TNAG-1171-FCO40-1452-Future-of-Hong-Kong-1982 — Page 61

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1. In discussing my minute of 24 May, you suggested that my ideas were a non-starter as any scheme on the lines I sketched would cause an immediate collapse of confidence in Hong Kong.

2. Clearly this must be for you to judge, but (at the risk of being tiresome) I wonder whether the point is not worth a little more reflection. Although we should be able to say quite honestly that the scheme did not make an eventual Chinese takeover any more likely, and by getting us off our legal 1997 hook was in practice likely to buy us more time, I recognise that it would be a serious shock for Hong Kong. But, with all our possible. intellectual, financial and other resources, I wonder whether such a sudden shock, for which we would be prepared and over whose timing we would have a degree of control, might not be easier for us to survive than the other likely scenarios. I suppose much would depend on whether we could persuade the major hongs not to lose their nerve.

3.

Others have suggested before that a limited drop in confidence is the most effective way of convincing the Chinese that if they wish to continue enjoying Hong Kong's golden eggs they must accept a medium-term continuation of British administration.

25 May 1982

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N J Cox

For Easter Dept.

See 1249 (280

CODE 18-77

SS 8/78

cc: Mr Thomson

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