CONFIDENTIAL
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6.
1
We fully recognise that the Chinese side may well take the view that HKG cannot represent the future HKSARG in any negotiations with the UK as the current sovereign
power.
We also recognise that the difficulty in this respect would be particularly acute in the case of an Air Services Agreement (ASA) where the problem would not be the ASA itself but the underlying commercial' deal set out in the Confidential Memorandum of Understanding. We accept that there may be a case for a different approach here. However, in the first instance, we believe we must at least try for a solution that will place Hong Kong in as good a position vis a vis the UK after 30 June 1997 as other States, and vice versa.
7.
Chinese objections could, in our view, be reasonably refuted by the argument that the UK does not expect a better deal than those already negotiated at arms length with other States. The Chinese side will, in any event, have an opportunity to vet such agreements before signature. Such agreements will not be signed or enter into force until 1 July 1997 but the fact (which would become known) that the UK and China have reached agreement through the JLG on the various subjects will provide a useful boost to confidence. Indeed, for the UK to seek any other solution would appear odd given our insistence that such agreements are an important ingredient for maintaining and preserving Hong Kong's prosperity and stability.
Timing
8.
We
Timing in our view needs careful thought. first need to be clear about our Own objectives. Thereafter there are some advantages in proceeding as quickly as possible, since the existence of draft agreements ready to be signed in these matters would be generally beneficial to confidence. However there are also strong arguments for postponing our approach to the Chinese. They are almost bound to take the view that HKG cannot represent Hong Kong in negotiations with the British Government.
Moreover in present circumstances they are very likely to try to use the UK's wish to have these agreements as a means of exerting leverage over us.
9.
It is possible that these risks will diminish over time. By 1995 or so the political and constitutional position will have clarified considerably: the likely shape of the future SAR administration should be a lot clearer, and it may by then be more difficult for the Chinese to claim to represent their views. Chinese need for leverage
over us may have diminished.
CONFIDENTIAL
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