$ 295
ECRET
P PEKING 040938Z JAN 79
TO PRIORITY FCO
TELNO 16 OF 04 JAN
INFO/PRIORITY HONG KONG
Holio 82
SECRET
RECEIVED
Akkorolt
INT
BERTY NO. 51
JAN 1979
OFFICE
REGISTRY
Action
No
See (3)
VERNOR'S LETTER OF 21 DECEMBER TO MCLAREN: NEW TERRITORIES
LEASES.
1. I AM AT ONE WITH THE GOVERNOR IN PREFERRING THE JOINT DRAFT AT ANNEX A TO HIS LETTER. PARAGRAPHS 3 AND 4 IN PARTICULAR SEEM TO COVER NEATLY BUT IN A NON-CONTROVERSIAL MANNER THE WMAJOR POLITICAL PROBLEMS AND THE SAVING DEVICE IN PARAGRAPH
4 IS IMPORTANT. IF IT WERE FELT ESSENTIAL TO COVER EXPLICITLY THE VARIATION OF EXISTING LEASES, PARAGRAPH 3 FROM ANNEX B MIGHT PRESUMABLY BE IMPORTED INTO THE TEXT AT ANNEX A: BUT THIS HARDLY SEEMS NECESSARY.
#
2. ON TIMING, I AGREE WITH THE GOVERNOR'S POINTS AT 11 (C), (D) AND (E). I AM NOT SO SURE ABOUT 11 (A) AND (B) AND PARA- GRAPH 14. ON 11 (A), THE CHINESE GOVERNMENT HAVE NOT BEEN TOO PREOCCUPIED TO TAKE MAJOR AND POSITIVE STEPS IN RELATION TO JAPAN AND THE USA. THEY ARE IN A DECISIVE AND OUTWARD- LOOKING MOOD. ON 11 (B), THE CHINESE MUST BE WELL-INFORMED ON HONG KONG AND AWARE OF THE LEGAL AND ACCOUNTING PROBLEMS BEGINNING TO ARISE. ON PARAGRAPH 14, I DO NOT SEE CHINA DOWN- GRADING HONG KONG BECAUSE OF THE PROSPECTS OF FOREIGN CREDIT. HER WEEDS ARE TOO GREAT AND VARIOUS. SHE NEEDS ALL SOURCES OF ASSISTANCE. NOR DO LI QIANG'S RECENT REMARKS IN HONG KONG SUGGEST THAT THE COLONY'S VALUE IS SEEN AS EXCLUSIVELY
FINANCIAL.
*
3.
IN GENERAL, THOUGH THERE IS NEVER AN IDEAL TIME, THE NEXT ONE OR TWO YEARS, WITH DENG AT THE HEIGHT OF HIS POWER, ARE
MY INSTINCT IS TO TAKE LIKELJ TO BE AS GOOD AS WE SHALL GET, THE NEXT FAVOURABLE OPPORTUNITY TO APPROACH THE CHINESE.
4.
AS REGARDS LEVEL OF APPROACH, WE SHALL HAVE TO BEAR IN MIND THE POSSIBILITY OF A VISIT BY THE GOVERNOR TO PEKING.
SECRET
BUT
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