited Gu Mu to visit the UK. He asked whether Gu Mu had been demoted, Sir Y K Pao said that this was not yet clear. It seemed unlikely that he would get one of the two Vice Premier jobs; but he would probably become a State Counsellor. Sir Y K said that Mrs Thatcher had written to him confirming what Lord Carrington had said, that an invitation was on the table and had been renewed both by Mr Rees and by Mr Atkins. But during his recent visit Gu Mu had asked him about reactions to his enquiry about a loan. Sir Y K had replied that it was too early to give a definitive response, but he had undertaken to ask the British Government about terms and interest rates. He had therefore had a word with Mrs Thatcher at the

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