TNAG-1233-FCO40-1546-Future-of-Hong-Kong-1983 — Page 103

December 7, 1982

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MEMORANDUM OF A LUNCH MEETING WITH PROFESSOR PAUL T.K. LIN AT 'BOULDER LODGE', CASTLE PEAK, ON SUNDAY, DECEMBER 5, 1982

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Professor and Mrs. Lin, who had just returned from a visit to Beijing, lunched with us at Boulder Lodge on Sunday, December 5th.

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Professor Lin said that whilst in Beijing he had had several conversations with Senior Officials there regarding the Chinese Government's views as to the future of Hong Kong.

He mentioned that Mr. Liao Cheng-Chih, Member of the CCP Political Bureau and Vice-Chairman of the National People's Congress Standing Committee, was the official dealing with Hong Kong affairs.

Negotiations between UK and China appeared to have come to a stand-still, the ball being in the UK's court.

Considerable exception had been taken to several of Mrs. Thatcher's remarks. Deng Xaioping exercised a moderating influence but there were several hard-liners with whom he had to contend.

Certain decisions appeared to have been taken at the recent meeting of Congress, and it was likely the Chinese would come out with a definite statement within the next six to twelve months.

It now appeared that the Chinese interpreted sovereignty not only as applying to the ownership of land but also to administration of the territory.

LK referred to the need for a UK back-up to preserve the free convertibility of the Hong Kong Dollar. Professor Lin intimated that the Chinese considered the financial reserves built up by the Hong Kong Government would be sufficient to guarantee this.

In reply to a question as to how a smooth transition could take place, Professor Lin said that it might be possible to arrange for a period under British Administration followed by a period of joint administration leading to total Chinese administration.

In Professor Lin's considered opinion it was important for the UK to take the initiative to improve the relationship as soon as possible.

At this stage the UK could exert some influence on the shape of things to come, but once the Chinese Government had publicized their views, the UK would be faced with a fait accompli and it would be extremely difficult to change anything without a considerable loss of face.

Everything possible should be done to avoid confrontation and emphasis should be laid on the benefits to both parties gained over the long association between China and the UK.

Professor Lin felt that whilst negotiations on an official basis might meet with difficulties there was room for conversations on an unofficial basis which could be to advantage.

He believed a unique opportunity presented itself to strengthen the ties between the UK and China. If Mrs. Thatcher were willing to recognize sovereignty and China's attitude to the so-called 'unequal' treaties, she would be taking advantage of a great historic occasion to provide Hong Kong with a broader, more enduring political base.