TNAG-2243-FCO40-3224-Most-favoured-nation-status-for-China-impact-on-Hong-Kong-1991 — Page 53

CONFIDENTIAL

1.

MDHIAN

(A) THE DIFFICULTY CONDITIONALITY CREATES FOR MEN RENEWAL IN 1992. EVEN IF THE CHINESE ACCEPT THE CONDITIONS, THEY ARE UNLIKELY TO BE ABLE TO MEET THEM FULLY.

(B) THE PRECEDENT. EVEN IF THE CHINESE SUCCEED IN MEETING THE CONDITIONS TO SOME EXTENT, THERE IS NO GUARANTEE THAT FURTHER CONDITIONS WOULD NOT BE IMPOSED NEXT YEAR, OR THE YEAR AFTER NEXT.

(C) THAT THEY WILL NOT/NOT BE ACCEPTABLE TO THE CHINESE, HOWEVER MILD THEY MAY BE, AND COULD TRIGGER OFF ENTIRELY THE WRONG RESPONSE.

4. ALTHOUGH RENEWAL OF CHINA'S MEN HAS CEASED TO BE A FOREGONE CONCLUSION SINCE 1989, THERE IS STILL A WIDELY HELD ASSUMPTION IN

THE MINDS OF LOCAL AND FOREIGN BUSINESSMEN AND INVESTORS THAT THE PRESIDENT WILL, LIKE LAST YEAR, SUCCEED IN SECURING UNCONDITIONAL RENEWAL. IF IN THE END A CONDITIONALITY PACKAGE HAD TO BE AGREED THIS YEAR, IT WOULD CHANGE THIS PERCEPTION COMPLETELY AND WOULD CREATE MUCH MORE UNCERTAINTY. THE TOUGHER THE CONDITIONS, THE

GREATER THE IMPACT.

5. WE WOULD THEREFORE SUGGEST THAT THE MESSAGE FROM THE SECRETARY

OF STATE SHOULD LEND SUPPORT TO THE PRESIDENT'S PRESENT POLICY TOWARDS CHINA, INCLUDING UNCONDITIONAL RENEWAL OF CHINA'S MFN, AND WOULD WELCOME AN OPPORTUNITY TO COMMENT ON THE DRAFT.

WILSON

YYYY

ΜΑΙΝ

57

.CHINA TRADE

LIMITED

HKD

FED

JOINT DIRECTORATE

DISTRIBUTION

73

EAPD/ODA

ECONOMIC ADVISERS

PAGE

NPDD

RAD

PS/LORD CAITHNESS

PS/PUS

SIR J COLES

MR MILES

MR BURNS

2

CONFIDENTIAL