TNAG-1168-FCO40-1448-Future-of-Hong-Kong-1982 — Page 63

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FM PEKING 120970Z MAR 82

TO PRIORITY F C O

TELNO 153 12 MARCH

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INFO PRIORITY HONG KONG (PERSONAL, FOR GOVERNOR

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YOUR TELNO 158:

FUTURE OF HONG KONG

1. I AM GLAD YOU HAVE BEEN ABLE TO LOOK AT THIS AGAIN. BUT THERE STILL SEEMS TO BE SOME CONFUSION BETWEEN ACTUAL NEGOTIATIONS (STILL A GOOD WAY OFF) AND THE CURRECT PROCESS OF EDUCATION IN ECONOMIC AND FINANCIAL REALITIES.

2. 1 ENTIRELY AGREE THAT IT WOULD BE PREMATURE TO MAKE AN **OUTRIGHT PROPOSAL** (PARA 2 OF TUR) BEFORE OUR OWN POSITION IS PREPARED. BUT THIS DOES NOT MEAN WE MUST CONCEAL UNTIL THEN THE REALITY THAT WITHOUT BRITISH ADMINISTRATION THE INVESTORS WILL NO LONGER INVEST. THE SOONER THE CHINESE RECOGNISE THIS THE BETTER. THIS IS NOT A PROPOSAL BUT A COMMERCIAL FACT, THE STARTING POINT OF ANY PRACTICAL DISCUSSION.

3. WE MUST I THINK SUBSTITUTE THE WORD **WOULD'' FOR ''COULD'' IN THE FINAL SENTENCE OF PARA 1 OF TUR. SUBJECT TO THAT AMENDMENT I AGREE THAT THIS IS THE LINE TO TAKE. BUT IF WANG PRESSES FURTHER E.G, IF HE ASKS SPECIFICALLY **DO YOU MEAN THAT CONTINUED BRITISH ADMINISTRATION IS ESSENTIAL TO CONFIDENCE?'' THEN I DO NOT SEE HOW ONE CAN AVOID SAYING "'YES''. TO GIVE THE IMPRESSION THAT THERE WAS EVEN THE SLIGHTEST DOUBT ABOUT THIS IN OUR OWN MIND WOULD ONLY PROLONG THE TIME REQUIRED FOR THE CHINESE TO REACH THE SAME CONCLUSION. IT WOULD UNDO THE WORK BEING DONE, WE HOPE, BY BUSINESSMEN TO WHOM THE CHINESE TALK, AND FAR FROM PROTECTING OUR NEGOTIATING POSITION, AS YOUR TELEGRAMS SUGGEST, IT WOULD FATALLY UNDERMINE IT, SINCE THE ONLY GROUND ON WHICH THE CHINESE CAN EVENTUALLY BE RECONCILED TO CONTINUING BRITISH ADMINISTRATION WILL BE THEIR RECOGNITION THAT WITHOUT IT THE MONEY WILL NO LONGER COME IN.

CRADOCK

LIMITED

HD/HK&GD

HD/FED

COPIES TO:-

SIR E YOUDE C/O HK&GD

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MR GIFFARD

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