19 CAVENDISH AVENUE
LONDON NW8 9JD
01-286 9020
-2-
I assume that British Government policy is to remain in Hong Kong as long as possible. If that is the case action is urgently required.
As you know, the Chinese do not recognise the validity of the cession of Hong Kong Island and the Kowloon Peninsula or of the lease on the New Territories which expires in 1997. Never- theless they do have some kind of de facto value. Peking agencies have bought a lot of land from the Hong Kong Government both in the ceded and the leased territories and market prices, accepting the Hong Kong Government leases including those which expire three days before the 1st of July 1997. Peking is also increasingly entering into joint ventures with firms in Hong Kong. For example, the Bank of China is now guaranteeing the Hong Kong Government that Jardine Matheson will perform their part of the contract to develop the land over parts of the Mass Transit Railway owned by Peking agencies. Peking has also allowed factories to be set up and run on the Chinese side of the border, where labour is cheaper, by Hong Kong firms which get the profit and more or less have the ownership, though without any security of tenure, of the operations and land concernedo Sir Lawrence Kadoorie told me that the Chinese are insisting that he should own the power line which he is putting across the border into China to be connected with the grid for Canton. It is clear that Peking is trying to indicate in various little ways that they regard the British in Hong Kong as a semi- permanency. However such signs, though welcome,