TNAG-1871-FCO40-2659-Relations-between-Hong-Kong-and-China-1989 — Page 61

CONFIDENTIAL

134506 MDTTAN 9096

DENY THE TRUTH OF PRACTICALLY ANY SPECULATION (THIS IS OF COURSE THE NATURE OF SPECULATION ANYWHERE).

THE LINE

3. ON THE BROADER QUESTION OF THE POSITION OF ZHAO, TAKEN BY THE EMBASSY REPORTING HAS NOT BEEN AS ROSY AS SOME APPEAR TO BELIEVE IT TO HAVE BEEN, THE VIEW FROM THE BEGINNING HAS BEEN, FIRSTLY, THAT IT IS IMPOSSIBLE TO CONFIRM OR DENY CATEGORICALLY THE TRUTH OF THE SPECULATION BUT THAT SOME OF IT (E.G. DIRECTLY QUOTING FROM DENG IN A PRIVATE GATHERING) IS HARDLY CREDIBLE SEMICOLON SECONDLY, THAT THERE IS NO OUTWARD EVIDENCE OF ZHAO'S POSITION BEING UNDERMINED TO THE EXTENT IMPLIED BY THE SPECULATION SEMICOLON THIRDLY, THAT THE POSITION OF ZHAO, TAKING A LONGER PERSPECTIVE, IS STRONG SEMICOLON BUT, FOURTHLY, IRRESPECTIVE OF THE SPECULATION, HIS STANDING MUST HAVE SUFFERED AS A RESULT OF THE SERIOUS ECONOMIC DIFFICULTIES BROUGHT ABOUT BY POLICIES FOR

THE CRUCIAL QUESTION WHICH HE MUST BE HELD CHIEFLY RESPONSIBLE.

IS HOW IT HAS SUFFERED. THE CATACLYSMIC ASSESSMENTS MADE BY JOURNALISTS NOW APPEAR TO HAVE BEEN OVER-EXCITED: ZHAO IS NOT FALLEN SEMICOLON HE IS NOT A PUPPET SEMICOLON HE IS NOT BARRED

THE MORE FROM MAKING IMPORTANT STATEMENTS ABOUT THE ECONOMY. COOL-HEADED POSITION APPEARS TO HAVE BEEN JUSTIFIED.

BUT 4. NOBODY SHOULD FORGET THE EXPERIENCE OF HU YAOBANG'S FALL,

IT IS FAIRLY CLEAR THAT NEITHER SHOULD THEY BE MESMERISED BY IT. ZHAO DID COME UNDER CRITICISM AT BEIDAIHE FOR MISHANDLING THE ECONOMY, FOR WHICH HE HAS HAD TO MAKE A PUBLIC SELF-CRITICISM. AS A RESULT, HIS FUNCTIONS APPEAR TO HAVE BEEN ALTERED AND RESTRICTED IN SCOPE. HE IS NO LONGER PLAYING THE DUAL ROLE OF GENERAL SECRETARY AND PREMIER AS HE WAS BETWEEN THE FALL OF HU YAOBANG AND THE SUMMER OF 1988. LI PENG AND YAO YILIN HAVE TAKEN

THE RELATIONSHIP ON MORE OF THE EXECUTIVE, GOVERNMENTAL FUNCTIONS. BETWEEN ZHAO AND LI HAS REVERTED TO THE MORE TRADITIONAL RELATIONSHIP BETWEEN PARTY AND GOVERNMENT LEADERS AS ENJOYED BY

WITH DUE MAO AND ZHOU ENLAI AND HU YAOBANG AND ZHAO ZIYANG. CONSIDERATION FOR THE UNPREDICTABILITY OF THE CHINESE POLITICAL SYSTEM, OUR LIMITED KNOWLEDGE AND POSSIBLE FUTURE DEVELOPMENTS, THE SPECULATION THAT ZHAO HAS LOST ANY ROLE IN ECONOMIC MATTERS AND IS ABOUT TO FALL APPEARS TO HAVE BEEN PROVED EXAGGERATED. ZHAO'S ROLE HAS BEEN RESTRICTED AS A RESULT OF ECONOMIC PROBLEMS BUT HE REMAINS A POWERFUL AND INFLUENTIAL FIGURE IN ECONOMIC AS IN OTHER FIELDS. THE SIGNS ARE THAT HE HAS WEATHERED THE STORM AND THE MOST RECENT TRENDS IN ECONOMIC STRATEGY HAVE A DISTINCTLY ZHAO RING ABOUT THEM.

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