TNAG-1238-FCO40-1551-Future-of-Hong-Kong-1983 — Page 11

CONFIDENT TAL

b. An Associated Press report, 7 October, quoted a Chinese official |(not identified) as saying that sovereignty comes before prosperity;

the recovery of China's sovereignty over Hong Kong must take precedence but efforts would be made to guarantee its stability and prosperity. He added, in answer to a question, that he did not think it would be possible for Britain to continue an administrative role even if Britain conceded sovereignty.

C. The Financial Times, 11 October 1982 reported a comment by a Chinese official (not identified) rebutting assertions that sovereignty over Hong Kong belonged to China and management to Britain. He said that that was not complete sovereignty; sovereignty included both territorial sovereignty and management sovereignty.

November 1982

a.

At a meeting with Sir Y K Kan and Mr Newbigging and others on 1 November 1982, Xi Zhongxun said that a plan for the future of Hong Kong should be worked out by both sides within the next one to two years; Hong Kong's stability and prosperity could be maintained by retaining the existing systems, although there would need to be certain changes in the legal system, but these would be beneficial to the prosperity and stability of Hong Kong. Xi added that Hong Kong was very important especially for China's modernisation policy.

b.

The same visitors reported that Wang Daohan, Mayor of Shanghai, told them on 3 November that Hong Kong's prosperity and stability would be maintained; individual and corporate property and investments would be protected after 1997; sovereignty was not negotiable, but management and administration were negotiable.

C.

Liao Chengzhi told a delegation of the Hong Kong Factory Owners' Association on 20 November that sovereignty over Hong Kong belonged to China and it was only a question of when China will exercise this sovereignty; the question of sovereignty was not negotiable; whether Hong Kong would be run well after the reversion of sovereignty to China would depend upon the part played by the Hong Kong people themsel- ves. China would not send a single soldier or official to Hong Kong; the status, living standards, trade relations and currency of the territory would be maintained as at present. There would be two major changes: the British flag would no longer fly, and instead of a British Governor there would be an official with a title such as Chairman of the Hong Kong Special Administrative Region chosen from among the people of Hong Kong; China hoped to cooperate with Britain to maintain the stability and prosperity of Hong Kong, although she might have to reconsider in the event of disturbances in Hong Kong which undermine the stability and prosperity. Liao added that there were differences between the questions of Hong Kong and Taiwan; the Hong Kong Governor and Gurkha soldiers would have to be removed and the defence of Hong Kong would be China's responsibility, but this would not be the case | with Taiwan; an extension of the lease was out of the question.

expressed confidence in Hong Kong's industrial sector in particular, while criticising high land prices and speculation in property and shares. Liao said that he expected Hong Kong would only account for about 10 per cent of China's foreign exchange earnings in the future.

3 CONFIDENT TAL

Liao

/But