CONFIDENTIAL
7.
over the whole of Hong Kong should revert to China. In this way some account would have been taken of the strong national feelings in China that Hong Kong was Chinese territory while at the same time the Hong Kong Chinese would have been assured of the continuation of the system of government and law and the kind of economy to which they attached so much importance. The presentation of this case made little impact on the Chinese negotiators. They were adamant that the continuation of the British link after 1997 would not be acceptable to China and they would not 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 communiqué 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.
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