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willing to help. Hong Kong provides about one-third of China's foreign exchange earnings and the Chinese leadership have made it clear that the territory has a key role to play in the achievement
It would cause of their ambitious modernisation programme. difficulties for them if Hong Kong began to run down at any time
in the next ten years.
4.
Against this background, the solution I propose, with the full support of the Governor, is to issue future leases in the New Territories without a fixed term, valid "so long as Her Majesty may administer the territories", and to convert existing leases
There would be a into indeterminate leases of the same kind.
need for legislation in Hong Kong, and a covering Order in Council
here.
5. A solution on these lines would be consistent with the Chinese line that the future of Hong Kong will be settled "when the time is ripe" (a formula which enables them to keep their options open). But it would be interpreted by public opinion in Hong Kong as an indication that the Chinese were prepared to see British administration continue after 1997 and would thus provide a boost to confidence. In theory it would also open up the possibility that leases could be terminated before that date. To reassure lease-holders and others on that score, the Order in Council would include a saving clause designed to protect the rights of the Crown in the New Territories under the Treaty of
1898.
6.
Chinese acquiescence is essential because, for the first time, we would be taking legislative action which implied the
We would aim to retention of the New Territories beyond 1997. present the proposal to the Chinese as one requiring no positive action on their part and hence no stance at variance with their claim that Hong Kong is part of China. For the reasons given in paragraph 3 I believe this is the right time to broach the matter
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