CONFIDENTIAL
Senior Representative to the Joint Liaison Group have unanimously advised that the Chinese would react very negatively to a proposal that HKG should capitalise HMOCS pensions and transfer the funds to us before 1997; and that even to raise the idea with them would be dangerous to our wider interests. (In the worst situation it could lead to the Chinese seeking to re-open the provisions of the Joint Declaration in which they guarantee continuity of public service, salaries, pensions etc after 1997.) This advice from David Wilson, Robin McLaren and Tony Galsworthy draws on years of negotiating with the Chinese and on close
personal involvement in the discussions in which the Chinese
have raised Hong Kong civil service pensions. I back their judgement.
6.
However, as indicated in my minute of 26 February I am content that we should take no final decision about HMG funding of the sterling safeguards until the private sector approach you mention (Option (d) in the paper) has been fully explored. I am glad that our officials continue to work on this and had a useful meeting with Barings on
6 March.
Compensation
1.
As for what Malcolm Caithness could say in Hong Kong last week, we were grateful for the revised draft statement enclosed with your letter. However we saw difficulties in Hong Kong terms with the revised formulation of paragraph 5 on pensions questions (sterling safeguards and SPOS). Malcolm Caithness therefore concluded that the option at the end of paragraph 6 of your letter was the best one, ie that he should say nothing about pensions at this stage and confine his announcement to a low-key statement of our intention to open consultations on the
compensation/incentive scheme (ie the last two sentences of
JIFABG/3
CONFIDENTIAL
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