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China's interests. The assessment of their interests in paragraphs 6 and 7 above leads to the conclusion that they are unlikely to try to recover the Colony in the 1980s either by quick forcible takeover or by negotiation; and if the continuation of special arrangements would be in their interests, they may well be able to find a formula to overcome the pressure imposed by the 1997 date.
13. But from our point of view it will become increasingly desirable to have at least an implicit understanding and preferably a clear-cut agreement with China about the future of the Colony. Both investors and the population at large will almost certainly begin to question their future with increasing insistence as 1997 approaches. The dangers of a declining economy and an increasingly ungovernable society seem obvious. A crucial difficulty for the timing of an approach to China is that meaningful discussion presupposes the existence of an ordered, well-established Government in Peking. It seemed likely that the
present Chinese leadership had reached agreement on the handling of the succession to Mao Tse-tung and Chou En-lai but the unexpected appointment of Hua Kuo-feng as Acting Prime Minister demonstrates the uncertainties which are likely to continue at least until Mao's death and probably beyond; and there remains the question of whether the successor Government can impose itself on China as a whole which may well not be apparent for some years. We will also need time to assess its political stability and the character of its policies both internal and external (not least towards Taiwan) before we can determine the best negotiating
posture. These considerations point to negotiations in the mid- 19808; but obviously the question will need to be kept under constant review in the light of the evolving situation in China and in the Colony. Delay is not without risk eg of a crisis in the Colony as a result of instability in China similar to 1967; but our experience of events then provides us with some guide as to the signs of approaching trouble and we need not be as unprepared (Annex A). And delay has advantages in permitting the possible evolution of a less harsh and idiosyncratic regime in China and a rising standard of living if the economy continues to develop as at present.
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