TNAG-2732-FCO40-3938-Future-of-Hong-Kong-constitutional-development-1993 — Page 76

SECRET

the spectrum of possible outcomes, and would be satisfactory for us, particularly if coupled with a return to cooperation on other issues. But it is probably only attainable if LegCo watered down the Governor's proposals to the point where they

met most Chinese demands. The outcome would then

probably be very difficult for us to justify as meeting our objectives of free and fair

elections.

They could decide to confine the dispute with

us to electoral issues, and therefore to hold new

LegCo elections in 1997, but allow cooperation to

resume in other areas. The Chinese have an

interest in a degree of cooperation with us eg

particularly in the economic/financial areas,

both to keep influence over our decisions pre-1997, and to protect their economic stake in Hong Kong. It is not the way they have chosen to

conduct the dispute so far: they have already

spread it to include most aspects of our dealings on Hong Kong and (recently) the commercial relationship with the UK. The tone of the NPC was strongly nationalistic on Hong Kong, and this will have made it harder for Chinese officials to

unblock other aspects of the relationship, in the

absence of a satisfactory settlement on democracy. They would probably seek a high price

for doing so, including a tighter grip on

pre-1997 decisions over such issues as the airport, and contracts and franchises. And they

would have to decide whether to boycott/disrupt

the 1995 elections, or encourage their allies to

participate.

HongKongissuesahead/BRIEFS/NJH

SECRET