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contemplate any division between formal sovereignty and the exercise of it. As we moved through the summer of 1983, the full force of their objections was unleashed on Hong Kong through articles in the Communist press and by messages conveyed to Hong Kong by visitors to Peking.
15. When the talks reopened after the summer break the atmosphere at the negotiating table was chilly. The Chinese negotiators declined to insert in the communique at the end of the 22/23 September session the magic words indicating that the discussions had been "useful and constructive", a formula used on all previous occasions. Hong Kong's financial system was already fragile as a result of a collapse of the property market the previous year (a casualty more of speculation and oversupply than of political factors). A local bank had been on the verge of failure and the Hong Kong Government had had to take emergency action to acquire it in order to prevent disastrous damage to confidence in the Hong Kong banking system. Hong Kong took further fright at the deadlock in the negotiations. The Hong Kong dollar, which had been declining in strength over the previous year, fell nearly 15% in 24 hours. There was a whiff of panic in the air and reports of the shelves of supermarkets being emptied by families, nervous that the currency would collapse. It was stemmed only by the skilfully managed and remarkably successful introduction of a link between the Hong Kong dollar and the US dollar which restored confidence in the Hong Kong currency.
16. The intense Chinese propaganda faced the people of Hong Kong with a particularly difficult dilemma. Should they bow to the inevitable, and with the stoicism and instinct for self-preservation which has helped Chinese people survive centuries of unrest and political change, keep their heads down and try to make the best of whatever Peking would give? Or should they stand up and be counted, point to the inadequacies of general promises and demand some more tangible guarantee of the continuation of their way of life? Those prepared to stand up for Hong Kong's own interests included the Senior Unofficial Member, Sir S Y Chung, and his colleagues in the Executive and Legislative Councils, a number of young professionals and some independent citizens and newspapers. Their message was a powerful one, and they refused to be cowed by signs of Chinese displeasure. Even those who believed that China would not concede on either sovereignty or administration declined to remain silent on what they saw as essential to the well-being of Hong Kong. The message was reinforced by a perceptible anxiety and fragility of confidence among the population which endured throughout the negotiations.
17.
I have no doubt that these direct and indirect expressions of what the people of Hong Kong wanted played a substantial part in bringing the Chinese to recognise that Hong Kong would not take general declarations on trust; and thus powerfully reinforced the hand of the negotiators in Peking. Without their courageous advocacy we should not have got such a good agreement.
18.
The experience of that phase was a sobering one for both sides. To the British it demonstrated that pursuit of the objective of continued British administration could only prolong the deadlock and might bring about the collapse of Hong Kong which it was the objective of the negotiations to avoid. On the other hand, Hong Kong was not yet ready to survive an announcement that British administration would cease in 1997. I therefore visited London with the Unofficial Members of the Executive Council, who were brought with some difficulty to accept that a new formula should be put to the Chinese. In essence this was that, without prejudice to the final outcome of the negotiations, it should be agreed with the Chinese that an examination should be made of the possibility of Britain and China together constructing, on the basis of the proposals put forward by China, arrangements which could ensure the maintenance of stability and prosperity in Hong Kong. If such arrangements could be agreed, the British Government would be prepared to recommend to Parliament a bilateral agreement enshrining them and do its utmost to help with the introduction and implementation of such an arrangement.
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