TNAG-1565-FCO40-2130-Future-of-Hong-Kong-nationality-and-passports-Hong-Kong-(Br-1986 — Page 71

HAN 340π

RECEIVED IN REGISTRY

1 MAY 1986

DESK OFFICER

INDEX

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CONFIDENTIAL

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I C Orr

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30/44 2534

REGISTRY

་གས་་བ་་་མས་

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Date:

CC:

Far Eastern Department

29 April 1986

+encil B

Mr Walker, RD (FE)

Mr Hum, HKD

PUSD

Miss Neville-Jones, Planning

Staff

Sir P Cradock, No 10 Downing St Mr Wright, Assessments Staff,

Cabinet Office

Colonel Leech, DI ROW3, MOD

A

B

Dr Wilson

PS/Mr Renton

DENG XIAOPING: TIME MAGAZINE'S MAN OF THE YEAR

1. In his minute of 2 April about Sir R Evans' despatch on Deng Xiaoping, Mr Henderson recorded Mr Renton's concern about a possible build up of pressure against the open door policy due to foreign exchange deficits; and asked whether Deng Xiaoping's view of the Chinese people boded ill for non-ethnic Chinese. I attach Mr Walker's helpful minute of 7 April commenting on both issues. We, and on the latter point HKD, have the following further thoughts.

Foreign Exchange Deficits

2. I believe that most Chinese leaders consider (rightly) that, whatever foreign exchange problems confront them through the open door, closing it again would not be an option compatible with their own widely agreed targets for economic growth. Recent months have, however, seen them on the defensive from time to time, particularly following last December's student demonstrations against the trade deficit with Japan. A continued rapid decline in China's balance of payments position would unify and strengthen those who advocate more self-sufficient policies.

3.

I do not think this would be allowed to happen. Indeed, the controls on foreign exchange expenditure reintroduced in the wake of last years import spree seem already to be having some effect. Preliminary (and not necessarily reliable) Chinese figures indicate that in the first quarter of 1986, exports rose by 13.9% and imports held roughly steady compared with the same period last year (cf 5.7% and 31.8% respectively for the whole of 1985 against 1984). As Mr Walker points out, the main effort will now be devoted to increasing

CONFIDENTIAL

/exports