TNAG-1235-FCO40-1548-Future-of-Hong-Kong-1983 — Page 52

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A different version, which would have more to recommend it for China, would be the creation of a special area, perhaps a proper "autonomous region," consisting of the large Shenzhen zone and the New Territories as a minimum, with a maximum that could include all Hong Kong, Macao and part of south Guangdong. Such a region might be fully owned by China but actually enjoy proper semi-independence and self-government, run on reasonably capi- talist lines but with increasing state participation done slowly and carefully so that it was clearly successful. A proposed clause in the new draft Chinese constitution might allow this to happen. Such an outcome might not only gain for China the economic benefits, but it could show Taiwan that China can run such an area, and that China will keep its word. In this way the long-delayed re- unification of China might come about peacefully and successfully.

It is not possible to predict with any degree of confidence which of these possibilities or indeed any other-will be the outcome. Three cases perhaps seem to be marginally more likely at the time of writing. One is Option 1, maintaining the status quo after 1997 but without a new lease; for China there is no valid lease now so that continuation of the present situation relies on political pre- ferences but for Britain there would be legal problems, although it should not be beyond the wit of lawyers to overcome these if the desire is great. This would require strong private reassurance from Beijing to London and Hong Kong as well as public ones to the world. The second case is putting in a Chinese communist governor and keeping as much as possible of Hong Kong's dynamism. The third case consists of a convergence and melding of the economy of Hong Kong with that of southern Guangdong by means of the special economic zone of Shenzhen. That there would be power shifts involved seems unquestionable, but whether it would be Beijing gaining from Hong Kong or both losing to a local body is uncertain.

NOTES

1 What we are doing in the comparison is to assume that there is no change in trade size, partners or practices, merely a change in boundaries and ownership. The result is then a minimum estimate; after a take-over it can be assumed that any change in trade size and flows would be unfavorable, thus increasing the loss for China. 2 William F. Breazer, The Commercial Future of Hong Kong, Praeger, N.Y. 1978, pp. 68–71. A variant of the method was used as it is now possible to identify deposits with deposit-taking companies and treat these as banks.

3 Valuing the 12.8 million ounces of gold at U.S.$400 an ounce.

4 China: International Trade, Central Intelligence Agency, Second Quarter, 1981.

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