TNAG-2451-FCO40-3568-Future-of-Hong-Kong-constitutional-development-1992 — Page 57

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a sustained campaign of intimidation against LegCo

members. We have already seen evidence of crude threats

involving members' business interests in China, and their

hopes for preferment in Hong Kong post-1997;

-

a similar effort to frighten members of the business

community.

quarter;

We have already heard the first jitters from that

a continuing refusal to agree financing arrangements for the new airport;

a freeze on progress in the Joint Liaison Group.

But the Chinese also need to weigh up their own significant economic interests in Hong Kong. I very much doubt that they will disrupt trade or financial links with

Southern China, or turn to the more extreme forms of pressure

such as interference with supplies across the border. They

also seem to be ready so far to let Sino/ British contacts in

other areas continue largely unaffected. But we do not know

how long this will last.

The immediate issue is whether support for the Governor's package will hold up in Hong Kong under this Chinese onslaught. At present, the Hong Kong Government consider that

they can count on the firm support of about half of LegCo. It will be very helpful to have the Governor's assessment on 18

November. So far the markets are resilient (suggesting that

investors are taking a long term view of the potential of Hong

Kong and Southern China). But the Chinese have many forms of

economic and political blackmail at their disposal. Members

of the conservative pro-business grouping in LegCo are already

backing away from support for the Governor's proposals.

Chinese officials have threatened that if these are

implemented unchanged, China will begin to make arrangements

for establishing the Legislature, Administration and Judiciary

on a new basis after 1997. This may be bluff, but we cannot

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