TNAG-1255-FCO40-1588-Third-countries-and-the-future-of-Hong-Kong-1983 — Page 26

CONFIDENTIAL

Governor through many channels. We are in close consultation, through the Governor, with Hong Kong's Executive Council (EXCO). Mr Luce visited Hong Kong

24-28 September. Governor and Unofficial Members of

EXCO visited London 6-8 October.

6. Central issue is to devise package in which Hong Kong people will have confidence. Given joint Sino-British aim, confident such an arrangement can be worked out.

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British Government obtains no revenue from Hong Kong other than that of normal trading partner, contrary to what Chinese seem to think.

8 Important nothing said or done to damage confidence in Hong Kong. Grateful for your understanding.

9. Chinese propaganda has floated idea of Hong Kong as Special Administrative Region (SAR) under Chinese constitution with considerable autonomy and functioning essentially as it does now.

10. Most people in Hong Kong sceptical of this SAR idea, which suggests basis for confidence not grasped. Insufficient simply to assume that by saying eg that Hong Kong will continue to be financial/commercial

centre or that currency will continue to be

internationally tradable, this will just happen. Hong Kong people and investors need proof of effective

guarantees.

Sovereignty

11.

Chinese and British positions well-known. We fully realise importance of sovereignty issue to China.

We are not inflexible. Willing to consider any

solution acceptable to Britain, China and Hong Kong.

CONFIDENTIAL