SECRET
7. Need to devise package in which Hong Kong people will have
confidence. Must therefore agree arrangements which will reassure
them.
8. Collapse of Hong Kong economy through lack of confidence would
reflect badly on Britain and China. Our aim remains to seek a
settlement acceptable to Britain, China and people of Hong Kong.
9. British Government obtains no revenues from Hong Kong, other
than those of normal trading partner, contrary to what the Chinese
seem to think. Helpful if you can explain realities of Hong Kong's
economic workings to any Chinese officials with whom you have
dealings.
[DEFENSIVE]
10. Sovereignty: Chinese and British positions well known.
We
fully realise importance of sovereignty issue to China. We are not
inflexible. Are willing to consider any solution to Hong Kong's
future which would be acceptable to Britain, China and Hong Kong.
11. Acceptability: We are taking views of people of Hong Kong
fully into account. Made known to us through variety of official
and unofficial channels. In this context, Governor and unofficial
members of Hong Kong's Executive Council visiting London again 6-8
October for consultations with Ministers. Richard Luce visited Hong
Kong 24-28 September.
HONG KONG STOCK MARKET AND EXCHANGE RATE FLUCTUATIONS
12.
Uncertainty about future main reason for fall in Hong Kong dollar exchange rate recently. But other factors also significant eg world recession, worldwide strength of US dollar. Give underlying strength in Hong Kong's economy Hong Kong dollar
undervalued.
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