TNAG-2256-FCO40-3240-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-gene-1991 — Page 9

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4. The Secretary of State's visit to Peking will be the

first real substantive encounter at that level since Sir G

Howe's negotiation of the joint declaration. My fear is that the Chinese think that they have got us on the run and are determined to use the airport project to extract maximum

concessions from HMG on the wider question of consultation.

It would be helpful to have your assessment, and those of Sir A Donald and Mr Galsworthy,

off Chinese motives.

Redacted under FOI Exemption Sec 23

5.

Whatever the interpretation this may be a deadlock which

can only be resolved at the highest level. We we must be

ready to take the Chinese to the brink making it clear that if they stick to their present demands (on the question of guarantees as well as of the sums involved) it will not be possible for the airport project to proceed, with all the consequential damage both to business confidence in Hong Kong

and to our own bilateral relations. I tend to agree that the

first step should be an instruction to Sir Alan Donald to

convey to the Chinese deep Ministerial concern in London (see

MIFT for possible language). In the light of the Chinese

response we would consider whether a personal message from the Secretary of State might be advisable. Unless these approaches shift the logjam however we must expect the

Secretary of State to have to speak bluntly to the Chinese

when he reaches Peking. In the event of failure I am sure

that he would wish to spell out clearly to the press what had happened and why.

6.

The logic of this is that while we would seek to use

the imminence of the visit as a lever over the Chinese, we

should