CONFIDENTIAL
11. Sir Alec Douglas-Home asked what points were liable to be raised by UMELCO. Sir Murray Maclehose said one point of concern in Hong Kong was the effect of China's entry into the United Nations and the opening of the American dialogue. Sir Alec Douglas-Home said he thought that President Nixon's intention was to take maximum advantage of China's new policy for personal reasons and also to score a point over the Russians. Sir Murray Maclehose said that UMELCO was calm about the Chinese develop- ments, but that concern was being expressed by many people particularly students, who were worried about the future. Sir Alec Douglas-Home then asked whether UMELCO would raise the question about the future of Hong Kong. Sir Murray Maclehose said this was doubtful, though such questions may be raised at the press conference. Sir Alec Douglas-Home enquired what Hong Kong thought should be done about the lease. Sir Murray Maclehose said sooner or later we would have to discuss with the Chinese but not until a government was in power from which there was some hope of getting a satisfactory answer. Meanwhile we had to plan to put realism in the best possible posture to face the problems of the approach of 1997. instance private capital investment would progressively dry up; recruitment to government of both expatriate and local officers would be progressively affected. There were a host of other similar problems. We had to consider what action we could take now to make this problem more manageable later on. Generally speaking he thought our object should be to ensure in Hong Kong such a margin of standard of living, sophistication of life, and contentment over conditions in China, that the Chinese would be reluctant to take it over. Their experience in Shanghai might help. In answer to a question of Sir Alec's Mr Haddon-Cave said that investment had not yet fallen off; it might do so in the 1980's. Sir Murray Maclehose said, by way of example, that Hong Kong might consider it desirable to start major capital projects required for the 80's earlier so as to benefit from the private investment still available while prospects of amortisation, still existed. The underground railway was a case
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in point. In a few years' time it could no longer attract private capital. answer to a question from Sir Alec Mr Haddon-Cave said that it would be expensive - (cost at 1970 prices was £550 million). A decision on the railway would be made in the second half of this year and, if it was decided to go ahead, discussions would then have to be held with financial consortiums in view of the cost, the abnormally long amortisation period and the non-viability of the operation until the 21st century.
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Sir Alec Douglas-Home asked what had happened about the Runway Extension. Sir Hugh Norman-Walker said it was already under construction and was being paid for by Hong Kong. Sir Murray Maclehose said that the publicity over the runway extension had increased the local feeling that the UK should give more aid to Hong Kong. He thought that for political if not economic reasons, aid from the UK would be a good local indication of the UK's continued concern and responsibility for Hong Kong. In reply to Sir Alec on why the UK had not provided a loan for the airport extension, Mr Haddon-Cave explained that Hong Kong had made several tactical errors; in 1967, they had applied for a loan on moral grounds; in 1968 they applied on financial grounds
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CONFIDENTIAL