TNAG-2472-FCO40-3599-Confidential-talks-between-the-UK-and-China-regarding-financ-1992 — Page 142

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Joint Declaration as the final arbiter in our dealings with

China. But seen from here the whole negotiation over the

Airport MOU has marked a watershed. It is not simply that the

Chinese have been able to argue that we have now moved into a

second qualitatively different phase of the transition. It is

even more relevant that as we come closer to 1997 the political

theory in the Joint Declaration (and perhaps even in the Basic

Law) is coming up against the test of hard reality in the shape

of hard-nosed financiers, bankers and Treasury officials who

want to calculate the exact risks that are being undertaken, and

who are looking for further reassurances about the attitude of

China.

6. We have already had considerable exchanges about how best to

give specific application to the Chinese commitments which we

have already secured. One has only to listen to the MTRC or the

HSBC to realise how pressing it has now become to pin the

Chinese down in a more hard and fast manner to honouring or at

least not disrupting the commitments which are now being entered

into before 1997, and which will straddle that year. I realise

only too well how difficult this is if at the same time we wish

to resist a Chinese veto over decisions taken by HKG before 1997

or any comparable Chinese involvement in the decisions taken by

the SARG after 1997.

7. There is probably not much we can do until we know the result

of the general election here in the UK. If the result is that

the Conservative Government is returned, then the policies that

we have been pursuing and the commitment entered into after the

Airport MOU will probably continue, and we can legitimately

press the Chinese to be more cooperative in the way we have been

doing so far. You will know from talking to Lord Caithness that

our present Ministers are greatly concerned about the

difficulties