The Downing Street Years
Page 65
All of these elements were present in my dealings with and visits to the Far East, the Middle East and Africa. In these regions — in the last case a whole continent — the struggle between East and West was being waged by influence and by arms. But in each that contest also worked upon other issues particular to the region.
In the Far East, the dominant long-term questions concerned the future role and development of a political and military super-power, the People’s Republic of China, and an economic super-power, Japan; though for Britain, it was the future of Hong Kong which had to take precedence over everything else.
In the Middle East, it was the Iran-Iraq War, with its undercurrent of destabilizing Muslim fundamentalism, which cost most lives and threatened most economic harm. But I always felt that the Arab-Israeli dispute was of even more abiding importance. For it was this which time and again prevented the emergence — at least until the Gulf War — of a solid bloc of more or less self-confident pro-western Arab states, no longer having to look over their shoulders at what their critics would make of the plight of the landless Palestinians.
Finally, in Africa — where, as in the Middle East, Britain was not just another player in the great game, but a country with historic links and a distinct, if not always favourable, image — it was the future of South Africa which dominated all discussion. For reasons which will become clear, no one had a better opportunity — or a more thankless task — than I did in resolving an issue which had poisoned the West’s relations with black Africa, left isolated the most advanced economic power in that continent and been used, incidentally, to justify more hypocrisy and hyperbole than I heard on any other subject.
THE FAR EAST
Hong Kong
My visit to China in September 1982 and my talks with Zhao Ziyang and Deng Xiaoping had had three beneficial effects.* First, confidence in Hong Kong about the future had been restored. Second, I now had a very clear idea of what the Chinese would and would not accept. Third, we had a form of words which both we and the Chinese could use about the future of Hong Kong which would provide a basis for continuing discussion between us. But there was a real risk that each of these gains would be transitory. Confidence in the colony was fragile. It was by no means clear how we could persuade the Chinese to be more forthcoming with their assurances. And — what I found most worrying — the Chinese proved very reluctant to get on with the talks which I had envisaged when I left Peking. For months nothing happened. I asked the advice of that old China hand, Henry Kissinger: his response was ‘don’t worry — that’s just their way.’ But I was worried and became more so as time passed.
On the morning of Friday 28 January 1983 I held a meeting with ministers, officials and the Governor of Hong Kong to review the position. We had learnt that in June the Chinese were proposing unilaterally to announce their own plan for Hong Kong’s future. We were all agreed that we must try to prevent this happening. I myself had been doing some fundamental rethinking about our objectives. I proposed that in the absence of progress in the talks we should now develop the democratic structure in Hong Kong as though it were our aim to achieve independence or self-government within a short period, as we had done with Singapore. This would involve building up a more Chinese government and administration in Hong Kong, with the Chinese members increasingly taking their own decisions and with Britain in an increasingly subordinate position. We might also consider using referenda as an accepted institution there. Since then legislative elections have demonstrated a strong appetite for democracy among the Hong Kong Chinese, to which the Government has had to respond. At that time, however, nobody else seemed much attracted by my ideas: and in the end I had reluctantly to concede that since the Chinese would not accept such an approach it was not then worth studying further. But I could not just leave things as they were, so in March 1983 I sent a private letter to Zhao Ziyang which broke the deadlock and got Anglo-Chinese talks off the ground again. This went marginally further than I had in Peking. There I had told Mr Deng that I would be prepared to consider making recommendations to Parliament about Hong Kong’s sovereignty if suitable arrangements could be made to preserve its stability and prosperity. I now subtly strengthened the formulation:
Provided that agreement could be reached between the British and Chinese Government on administrative arrangements for Hong Kong which would guarantee the future prosperity and stability of Hong Kong, and would be acceptable to the British Parliament and to the people of Hong Kong as well as to the Chinese Government, I would be prepared to recommend to Parliament that sovereignty over the whole of Hong Kong should revert to China, [my italics]
Geoffrey Howe and the Foreign Office wanted to go further: they argued strongly that I should concede early in the talks that British administration would not continue. I saw no reason to make such a concession. I wanted to use every bargaining card we had to maximum effect. Just how few such cards there were, however, quickly became apparent.
There were three rounds of talks over the summer in which no progress was made. When we took stock of the situation at a meeting on Monday 5 September it was clear that the talks would break down when they resumed on 22 September unless we conceded administration as well as sovereignty to the Chinese. One particular problem was that the timing of the talks was publicly known and it had become the practice at the end of each session to announce the date of the next. If the Chinese decided to hold up progress or break off altogether it would immediately become apparent and damage would be done to confidence in Hong Kong.
This is indeed what happened after the 22–23 September talks. Intensified Chinese propaganda and anxiety at the absence of any reassuring element in the official communiqué caused a massive capital flight out of the Hong Kong dollar and a sharp fall in its value on the foreign exchanges.
Early on Sunday morning, 25 September, I received a telephone call from Alan Walters, who was then in Washington and had been unable to track down either Nigel Lawson or the Governor of the Bank of England. Alan was convinced that the only way to prevent a complete collapse of the currency and all the serious political consequences that entailed was to restore the currency board system — backing the Hong Kong dollar at a par value with the United States dollar. (The Hong Kong Government’s reserves were big enough to make this possible.) Although I was largely convinced by Alan’s arguments and accepted the urgent need for action, I still had some concerns — mainly whether our exchange reserves would be put at risk. But I informed the Treasury of what I considered was a dangerous crisis that needed immediate defusing, and they got in touch with Nigel and the Governor of the Bank. The following Tuesday I met Nigel, the Governor and Alan at the Washington embassy. Although Nigel was at first reluctant and the Governor had reservations, they eventually agreed with me that a restoration of the currency board was the only solution. As always this news soon leaked out to financial markets, confidence was restored and the crisis of the Hong Kong dollar was over. We sealed it later on 16 October 1983 by fixing the Hong Kong dollar at an exchange rate of 7.80 Hong Kong dollars for a US dollar. The financial press thought it was ‘an unalloyed success’. And so time has proved it to be.
But it was also necessary to see that Anglo-Chinese talks began again. On 14 October I sent a further message to Zhao Ziyang expressing our willingness to explore Chinese ideas for the future of Hong Kong and holding out the possibility of a settlement on those lines. I had by now reluctantly decided that we would have to concede not just sovereignty but administration to the Chinese. On 19 October the talks were accordingly resumed.
I hoped that by pointing out in my message those aspects of the Chinese negotiating position which might conceivably lead to as much autonomy for and as little change in the way of life of the people of Hong Kong as possible, we might make some progress. In November I authorized that working papers on the legal system, financial system and external economic relations of Hong Kong be handed over to the Chinese. But their position hardened. They now made
it clear that they were not prepared to sign a treaty with us at all but rather to declare ‘policy objectives’ for Hong Kong themselves. By now I had abandoned any hope of turning Hong Kong into a self-governing territory. The overriding objective had to be to avoid a breakdown in the negotiations, so I authorized our ambassador in Peking to spell out more clearly the implications of my 14 October letter: that we envisaged no link of authority or accountability between Britain and Hong Kong after 1997. But I felt depressed.
At this time I received further advice from someone whose experience in dealing with the Chinese I knew to be unequalled. At the Commonwealth Heads of Government Meeting (CHOGM) in New Delhi I discussed our problems in dealing with the Chinese with Lee Kuan Yew, the Prime Minister of Singapore. Unfortunately, the discussion was interrupted on several occasions and Mr Lee telephoned through to me his full advice later. This was that we should send a very senior minister or emissary to convey our proposals at the highest possible level of the Chinese Government. It was crucial, he said, that we should adopt the right attitude — neither defiant nor submissive, but calm and friendly. We should say clearly that the fact was that if China did not wish Hong Kong to survive, nothing would allow it to do so. This, of course, was precisely the point that Deng Xiaoping had put to me in September 1982. I had managed then to persuade him that there was an international price to be paid if he simply took over without any regard for the prosperity and system of Hong Kong. But I now had to accept that China’s concern for its international good name would allow us only so much latitude. Mr Lee’s advice therefore confirmed me in the course upon which I had decided the previous month. The question remained: what would be the basis of the Chinese administration? From now on we must concentrate on the questions of autonomy and preservation of the existing legal, economic and social system after 1997.
Whatever concessions we had to make, I was determined that the representatives of the people of Hong Kong — the ‘unofficial’ members of the Hong Kong Executive Council (EXCO) — should be consulted at each crucial stage. Geoffrey Howe and I met them on the morning of Monday 16 January 1984 at Downing Street. As always, I was struck by their common sense and realism about the highly unpalatable options they knew we had to consider. They basically shared our objective, which was the highest degree of autonomy for Hong Kong we could get backed by the best possible Chinese assurances. After this meeting I began to think hard about how best we could give undertakings of a right of entry to the United Kingdom to those in Hong Kong who would be putting themselves and their families at risk through sensitive work for the Hong Kong Government in the period up to 1997. When I discussed the matter with ministers and officials in July I said that we should err on the side of generosity. It must never be said that the United Kingdom repaid loyalty with disloyalty.
The single most difficult issue which we now faced in negotiations with the Chinese was the location of the ‘Joint Liaison Group’ which would be established after the planned Anglo-Chinese Agreement had been signed to make provision for the transition. I was worried that during the transition this body would become an alternative power centre to the Governor or, worse, that it would create the impression of some kind of Anglo-Chinese ‘Condominium’ which would have destroyed confidence. But I also insisted that it should continue for three years after 1997 so as to maintain confidence after the handover of administration had taken place. I wrote to Mr Zhao to this effect.
Geoffrey Howe had visited Peking in April and now returned in July, accompanied by Sir Percy Cradock, and successfully reached a compromise on the Joint Liaison Group, which would not operate in Hong Kong before 1988. Geoffrey’s patient negotiations eventually secured agreement. It was no triumph: but nor could it be, considering the fact that we were dealing with an intransigent and overwhelmingly superior power.
The terms had three main advantages. First, they constituted what would be an unequivocally binding international agreement. Second, they were sufficiently clear and detailed about what would happen in Hong Kong after 1997 to command the confidence of the people of Hong Kong. Third, there was a provision that the terms of the proposed Anglo-Chinese Agreement would be stipulated in the Basic Law to be passed by Chinese People’s Congress: this would in effect be the constitution of Hong Kong after 1997.
Geoffrey was always good at the actual process of negotiation, though we sometimes fell out as to what was possible as a result of negotiations. In this case, though, he had shown an impressive grasp of the issues throughout; moreover, his meeting with Mr Deng was highly effective in reassuring the Chinese that we were to be trusted and so paving the way for me to return to Peking to sign the Joint Agreement. I congratulated Geoffrey in Cabinet on his return — and I meant every word.
My visit to China in December to sign the Joint Agreement on Hong Kong was a much less tense occasion than my visit two years earlier. The difficult negotiations were already concluded. We had won the support, with some reservations, of the Unofficial Members of EXCO for the agreement. I had explained its contents to President Reagan and won American support as well. The main purpose, therefore, of my talks in Peking must be to strengthen the trust which the Chinese had in our good faith as regards the management of the transition till 1997 and to reinforce in every way possible their sense of obligation to carry through the agreement.
I arrived in Peking on the evening of Tuesday 18 December. The official welcoming ceremony was at 9 o’clock the following morning: at it I reviewed a Guard of Honour in Tiananmen Square, where less than five years later the massacre of protesters took place which would suddenly throw doubt on the carefully negotiated agreement I was here to conclude.
The rest of the morning was spent in some two and a half hours of talks with Prime Minister Zhao Ziyang. The mood was friendly and relaxed: but it was clear to me that the Chinese were as concerned about the transitional period as I was. They wanted to maintain stability and prosperity: but they had their own ideas about how this should be done. I emphasized that it all came down to the drafting of the Basic Law. It must be suited to the capitalist system and consistent with the Hong Kong legal system. I stressed how important it was that China had expressed willingness to solicit opinions from a wide range of people within Hong Kong. I then broached what I knew would be an even more sensitive topic. I said that the Chinese would be aware of our proposals for the constitutional development of Hong Kong — essentially strengthening in a modest way democracy and autonomy, though I was careful not to use these words. Mr Zhao answered that the Chinese Government was not prepared to make any comment on constitutional development in the transitional period. In principle, the Chinese too wanted more Hong Kong people involved in the administration. But that process must not adversely affect stability and prosperity or the smooth transfer of government in 1997. I left it at that; it was as far as I felt it was prudent to go at this meeting.
In the afternoon I talked to the Chinese Communist Party General Secretary, Hu Yaobang, whose influence I had been told was greater than some outside observers thought. I had earlier met the diminutive Mr Hu when he visited London. He was widely considered — perhaps too widely for his own interests as it turned out — to be Deng Xiaoping’s preferred successor and was known as a reformist. I had said quite openly to him in London that many of us hoped that those like him who had lived through the Cultural Revolution would bring a new approach to China’s affairs. He went on to tell me, with tears in his eyes, about the suffering he personally had endured at this time. It would be nice to believe that he could understand at least some of my worries about Hong Kong’s future: but perhaps human nature is not quite that simple.
I then went on to the crucial meeting with Deng Xiaoping. The most important immediate guarantee of Hong Kong’s future was Mr Deng’s goodwill. I told him that the ‘stroke of genius’ in the negotiations had been his concept of ‘one country, two systems’. He, with becoming modesty, attributed the credit for this to Marxist historical dialectics, or to use
what appeared to be the appropriate slogan, ’seeking truth from the facts’. Apparently, the concept of ‘one country, two systems’ had been devised originally from Chinese proposals of 1980 for dealing with Taiwan. (In fact, it proved a good deal more appropriate for Hong Kong: the Taiwanese attitude was clearly ‘one country, one system — ours’ — and given their economic success and their move to democracy, I can see their point.)
The Chinese had set out in the agreement a fifty-year period after 1997 for its duration. I was intrigued by this and asked why fifty years. Mr Deng said that China hoped to approach the economic level of advanced countries by the end of that time. If China wanted to develop herself, she had to be open to the outside world for the whole of that period. The maintenance of Hong Kong’s stability and prosperity accorded with China’s interest in modernizing its economy. This did not mean that in fifty years China would be a capitalist country. Far from it. He said that the one billion Chinese on the mainland would pursue socialism firmly. If Taiwan and Hong Kong practised capitalism that would not affect the socialist orientation of the bulk of the country. Indeed the practice of capitalism in some small areas would benefit socialism. (Since then, it has become clear that Chinese socialism is whatever the Chinese Government does; and what it has been doing amounts to a thorough-going embrace of capitalism. In economic policy, at least, Mr Deng has indeed sought truth from facts.)
I found his analysis basically reassuring, if not persuasive. It was reassuring because it suggested that the Chinese would for their own self-interest seek to keep Hong Kong prosperous. It was unpersuasive for quite different reasons. The Chinese belief that the benefits of a liberal economic system can be had without a liberal political system seems to me false in the long term. Of course, culture and character affect the way in which economic and political systems work in particular countries. The crackdown after the Tiananmen Square massacre in June 1989 convinced many outside observers that in China political and economic liberty were not interdependent. Certainly, after those terrible events we reassessed what needed to be done to secure Hong Kong’s future. I was reinforced in my determination to honour Britain’s obligations to those on whom British administration and Hong Kong’s prosperity depended up to 1997. In any case, I always felt Britain would benefit economically from talented, entrepreneurial Hong Kong people coming here.