CONFIDENTIAL
135524
MDHQAN 5339
MFN would be disastrous for Hong Kong (it could mean the loss of up to 50,000 jobs and a reduction of 1.5 percent in GDP growth). So Ministers and the Governor will be lobbying for renewal of MFN preferably without conditions. The possibility of Losing MFN status may of course act as a constraint on Chinese behaviour towards Hong Kong. But we would not favour making Chinese behaviour over Hong Kong a condition for MFN renewal.
the Singaporeans need look no further for an explanation of our policy than the wish of the people of Hong Kong (expressed for example in the way they voted during the 1991 LegCo elections) for a greater say in the running of their own affairs. We and the Governor had to respond to those wishes. The Basic Law does not lay down electoral arrangements for the LegCo which would make the transition in 1997 under the "through train" concept. So the Governor had to make proposals.
the substance of those proposals adds up to a modest extension of democracy. The Governor avoided doing things which the Chinese had said in advance were unacceptable to them (putting Martin Lee on to ExCo, unilaterally increasing the number of directly elected LegCo seats). They are carefully within the terms of the Joint Declaration and the Basic Law (the distinction drawn by Lee Kuan Yew in para 6 of your second TUR is
not accurate).
the Governor has been criticised by some for not consulting the Chinese before announcing his proposals. But it would not have been politically possible to have spent months in secret negotiations with the Chinese about electoral arrangements before telling Hong Kong people what the Governor had in mind.
the Governor's proposals are not set in concrete. If others have alternative ideas, he and we will consider them provided that they would also result in elections which were fair, open and supported by the people of Hong Kong.
as for how the relationship with China will develop, you were right to say that we want to see a return to calm discussion in a effort to narrow differences. At present, the Chinese seem to be putting all their efforts into a campaign of intimidation of the Hong Kong people : their
their deliberate efforts to talk down the market,
their other moves to unsettle the business community and their pressure on members of LegCo are all part of this. Their
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