The negotiations leading to the Joint Declaration

What we got was a "war of words" between the three sides. China suspected that Britain would strip Hong Kong of all its assets and return a worthless colony to China.

Indeed, rather a lot of people in Hong Kong joked, during this phase, that Britain should indeed restore Hong Kong to its original condition before returning it!

One consequence of the uncertainty was that the Princely Hong, whose role in the First Opium War was known to every Mainland schoolboy, and who suspected that they might be expropriated by the PRC, moved their corporate headquarters to Bermuda. This did indeed infuriate the Mainland, who plainly did not quite understand what the Princely Hong had done.

The Mainland started issuing threats, including mention of the water supply, and the inevitable happened - confidence in the future of Hong Kong fell dramatically and the property market and stock markets collapsed, triggering a run on the Hong Kong Dollar.

Deng Xiaopeng met with Margaret Thatcher and ordered her to deal with this. His exact words, according to her, were, "The money is going out! You must stop it!"

She replied that, under the British and Hong Kong free market systems, she had no control over the actions of businessmen - a thought that had plainly never occurred to him.

The Mainland became apoplectic - Perfidious Albion (they used far worse terms than that) was deliberately draining all the wealth from Hong Kong. The markets and the currency went into free fall.

On Black Saturday, the 24th September 1983, the HK$ collapsed, falling to HK$9.6 / US$1.

Enter Sir John Bremridge, whom we met earlier, and the Currency Board Scheme.

Read all about it:

http://www.info.gov.hk/hkma/eng/curr...k_ex/index.htm

- Bremridge's Currency Board system is the second plank in the Hong Kong Way of Doing Things that commends itself, along with Cowperthwaite's postive non-interventionism, to right-wing economists, generally, across the world.

The Currency Board system depends on Hong Kong having enough foreign exchange to back its currency completely.

The HK$ is not a "fiat currency"; but it is backed by a fiat currency - Hong Kong's money is precisely as good as US money - but, and here is the point, these days - not any better.

Bremridge did not intend his scheme to be permament, but his sucessors have not been able to find a way to get out of it, so it continues to this day.

Hong Kong's US$ reserves have continued to swell, so that today the HK$ is backed several times over by US$.

This puts the Financial Secretary in an unusual position. He never needs to borrow, but on one famous occasion, during the Asian Financial Crisis of 1997, the then Financial Secretary, Sir Donald Tsang, took action to support the Hang Seng Index by using the Reserve Fund to make massive purchases of equities.

When the stock market recovered, in due course, he sold them again and booked such a large profit that he was able to cut income and corporation tax.

Which is one reason why he became Chief Executive of the SAR, in sucession to CH Tung, but we are getting ahead of ourselves.
There was a suggestion, which I recall Martin Lee making, that Britain could return the New Territories and keep the island.

There were two snags to this idea; first, a quick poll showed that the number of people who chose to live on Hong Kong island would have roughly doubled (remember the water problem!) and second, fundamentally, as noted above, China did not accept the treaty ceding Hong Kong to Britain.

A rarer variant on the theme of "How to solve the 1997 problem", one that I subscribed to, was "Renew the lease and lease the Isle of Wight to China."

I still think that would have been the best solution. However, as my Taipan at the time, David Gledhill, remarked, "Sir John Nicholson would never have stood for it".

This was a shipping in-joke - Sir John Nicholson, ex-Chairman of the Ocean Steamship Company, was, at the time, Lord Lieutenant of the Isle of Wight, and no doubt a significant donor to Conservative Party funds - containing a truth.

In real terms, of course, this would have created such an outburst of NIMBYism as to be an utter non-starter.

Pity, though.
 
The return of Hong Kong to China really falls into four distinct phases:

1. The initial contacts, leading to

2. The Joint Declaration and the drafting of the Basic Law

3. The "4th June 1989 events" and the "Rose Garden" (it's not a rose garden, it's an airport)

4. The Governorship of Chris Patten and the issue of democracy in Hong Kong.

Looking back, the only point at which Britain and China were singing from the same sheet was (2) - the gulf between the two parties at each of the other stages was huge.

As to the man on the Kowloon omnibus, he was never allowed to state his opinion, but, at point (4) in this process, he became a Politcal Animal.

The first stage really concluded with Deng Xiaopeng coming up with the "One country, two sytems" formula, in 1984. This solved a lot of problems, but it was really aimed at luring Taiwan into the loop.

Macao, unlike Hong Kong, had been overrun by Red Guards in 1967 but had been dismissively handed back to Portugal to "administer on behalf of the People's republic until further notice".

It was now clear that Hong Kong would revert to China in 1997; but the thought occurred to Deng that if Hong Kong were re-integrated smoothly, Taiwan might be persuaded to do likewise. Hence the "One Country: two systems" formula.

This was a trump card, not in Britain's hand, but in Hong Kong's - the People's Republic had decided that their interests lay in keeping Hong Kong sweet in order to persuade Taiwan.

Furthermore, this was a card that Hong Kong could continue to play, to some extent, after the 1st July 1997.

The announcement of the Joint Declaration, in 1984, came very soon after the British Nationality Act of 1981: not to put too fine a point on it, until then, citizens of a British colony were British citizens. The realisation that Britain might see six million Chinese citizens arriving with the return of Hong Kong spooked the Thatcher government, and the right of abode in the UK was withdrawn from British Dependent Territories Citizens well before the handover negotiatons cranked up...
 
I have nicked this calendar of events from Wikipedia; it shows signs of having been composed or edited by a native Chinese speaker with an acute awareness of the Mainland position:
 
24 March 1979
Hong Kong Governor Sir Murray MacLehose was invited to visit Guangzhou and Beijing to find out the attitude of the Chinese government on the issue of Hong Kong.

29 March 1979
Sir Murray MacLehose met the then vice Premier Deng Xiaoping and raised the issue of Hong Kong for the first time. Deng remarked that the investors could set their minds at peace.

4 April 1979
The Kowloon-Canton through-train routes were restored after 30 years of non-service.

3 May 1979
The Conservative Party won the U.K. Election.

29 October 1979
Premier Hua Guofeng visited Britain and had a meeting with Margaret Thatcher. Both of them expressed their concern to maintain the stability and prosperity of Hong Kong.

12 May 1980
Tabled by the Conservative Party in the British government, a new status "British Dependent Territories Citizens" was introduced. This status proposal was widely opposed by Hong Kong people.

3 April 1981
Lord Carrington met Deng Xiaoping in his visit to Beijing.

30 September 1981
Chairman of the NPC Ye Jianying issued nine guiding principles concerning a peaceful reunification of Taiwan and mainland China.

30 October 1981
The House of Commons passed the new British Nationality Act.

Nov 1981The Beijing government invited some Hong Kong citizens to help organising a united front in the handling of the Hong Kong issue.6 January

1982 Chinese Prime Minister Zhao Ziyang received Humphrey Atkins
Zhao insisted that the PRC would uphold her sovereignty over Hong Kong.

10 March 1982
Vice Premier Gu Mu received Sir John Bremridg,e promising to maintain Hong Kong's stability and prosperity.

6 April 1982
Deng Xiaoping revealed his wish to have official contact with the British government.

8 May 1982
Sir Edward Youde arrived as the 26th Governor of Hong Kong.

May 1982
Deng Xiaoping and Zhao Ziyang collected advice from Hong Kong notables

15 June 1982
Deng Xiaoping officially announced the position of the Chinese government in the context of the Hong Kong 97 Issue, marking the first public statement on part of the PRC with regards to the issue.
 
The next step was Thatcher's visit to China, where she and Deng met and disagreed with each other. Thatcher maintained that any discussion could only be on the basis of the treaties; Deng maintained that the treaties had been forced on the Qing at gunpoint and were unequal and therefore invalid.

The stage was set for a first class misunderstanding and a very public disagreement, which is just what happened. Thatcher appealed to Kissinger to intervene but he failed. Heath (see above) did rather better, but obtained from Deng the assurance quoted above that force would be used if there were any more trouble from the British,

At this point Sir Edward Youde added fuel to the fire by announcing that he would represent the people of Hong Kong at any talks - this infuriated the Mainland who suspected him of playing the democracy card. At the same time it delighted the people of Hong Kong, who suspected him of the very same thing. 

Youde went to London for meetings with Thatcher; the real weakness of the British position became apparent to her whilst at the same time he was able to get her interested in the concerns of the Hong Kong people.

Meanwhile, in China, the NPC had amended the Constitution to allow the creation of Special Administrative Regions - the "one country two systems" idea.

Evidently, the crash of the Hong Kong economy following the war of words had alarmed them far more than anything that Thatcher had said - they could see that maintaining confidence in Hong Kong was going to be vital, and they could not see how to do it within the Chinese state system.

The British concluded that there was no alternative to negotiating on this basis.

Talks started.

Once started, they proceeded rapidly, and led to the Sino-British Joint Declaration.

Hong Kong would become a Special Administrative Region and would retain its capitalist system and way of life for fifty years after the handover. The details would be set out in a Basic Law (nobody wanted to use the word "Constitution" for what would be a part of the People's Republic).

Comments

Thanks for posting this! I love it! About 20 years ago I attended a lecture in Hong Kong by a man who had written a book about the then-upcoming handover. I swore he said that during the negotiations with Thatcher, she at one point recommended keeping HK Island and returning the rest to China. Is that true?

I heard this said at the time. My informant certainly knew Sir David Wilson pretty well, so it may well come from the top, so to speak. It was a "logical" position for anyone who did not in fact know Hong Kong to take up if that person thought, as the non-specialists in the British Government did, that the negotiations were "about the lease". So far as China was concerned the negotiations were not "about the lease" but "about the unequal treaties", but in any case there was the water issue and the harbour could not really function if it were also a border, not to mention almost the entire population of Kowloon and the NT wanting to move onto the island.

Mrs Thatcher seems not to have been alone in wanting to keep the island; at the time, I heard that this was also proposed by Martin Lee, no less.  

great website. My father was the interpreter for the British delegation and was the only chinese person on the British team. He never talked about his experiences during the negotiations but I do know the British were not kind to him after the event and he was forced to leave Hong Kong for 10 years after the conclusion of the talks. He's now incapacitated and it's too late to get anything meaningful from him. A big regret.