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a new headquarters.
It was also pitched at such a level that the decision taken would be seen as a considered response by the Government to the Chinese request and, as such, could not be changed for several years at least.
3.
After considering the matter carefully, we decided that there was much to be gained by meeting the China Resources' request. As you know, we are anxious to build up a mutuality of interests between Hong Kong and China. This seemed one of the ways of achieving that objective. The Chinese supply us with much of what Hong Kong needs to survive. (Indeed we will soon have to approach them about greatly increased long-term water supplies.) In return we provide them with a prestige site for a new headquarters. An additional benefit would be the effect on public opinion of a large and expensive Chinese investment. There are also some possible disadvantages. One is that such a private treaty grant might be thought to establish a precedent for the future. Another is that the number of sweeteners we can hand out to the Chinese is limited and they should therefore be used sparingly. It seemed to us, however, that the advantages heavily outweighed the disadvantages and that the time was now suitable for a gesture of this sort.
4.
The Executive Council has now agreed with this line of reasoning and has endorsed a recommendation that the Environment Branch should enter into negotiations with China Resources to see what sort of site might be suitable. There are various possibilities and I will not go into further details at this stage until we are clearer on precisely what China Resources are looking for and how they will react to the agreement in principle to provide a suitable site. Nevertheless, I thought you, and Peking, would be interested to know about this development at an early stage.
(D C Wilson)
CC
R C Samuel Esq FED FCO
a
ET Davies Esq PEKING
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