TNAG-1258-FCO40-1591-Third-countries-and-the-future-of-Hong-Kong-1984 — Page 42

SECRET

after 1997 and this could be the purpose of the Chinese threat to issue a statement in September 1984 unilaterally if they had not got agreement by then. It was possible, however, that they would be prepared to talk after September 1984 at leisure about

the details of transition, as they saw it, to the return to Chinese sovereignty. In the meantime they had launched United Front propaganda campaigns, one of the purposes of which was to alienate the people of Hong Kong from loyalty to the British. (Over dinner Mr Donald spoke of the good relations between China. and Hong Kong during the Seventies, the pressure from the Chinese business community in Hong Kong for an end to uncertainty, Lord MacLehose's visit to Peking in 1979, the Carrington visit and the hearts at ease'' formula and the messages passed via Mr Humphrey Atkins and Mr Heath in the first half of 1982.)

1

3. Mr Gregg said that the Chairman of the Hong Kong and Shanghai Bank had told him that ''the glass could not be glued together again''. Mr Cochrane added that his US oil company

contacts were cynical about the future. As they saw it, both

sides seemed to be striking postures, but at the end of the day the British would leave and Hong Kong would become another

Shanghai. Did we know the situation on capital flight? Mr Donald said it was true that both sides had problems about principles, but in their hearts they understood that the practicalities were

what mattered. There might well be some temporary capital flight, but the problem with confidence among the people of Hong Kong was that neither Peking nor Britain was able to be completely frank about its position. Britain could not yield on sovereignty until

we had the necessary guarantees. The Chinese objected to a

British colonial presence post-1997, but they were wise enough to

know that they needed a British presence in the form of technical

and administrative skills associated with some British people.

He was sure that Hong Kong's economy would continue to thrive and

that the Chinese would make sure that business would go on. The

important thing was that there should be a sufficient British

presence to ensure that it did. There was a problem, however,

with some of the older generation in Hong Kong who felt Britain

owed them a living, and who would be fearful of a British''sell out''

SECRET

-2-

/4.