TNAG-2469-FCO40-3593-Most-favoured-nation-status-for-China-Hong-Kong-interests-1992 — Page 26

9 December 1992

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CONFIDENTIAL

Foreign & Commonwealth Office

London >WIA 2AH

Der Stephn

,

CHINA/HONG KONG : MFN STATUS

In your letter of 21 November recording the Prime Minister's talk with Ambassador Seitz, you asked for views on the suggestion attributed to the Governor that Chinese treatment of Hong Kong might be listed as a condition for MFN renewal.

The Governor tells us that Ambassador Seitz misreported him. He is writing to the Ambassador to say that he thinks making Hong Kong a condition for MFN would be politically maladroit. But he also thinks that concern about MFN renewal might affect how hard China pushed matters on Hong Kong.

The Foreign Secretary agrees. He and the Governor consider that the best way to bring MFN pressure to bear on China without damaging Hong Kong would be to put the case as follows to the new Administration and (discreetly) in Congress;

MFN renewal is essential for Hong Kong. Withdrawing it would be a serious economic blow to the territory, and damage the Governor's position at a time when he is fighting to maintain support for his democracy proposals;

withdrawal of MFN would also remove one of the most effective levers over Chinese behaviour towards Hong Kong. It would make it more likely that China would take extreme measures in Hong Kong, since they would then have little to lose;

so the most effective way to use the MFN card in support of the Governor would be to keep the threat of withdrawal hanging over China's head, but not actually to impose conditions which the Chinese would not meet and which therefore made withdrawal inevitable.

CONFIDENTIAL