TNAG-1445-FCO40-1929-Constitutional-development-in-Hong-Kong-1986 — Page 22

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NOW GONE PUBLIC ON THE NEED FOR DIRECT ELECTIONS PERHAPS 25 PERCENT IN 1988 MOVING TO PERHAPS AS MUCH AS 100 PERCENT BY 1997. THIS IS EXACTLY WHAT THE CHINESE FEAR. IT IS ALSO THE OPPOSITE OF WHAT INFLUENTIAL HONG KONG BUSINESSMEN HAVE BEEN URGING ON PEKING BY PRIVATE DIPLOMACY. EXPATRIATE REPORTERS IN PARTICULAR WARN THAT THE CHINESE WILL USE SIR E YOUDE'S DEATH TO SECURE A POSTPONEMENT OF THE GREEN PAPER. THERE HAS BEEN NO LOCAL INDICATION WHATSOEVER THAT THE PUBLIC WANT TO SEE THE PAPER POSTPONED RATHER THE REVERSE. ANY DECISION TO POSTPONE THE GREEN PAPER WOULD BE SEEN LOCALLY (AND ARGUABLY BY FOREIGN INVESTORS) AS A SIGNIFICANT WEAKENING OF THE ADMINISTRATION IN HONG KONG WITH PRACTICAL CONSEQUENCES ACROSS THE BOARD: AND SUCH A MOVE COULD NOT POSSIBLY GET PAST EXCO AND LEGCO. THAT SAID, INNATE PUBLIC CAUTION MAY PRODUCE A CONSERVATIVE (OR AT LEAST MIXED) RESPONSE TO OPTIONS IN THE GREEN PAPER.

(B) THE HONG KONG PUBLIC MAY NOT AUTOMATICALLY FAVOUR GOING DOWN A PATH THAT SEEMS LIKELY TO LEAD TO EARLY AND DIRECT CONFRONTATION WITH CHINA. HOPETFULLY THE POSITION WILL BECOME CLEARER IN THE COMING MONTHS, BUT GIVEN THE CONFUSED STATE OF PUBLIC OPINION AT THE MOMENT AND OUR COMMITMENT TO A NEUTRAL STAND ON THE GREEN PAPER, THE OUTCOME COULD WELL DEPEND ON WHETHER THE CHINESE DECIDE TO PLAY, EITHER OVERTLY OR COVERTLY, THE PUBLIC OPINION CARD. EVEN IF A STRONG MAJORITY EMERGES IN FAVOUR OF DIRECT ELECTIONS THE MORE MODERATE AMONG THEM MAY BE PREPARED TO SETTLE FOR THEIR INTRODUCTION AFTER THE BASIC LAV IS PUBLISHED. THIS COULD BE SEEN AS A REASONABLE COMPROMISE (SOMETHING WHICH

HONG KONG PEOPLE OFTEN TEND TO SEEK IN SITUATIONS LIKE THIS) BUT NOT TOO MUCH EXPECTATION SHOULD BE BUILT ON THIS ASSUMPTION AT THIS STAGE. WE ARE KEEPING OUR EARS TO THE GROUND.

(C) JLG VI WILL TAKE PLACE IN HONG KONG IN MARCH. IT WILL BE IMPORTANT AT A DELICATE MOMENT. WE MUST DO EVERYTHING TO RESOLVE THE QUESTION OF RIGHT OF ABODE LEGISLATION BY THEM. ADDITIONALLY, THE QUESTION OF POLICE EXPANSION/GARRISON RUN DOWN IS LIKELY TO BE AT THE CENTRE OF THE AGENDA. IT IS ALREADY IN THE PUBLIC DOMAIN. THE BROAD AGREEMENT WE NOW SEEM TO HAVE WITH WHITEHALL ON OUR BASIC STRATEGY (FCO TELNO 2886) WAS BY NO MEANS AHEAD OF TIME: IT WILL BE IMPORTANT TO UNBLOCK OUR LINES WITH THE CHINESE ON AT LEAST ROUTINE POLICE EXPANSION VERY EARLY IN THE NEW YEAR.

(D) PROTECTIONIS. AS DEMONSTRATED ABOVE, THE HONG KONG ECONOMY GOT THROUGH 1986 IN MUCH BETTER SHAPE THAN WE HAD FEARED. BUT HONG KONG LIVES BY ITS TRADE AND EVEN WITH THE ENCOURAGING REVIVAL OF EXPORTS TO EUROPE (FRG IN PARTICULAR) AND SIGNIFICANT GROWTH IN EXPORTS TO JAPAN, THE US STILL TAKES OVER 40 PERCENT OF OUR DOMESTIC EXPORTS. THIS ASPECT OF STABILITY AND PROSPERITY COULD EASILY UNRAVEL IN THE FACE OF A SAVAGE TRADE BILL IN OUR MAJOR MARKET.

(E) ''STANDING UP FOR HONG KONG'': FOR THE HONG KONG PUBLIC, AND FOR EXCO, THE FIRST TEST OF A NEW GOVERNOR WILL BE WHETHER HE WILL STAND UP FOR HONG KONG'S INTERESTS, PARTICULARLY ECONOMIC INTERESTS, EVEN WHEN THESE CLASH WITH UK INTERESTS. I AM PARTICULARLY CONCERNED IN THIS CONTEXT ABOUT THE RECENT REVERSAL OF BRITISH AIRWAYS' PLAN TO GIVE UP THE HONG KONG-PEKING ROUTE IN 1987. THIS EVOKED BITTERNESS AND EVEN REFERENCES TO COLONIALISM' AT THIS WEEKS'S EXCO. I WILL NOT GO OVER GROUND COVERED IN OTHER CORRESPONDENCE. BUT FOR HONG KONG IT IS IMPORTANT TO START THE YEAR BY GETTING THIS ONE RIGHT. LATER IN THE YEAR NEGOTIATIONS OVER THE DCA CARRY WITH THEM THE SAME SORT OF DIFFICULTY. VIETNAMESE REFUGEES ALSO REMAIN A CONSIDERABLE LOCAL PREOCCUPATION WITH A STRONG FEELING THAT HMG IS NOT DOING ENOUGH TO HELP. THIS WILL BE THE SUBJECT OF AN ADJOURNMENT DEBATE IN JANUARY.