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Unformatted text preview: Spring 2004 L7 Lecture 7
The Sino-British Negotiations over Hong Kong
(A) Background The Three Unequal Treaties
-- 1842 Treaty of Nanking ceded Hong Kong Island
-- 1860 Convention of Peking ceded Kowloon Peninsula
-- 1898 Convention of Peking leased North Kowloon and the New Territories. The PRC has never recognized the validity of these three treaties, but for strategic
reasons China did not want to take back Hong Kong after 1949. Hong Kong served
as a window that opened to the West, in terms of goods, people and information.
From the 50s to the 70s, when China was isolated from the international world,
Hong Kong was an important information center for China, and center for
smuggling and re-export in and out of China.
The official policy of PRC on Hong Kong was “make a long-term plan and make
full use of HK”(長期打算，充份利用) (B) The Path to Negotiations Britain was tempted to invite China to start negotiations on Hong Kong future in
early 1980s for several reasons:
The beginning of the Chinese reform era in 1978-- a more rational govt in
China. The emphasis on economic development by China also means that HK
is going to be more important for China’s development.
(2) In late 70s, there was increasing concern about the end of the lease of New
Territories and North Kowloon among investors in Hong Kong, in particular
about the status of landed property. The British govt. concluded that
confidence would erode quickly in the early to mid-1980s if nothing was done
to reduce the uncertainty caused by the 1997 deadline. Governor MacLehose (麥理浩) visited China in 1979. Deng Xiaoping (鄧小平)
told MacLehose that China had to take back (the whole) HK, and a negotiated
settlement should be made. MacLehose did not tell this when he returned from
China, but told the investors “to set their hearts at ease.” --投資者請放心. Britain
then began to prepare for a negotiation and began to push democratization in HK. In 1981-2, rumours began to spread that China was going to take back Hong Kong
very soon. The property market and the stock market deflated sharply in 1982. In
July 1981, the Hang Seng Index was at 1810, it was 1470 by the end of 1981, and
960 at August 1982. The British felt they had to do something. 1 Spring 2004 L7 The Falklands (Malvinas) Wars (福克蘭群島戰爭) of 1982 distorted the
perspectives of British Prime Minister Margaret Thatcher (戴卓爾夫人), who
thought that she could keep HK as she did over the Falklands. She visited China in
September 1982, trying to extend British rule over HK after 1997. (C) Interests of both Sides
Britain HK's prosperity has been providing much benefit for British firms. Big firms like
Swire, Jardine, Cable and Wireness made a lot of profit every year. British consultant
firms took a lot of jobs in HK every year. The annual surpluses of Hong Kong were
put in the Foreign Reserve Fund in London, which played a major role in supporting
the Pound in the 70s. Even if Britain was to leave Hong Kong, they wanted to leave gloriously. There was
international pressure as to how Britain could hand 6 million people to a communist
country. They wanted the last imperial retreat to be done in a dignified manner.
China HK as a free port, thriving and capitalist, has been serving the interests of Beijing. It
served as a window to the West, supplying the necessary commodities to China, and
a re-export center. The economic value of HK became more important after China's
open-door policy. HK can bring in capital, information, technology, management
techniques and other services. China did not want the repatriation process to frighten
investors and hurt the prosperity of HK. Recovering HK is important for national dignity in the eyes of the Chinese leaders.
Deng thus rejected all kinds of proposals that extended British governance—not be
the “second Lee Hung-cheung”(李鴻章) Hong Kong can also serve as a showcase for future unification with Taiwan. Thus it
is important to maintain the stability, prosperity, and liberty of HK to lure Taiwan
into a similar kind of agreement. Both sides had a common interest in preserving Hong Kong as a capitalist, free
and prosperous city. The difference is who should be in control and in what
form. 2 Spring 2004 L7 (D) A Game of Chicken
Both sides had the same preference orders:
(1) The worst case is that both sides refused to cooperate, and the economy of HK
collapsed because of that. Both sides gained nothing.
(2) The best case for both sides is gaining full control of Hong Kong, with the other side
backing down, while at the same time keeping the prosperity and stability of HK.
(3) The second best for both sides is mutual cooperation, with both sides sharing control
of HK and sharing the spoils. HK can keep stability and prosperity, and both sides
can benefit from that.
(4) The second worst for both sides is to capitulate in favor of the other side, and let the
other side have control of HK. This option may keep the stability and prosperity of
HK, thus is still better than option (1), a mutual non-compromise leading to a collapse
The best strategy of winning a game of Chicken is to throw the steering wheel out of
the window, put on cruise control, and climb into the backseat.
Payoffs in the Game of Chicken
C D 3, 3 2, 4 4, 2 1, 1 C
D (E) The Course of the Negotiations
Phase 1: The talks before talks When Thatcher went to Beijing in September 1982, her position was that the three
Treaties were valid, but could be changed by mutual agreement. She argued that
Hong Kong Island and South Kowloon had been ceded to Britain, and they wanted
to extend the lease of North Kowloon and the New Territories. 3 Spring 2004 L7 China’s position was that the sovereignty of China over HK must be recognized
before any formal negotiations could start. Chinese Premier Zhao Ziyang (趙紫陽)
told Thatcher openly that China must take back HK. Both sides had no agreement over the sovereignty issue in the negotiation. After the
Beijing visit, Thatcher still insisted that the three treaties were valid. Both sides
were deadlocked over the sovereignty issue. The Chinese govt, through NCNA (新華社) and the pro-PRC press in Hong Kong,
started a public opinion campaign on sovereignty. Groups in HK began to debate on
the issue of HK’s future and raised various proposals. The Chinese formula of “high
autonomy, HK people ruling HK” became a popular rallying point. Gradually the
pro-repatriation opinion got the upper hand. Meanwhile the stock market and
property market continued to drop. In March 1983, Thatcher gave up on the sovereignty issue. She wrote a letter to
Premier Zhao Ziyang, saying that if negotiations produced an agreement “acceptable
to the Hong Kong people”, then she “would be prepared to recommend” to
Parliament the transfer of sovereignty. Phase 2: Sovereignty vs Administration The talks, which started in July 1983, were conducted behind closed-doors, with no
representatives from Hong Kong. China objected to a “three-legged stool” (三腳凳).
HK's Governor Edward Youde (尤德) was present as a British delegate. Both sides
agreed to discuss the future administration of the whole HK territory. The British govt proposed letting them administer HK for a longer period of time-“exchange sovereignty for administration”(以主權換治權). The first 4 rounds of
talks saw both sides adopting a strong and uncompromising attitude. China insisted
that sovereignty and administration were inseparable (主權治權不可分). The HK people did not know the contents of the negotiations. All they got were two
words—useful and constructive (有益及有建設性) in the communiqué (聯合公報).
The population was getting nervous. After the third round, even these two words
were missing in the communiqué. The currency began to drop from around $6.5 HK
dollar to one USD, to $7.5 to one USD. After the 4th round in September 22-23, there was even no communiqué. There
were rumors that negotiations would break off, and China would take back HK very
soon. The whole city was panic-stricken, and the HK dollar fell to HK $9.7 to the
USD on September 24. Many people thought the currency was going to collapse,
and rushed to supermarkets to trade their notes for whatever they could find. 4 Spring 2004 L7 After the currency storm, the British govt gave in. They were convinced that “if
necessary, China would take back HK as a wasteland.” From that point on, the
negotiations were mostly based on how to put China’s blueprint into an agreement. Phase 3: China imposing its Blueprint After the 7th round, the negotiators began to work on the basis of China’s blueprint,
trying to write it into the terms of the agreement. Britain wanted a more detailed agreement, as this was considered to offer more
protection to HK. They wanted to write “high autonomy” “democracy”, and the
guarantee of a free capitalist system into the agreement. The PRC government used the deadline as a tactic. They said that if no agreement
was reached before September 1984, China would announce their own constitutional
blueprint for HK. The deadline forced the British to hurry and reached an
incomplete agreement. The ultimate agreement remains somewhat vague. The
detailed arrangements were left to the Basic Law, the drafting of which Britain had
no right to participate. (F) Effects of the Negotiation Process
(1) The politicizing effect—various groups of HK were mobilized to become more
concerned about the future of HK during the Sino-British negotiations. Among them
were the local-grown elite, including professionals like Martin Lee and grassroot
democrats. This provided the fuel for the democracy movement and party formation
in 1980s and 1990s.
(2) The Joint Declaration is an incomplete agreement. Some of the terms in the JD
remain vague. The details were left to the Basic Law which the British had no power
to control. There was a lot of room for re-interpretation by China and re-negotiation.
This laid the seeds for future conflicts and negotiations between Britain and China,
and between HK and China. (e.g., the Court of Final Appeal).
(3) The promise for full election of the legislature, and the “election” of the Chief
Executive triggered a decade-long bargaining about the composition of the legislature
and the degree of democracy in HK before and after 1997.
(4) The “50 year unchanged” idea led to constant conflicts in the transitional era,
whenever the Hong Kong government tried to make “major changes.” The Chinese
government was always suspicious that Britain tried to change a lot of things before
the “unchanged 50 years” comes. (E.g. the Airport) 5 ...
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This note was uploaded on 09/16/2010 for the course SOSC SOSC198 taught by Professor Michelle during the Spring '09 term at HKUST.
- Spring '09