TNAG-2914-FCO40-4189-International-support-from-the-USA-regarding-the-future-of-H-1993 — Page 37

CONFIDENTIAL

thereafter. This was in response to pressure from Congress to use MFN as a lever on China to improve her human rights record. The conditions for renewal are limited to requiring China to make significant progress over human rights. However, there was also pressure on the President to use MFN to address concerns about China's arms proliferation activities and trade surplus. The Administration said it would use other instruments at its disposal eg legislation on missile sanctions, GATT etc. to address these concerns.

5.

Revoking MFN would severely damage Hong Kong's economy as over 70% of Chinese exports to the US pass through Hong Kong. It could cause the loss of up to 70,000 Hong Kong jobs and halve GDP growth.

US SANCTIONS ON CHINA

6.

The United States has decided to impose category II sanctions against China (and Pakistan) because of alleged missile transfers (M11 missiles) between the two countries. The Americans here told us that they believe this will have no significant impact on Hong Kong, but this could change if they are upgraded to category Í sanctions (which might impact on eg Chinese exports of domestic electronic goods via Hong Kong) at some time in the future.

bgrnd.sosvis.NAT

JEB

CONFIDENTIAL