CONFIDENTIAL
HKB 020/14.
RAR(141
ঊ
06231 MDHIAN 1457
CONFIDENTIAL
FM HONG KONG
TO IMMEDIATE FCO
TELNO 2168
OF 30105OZ JUNE 89
AND TO IMMEDIATE WASHINGTON
INFO PRIORITY PEKING, TOKYO, EUROPEAN COMMUNITY POSTS
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ECONOMIC SANCTIONS AGAINST CHINA: HOUSE OF REPRESENTATIVE VOTE
1. WE HAVE COMMENTED SEPARATELY ON THE REFERENCE TO SUSPENDING NEW EXPORT CREDIT GUARANTEE COVER CONTAINED IN THE EUROPEAN COUNCIL DECLARATION ON CHINA. IF THE US ADMINSTRATION, UNDER PRESSURE FROM CONGRESS, WERE TO IMPOSE FURTHER TRADE SANCTIONS ON CHINA THIS WOULD CONCERN US GREATLY, FOR MANY OF THE SAME REASONS AS THE EC STATEMENT WORRIES US. WE SHOULD BE GRATEFUL IF WASHINGTON COULD BE INSTRUCTED TO BRING OUR CONCERN TO THE ATTENTION OF THE AMERICANS.
2. ECONOMIC DAMAGE INFLICTED ON CHINA WILL INEVITABLY HAVE
REPERCUSSIONS HERE. FOR SOME TIME WE HAVE BEEN SAYING (AS POSITIVE POINTS) THAT CHINA IS OUR LARGEST READING PARTNER: ONE OF THE LARGEST FOREIGN INVESTORS IN HONG KONG: AND THAT WE ARE BY FAR THE LARGEST INVESTOR IN CHINA. WE HAVE ALSO MADE MUCH OF HONG KONG'S ROLE AS A SPRINGBOARD OR DOORWAY TO TRADE WITH AND INVESTMENT IN CHINA: AND AS A BRIDGE BETWEEN CHINA AND THE WESTERN WORLD. THESE POINTS COULD ALL TURN NEGATIVE WERE ECONOMIC SANCTIONS IMPOSED AND WESTERN ECONOMIC LINKS WITH CHINA CUT, OR DELIBERATELY INHIBITED.
3. RE-EXPORTS, WHICH HAVE INCREASED SO SUBSTANTIALLY IN RECENT YEARS, AND NOW ACCOUNT FOR WELL OVER 50 PER CENT OF TOTAL EXPORTS, WOULD OBVIOUSLY BE SEVERELY HIT. OUR OWN DOMESTIC EXPORTS TO CHINA WOULD SUFFER IF THE CHINESE FOUND THEMSELVES UNABLE TO PAY FOR THEM. A GENERAL DOWNTURN IN THE CHINESE ECONOMY WOULD ALSO THREATEN THE PROFITABILITY OF INVESTMENTS OF HONG KONG BUSINESSMEN IN CHINA. MOST SECTORS OF HONG KONG'S COMMERCIAL AND FINANCIAL COMMUNITY STAND TO LOSE, SOME VERY SERIOUSLY.
4. PERHAPS WORST OF ALL WOULD BE THE PSYCHOLOGICAL EFFECT ON HONG KONG OF CREATING A SIEGE MENTALITY IN CHINA. AMERICAN OR WESTERN ECONOMIC SANCTIONS WOULD BE A WEAPON IN THE HANDS OF HARDLINERS. SANCTIONS WOULD BE ENTIRELY SELF-DEFEATING IF THEIR OBJECTIVES WERE THE DECLARED ONE OF PERSUADING CHINA TO TAKE A SOFTER LINE ON DISSIDENTS AND RETURN TO MORE LIBERAL POLICIES. WE HAVE ALWAYS SAID
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