TNAG-1257-FCO40-1590-Third-countries-and-the-future-of-Hong-Kong-1983 — Page 165

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BETTER THAN BEFORE, AND THE NEXT ROUND WOULD BE HELD IN MID

NOVEMBER. THE CHINESE RETAINED DEEP-ROOTED SUSPICIONS THAT WE

WERE 'MILKING' HONG KONG.

4. MR LUCE LATER ASKED WOLFOWITZ HOW HE SAW THE CHINESE

GOVERNMENT AFTER DENG XIAOPING. HE EMPHASISED THE UNDERLYING

STRENGTH IN HONG KONG'S ECONOMY. HE EXPRESSED THE HOPE THAT THE

US GOVERNMENT WOULD DO WHAT IT COULD TO ENCOURAGE US INVESTMENT

IN HONG KONG.

5.

BUT

WOLFOWITZ THOUGHT IT WAS GOOD NEGOTIATING TACTICS ON THE

PART OF THE CHINESE TO MAKE OUT THAT WE 'MILKED' HONG KONG.

THEY FROBABLY REALLY BELIEVED THIS AND WERE JEALOUS. IN THE

COURSE OF SINO-US DISCUSSIONS, THE CHINESE HAD MERELY REHEARSED

THEIR STANDARD POSITION ON HONG KONG. WOLFOWITZ DID NOT THINK

THEY UNDERSTOOD THE BASIS FOR CONFIDENCE THERE. HE AGREED THAT

HONG KONG PEOPLE WERE CONCERNED PRIMARILY WITH THEIR ECONOMIC

PROSPECTS. HE BELIEVED THE HONG KONG 'PROBLEM TO BE BOUND UP

WITH THE POSITION OF DENG XIAOPING, WHO DOMESTICALLY HAD TO

APPEAR BOTH SUCCESSFUL AND STRONG. IT WAS DOUBTFUL IF DENG

PERSONALLY UNDERSTOOD THE BASIS OF HONG KONG'S SUCCESS.

6. WOLFOWITZ STRESSED THE IMPORTANCE OF APPEARANCES TO THE

CHINESE. ON MOST SUBJECTS, THEY WERE DEALING FROM A POSITION OF

WEAKNESS. IT THUS HELPED FOR APPEARANCES TO BE OTHERWISE. IF

THEIR POSITION WERE OPENLY CHALLENGED, THEN TENDED TO THREATEN

AND BLUSTER IN ORDER TO REASSERT THEMSELVES BEFORE THEY ALLOWED

THINGS TO MOVE FORWARD. CF THEIR REACTION TO THE PRIME

MINISTER'S REMARKS IN HONG KONG A YEAR AGO AND TO THE HU NA CASE.

7. WOLFOWITZ PREDICTED INSTABILITY IN CHINA AFTER DENG. HU

YAOBANG WAS ALLEGEDLY COMING UNDER FIRE AND DENG HAVING SECOND

THOUGHTS ABOUT HIM AS A SUCCESSOR. THIS MIGHT GIVE DENG AN

INCENTIVE TO SETTLE THE HONG KONG QUESTION WHILE HE WAS STILL IN

CONTROL.

8. ON US INVESTMENT, WOLFOWITZ SAID HE WAS UNAWARE OF ANY MAJOR

LOSS OF CONFIDENCE IN HONG KONG BUT THE US ADMINISTRATION WERE

PLANNING TO TAKE A CLOSE LOOK AT THE ECONOMIC QUESTIONS INVOLVED.

SHULTZ HAD MADE CLEAR TO THE CHINESE THE US INTEREST IN HONG

KONG'S STABILITY AND PROSPERITY AND HAD COMMENTED ON THE DELICACY

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