TNAG-1243-FCO40-1557-Future-of-Hong-Kong-1983 — Page 48

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PS PS/Mr Luce Mr Evans

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Action Teken

Mr Donald

Mr Clift

HONG KONG

Miss Neville Jones

1. We have a crisis of confidence coupled with the threat of a secondary banking and property crisis in Hong Kong, and a perceived need to say more in public about our policy in the negotiations on which there is also a crucial decision to be made this week.

2.

There is an argument which we may be in danger of neglecting, but which affects all these components of the situation.

It may look like a presentational argument, but where confidence is concerned it is often hard to separate substance from presentation.

3. The argument is that we have a major point to gain in our public stance if we accept the Chinese premise on administration, strictly for the purposes of negotiation (as we have in effect done over sovereignty). This will enable us to say loud and clear that what we are defending is Hong Kong as a place of business, with the freedom to operate under the law which that requires. This is a position which should appeal to foreign investors (the Americans, Australians, Japanese and Europeans) as well as to our own business interests and those of Hong Kong itself.

4. At present, we are inhibited from making this point because it might imply that sovereignty and British Administration may be secondary considerations. Once we had accepted the Chinese premise for the purpose of negotiation, this difficulty would disappear. Our position would appeal to international and business opinion if we were seen to be standing up for Hong Kong as a place of business and not for Hong Kong as a British Colony.

We could say that, important as sovereignty and the right of administration were and were certainly recognised by us to be, the fundamental issue was freedom for Hong Kong to continue operating as a commercial and financial centre. This is an excellent position to defend, and gives us much scope, even if we continue to respect the confidentiality of the negotiations (which the Chinese do not respect and about which it is arguable we can no longer afford to be so correct as hitherto).

5. The argument that we can never claw back our position on British administration once we have accepted the Chinese premise for the purpose of negotiation can be countered by the proposition that, on the contrary, if we have to make a stand later (and we are in no way committed to the acceptance of any package or part of a package) a stand in defence of Hong Kong as a place of business is what will gain us maximum international (and I suspect domestic) support. I believe this is a sound and important argument. I also believe that we may soon need wider international support, both on confidence and for our negotiating position.

6. The argument would of course also apply to the preservation of freedom for the man in the street in Hong Kong.

Gelisens

CSR Giffard

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