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be that a change was a preliminary to a change in the actual
Hong Kong belongers. This could only be seen as a deliberate attempt by the British Government to distance Hong
Kong and its inhabitants from the United Kingdom. This would
create wide and deeply held resentment and more materially
would be likely to create doubts about the Colony's future
in relation to the People's Republic of China with
unquantifiable but potentially far-reaching effects on business
confidence. In making their planning and investment decisions
the business community in Hong Kong must be able to assume that the present status of the Colony will be maintained for a considerable period of time; an otherwise inexplicable change in nomenclature at the present moment would create suspicions
that the UK Government itself had doubts about the longer term
prospects. Such a loss of confidence at this juncture could
quickly lead to a drop in investment, with the prospects of a far-reaching economic slump which would directly damage
British interests as well as the interests of Hong Kong itself.
Hong Kong is second only to Japan as a market for British
exports in Asia outside the Middle East and British investment
in the Colony is substantial. The British Government is also
ultimately responsible for the well-being of the people of
Hong Kong and any prospect of economic recession, particularly
when the Colony is suffering from acute problems resulting
from the refugee influx, would be of direct concern to the
Government in London itself.
2.
Any change would furthermore seriously affect proposed
changes in the arrangements relating to the lease of the
New Territories which are at present the subject of
extremely delicate exchanges with the Chinese Government in
Peking. The New Territories in Hong Kong, which make up
over 90 per cent of the Colony's total land area, were
leased, rather than ceded, by China to Britain in 1898 and
the lease runs out in June 1997. Land Leases in the New
Territories drawn up by the Hong Kong Government have all
been written to end in 1997 and unless arrangements can be
made to extend them the increasingly short span of the current
leases will soon begin to deter investors. Ministers there-
fore decided that the Chinese Government should be told of
our intention to convert current leases into leases of
indeterminate duration. This will involve legislation, the
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