After the markets had closed, China duly issued its latest salvo against Mr Patten and Britain. Again demanding that Mr Patten abandon his plans for democratic reform, a Foreign Ministry spokesman in Peking added: 'The issue facing the British side is now whether the Sino-British Joint Declaration and the other agreements reached between the two sides are still needed.' The 1984 Joint Declaration is the basis for all agreements about the handover of Hong Kong in 1997.
Hong Kong government officials last night reacted cautiously with a statement that Britain 'has repeatedly made clear' its commitment to the Joint Declaration. But China's comments appeared to echo a warning from the Chinese Vice-Premier, Zhu Rongji, in London last month when he asked whether the agreement 'was gone with the wind'. This was widely interpreted as meaning that China might consider the 1984 declaration was no longer valid if Mr Patten pressed ahead and implemented his proposals. Peking later said Mr Zhu had been misrepresented by the foreign media.
Britain's chief representative at the time the Joint Declaration was negotiated, Sir Percy Cradock, warned on Tuesday that it would be 'a fatal misjudgement' to believe China would back down. Yesterday the Foreign Office said: 'Sir Percy is a distinguished former public servant. He is entitled to his views.' It emphasised, however, that it supported the Governor's view that a 'modest extension' of democracy in Hong Kong was in the colony's interest.
However, Douglas Hurd, the Foreign Secretary, softened the message with another plea to China to co-operate with Britain. 'It is a good thing if China and Britain, during the period up to 1997, can work together and we would like to do so on this occasion too,' Mr Hurd said. 'But that is not the same as saying the Chinese have the right to tell us . . . what we can or cannot do in areas that are our responsibility.'
While no one in Hong Kong seriously thinks China is planning to back away from an international agreement, such hints are part of a campaign to convince Hong Kong people that the price of supporting Mr Patten may be higher than they realised. Yesterday, as share prices plunged, passers-by in the business district gathered around share-price monitors in the windows of banks to watch Hong Kong's volatile market plummet.
By the close of trade, the Hang Seng index had dropped 433 points to 4978.2, an 8 per cent fall on the day and a 17 per cent plunge so far this week. Grim though this is for investors, the market is still more than 15 per cent up on the beginning of the year, though that is likely to be further eroded today. Half this week's decline can be seen as wiping out an unrealistic surge in the market in the weeks following Mr Patten's policy announcement, as foreign institutional investors piled in, seemingly untroubled by the impending row with China.
Yesterday's selling, on the other hand, was mainly by local, private investors, according to stockbrokers. The other Hong Kong barometer of public sentiment about 1997 - applications for emigration as a first step to qualifying for a foreign passport - may also now pick up. In the past few years, about 60,000 people have left the colony each year, though many return once they have secured their second passports.
This week's market plunge was prompted by comments by Chinese officials that long-term contracts with the Hong Kong government would not be valid beyond 1997 unless approved by the Chinese side.
Mr Patten yesterday sought to rebuild confidence and pointed the finger of blame for the share collapse at Peking. 'I have not done anything to affect what is happening in the market this week . . . What I do think it is sensible for me to say is that the underlying strength of the Hong Kong economy and the underlying strength of the firms in Hong Kong are there for everyone to see.' Peking countered: 'The responsibility for the large slump in the Hong Kong stock market does not lie with the Chinese side, and we did not want to see this.'
Mr Patten was yesterday still looking robust. He told a business symposium that people should believe that he wanted to do a good job for Hong Kong. And he added: 'I have been long enough in politics to know that any politician who judges his success or wisdom by the rose petals strewn in his path, or by the thorns periodically under his feet, is an idiot.'
Dragon's fury, page 21