TNAG-1173-FCO40-1465-Future-of-Hong-Kong-special-study-by-FCO-for-the-Prime-Minis-1982 — Page 153

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(f)

indivisible and is so regarded by the PRC.

They do not recognise the UK's claim to

sovereignty over the ceded areas and there is

no prospect that this situation would be

acceptable to them.

Incorporation of Hong Kong into China

Possibly as a Special Administrative Region, Without British Control

This is very likely to be the Chinese proposal.

It would give considerable local autonomy

including: -

(i) retention of existing structure

of government;

(ii)

(iii)

employment of some expatriates in administration;

separate currency.

The UK would no longer be responsible for the

government of the territory. The PRC would

assume responsibility for external affairs,

though direct commercial relations with other

countries would be allowed.

a)

Acceptability for HMG

This could be acceptable only as a last resort, if all other attempts to reach an accommodation with the PRC had failed. The UK would be seen as having mishandled the situation and failed to protect the interests of the territory unless the new constitutional arrangements for the territory were acceptable to the majority of the inhabitants and there was reasonable protection for British investment. The PRC might of course impose this solution unilaterally, possibly with some local support, but in that event British diplomacy would be seen as having signally failed.

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/ b)