Patten fights 'trench war' with Chinese

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CHRIS PATTEN, the Governor of Hong Kong, defied China and set a three-month timetable yesterday for finalising his proposals on democratic reform. As the local stock market dived in response to the latest Chinese threats, Mr Patten said he would put his plans to the territory's Legislative Council (Legco) by the end of February.

'I honestly don't believe the right way for me to respond in the present circumstances is to abandon a position which I believe to be rational,' Mr Patten told the council.

Hong Kong's business and financial sectors are trying to assess Monday night's statement from Peking that contracts, leases and agreements signed by the Hong Kong government, which are not also approved by China, will be invalid after the transfer of sovereignty in 1997. The biggest of such long-term contracts are in industries such as telecommunications, electricity and transport - in particular the planned new airport.

With a more precise timescale now for Legco members to vote on the Governor's political package, Hong Kong is facing several weeks of verbal 'trench warfare' between Mr Patten and Peking as China attempts to sway public opinion and erode support for the Governor.

Even the optimists, who believe that compromise will be reached in the end, expect a very rough ride. 'It is going to get a lot worse before it gets better,' said one businessman.

The stock market's Hang Seng index closed down nearly 309 points yesterday, which after Monday's 176-point fall means an 8 per cent drop in two days. It was the biggest daily drop since a coup attempt against Mikhail Gorbachev in 1991 wiped 8.4 per cent off the index.

China's latest move is seen as significantly raising the stakes by pinpointing commercial interests. One observer said: 'The Chinese government always tries intimidation first. Until this, most of the attacks consisted of firing blanks. We are now at a half-way house; China has stacked up some ammunition, but hasn't actually loaded any of it.'

The threat by China is perceived as the most potentially damaging act since 1989, when it temporarily stopped accepting back illegal immigrants who had crossed the border into Hong Kong.

Addressing Legco, Mr Patten again called for a return to 'sensible, rational dialogue' with China and repeated that he wanted to see alternative proposals from those who disagree with him.

The British position is that all contracts straddling 1997 are protected by the Joint Declaration provided they do not contravene China's agreed constitution for Hong Kong, the Basic Law.