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prepared to fork out. (This possibility is of course quite separate from the idea of a soft loan as canvassed by Y K Pao).
Flags
4.
This could be quite a tricky problem and one for which we must be well prepared given the Chinese stress on the point in the context of Taiwan. The Chinese may try to get agreement that the Chinese flag be flown alongside the Union Jack on official buildings.
This would obviously raise strong opposition in some quarters and could shake confidence. However I do not think we should rule it out here and now but it should presumably only be conceded in return for a very clear statement on continuing British administration. (It would be helpful to know what happens in Macao). Another possibility might be a request that the Taiwan flag be banned from Hong Kong. There would be a certain logic in this if we were making some concession on sovereignty, but I can see that it would be very difficult to enforce in practice on private buildings.
Other points
5.
We might find that, if negotiations got under way, the Chinese would try to bring in other questions such as air services, immigration and citizenship. To a great extent we should have to deal with such questions as they came up but we should work on the principle of preserving the present freedom of action of the Hong Kong authorities. Once we started shifting on individual points of this sort we would be opening the door to an impossible succession of Chinese demands.
6.
We shall be working further on these subjects and preparing briefs on them. I will keep you in touch with our thinking but should meanwhile be grateful for your and Michael Atkinson's comments.
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Jus
Dich
R D Clift
Hong Kong and General Department
M W Atkinson Esq MBE, PEKING
M Elliott Esq FED
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