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MUISTRY
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Aw 1948
SE CRE T
GRS 1450 SECRET
FM HONG KONG 030700Z JUNE 80
TO PRIORITY PEKING
TELEGRAM NUMBER 150 OF 3 JUNE
INFO PRIORITY F C O
YOUR TEL 62: LEASES AND THE FUTURE OF HONG KONG
1. WHILE I AM PLEASED WITH THE RATE OF PROGRESS, MY VIEW IS A LITTLE LESS ROSY THAN YOURS AND I SUSPECT THE TIMESCALE Î ENVISAGE IS LONGER. PROGRESS OVER THE PAST YEAR HAS BEEN: THE WHOLE PROBLEM OF THE FUTURE OF HONG KONG IN THE LONG AND SHORT
TERM HAS BEEN BROACHED: THE CHINESE HAVE ACKNOWLEDGED THE VALUE TO THEM OF A CAPITALIST SOCIETY IN HONG KONG AND RECOGNISED THE - NEED TO MAINTAIN CONFIDENCE IN IT: THEY HAVE FORMULATED PRINCIPLES
TO BE APPLIED IN THE LONG-TERM WHICH ARE NOT UNSATISFACTORY AS FAR AS THEY GO (THOUGH THIS ISN'T FAR): AND THEY HAVE SHOWN THEMSELVES. WILLING TO DISCUSS THE WHOLE PROBLEM IN AN INCREASINGLY RELAXED AND POSITIVE WAY. THIS IS ALL ONE COULD HAVE EXPECTED IN THE TIME.
2. THE IMMEDIATE DIFFICULTY IS FAILURE ON THE PART OF THE CHINESE TO ACKNOWLEDGE THE DIFFERENCE BETWEEN TWO ASPECTS OF THE PROBLEM: A. LONG-TERM (CANNOT BE POSTPONED MUCH BEYOND LATE 80S): WHAT WILL HONG KONG'S STATUS AND ADMINISTRATION BE AFTER
'97 AND FOR THAT PERIOD BEFORE IT IN WHICH LACK OF CLARITY ABOUT
THE FUTURE WILL MAKE HONG KONG POLITICALLY AND ECONOMICALLY UNVIABLE.
B. SHORT-TERM: (CANNOT BE POSTPONED MUCH BEYOND '82):
1). LONGER LEASES, PASSING '97, MUST BE ISSUED IN THE NEW TERRI- TORIES IN WHICH LESSORS CAN HAVE CONFIDENCE.
11) THERE MUST BE SUFFICIENT CONFIDENCE TO SUPPORT THE LOAN FINANCE
NECESSARY FOR MAJOR PROJECTS SUCH AS A NEW AIRPORT AND LANTAU
BRIDGE ON WHICH DECISIONS MUST BE TAKEN BY LATE $82 OR $83. SOMETHING
SOUND ON (1) COUPLED WITH FURTHER CHINESE ASSURANCES WOULD PROBABLY HAVE THE NECESSARY EFFECT ON INTERNATIONAL CAPITAL MARKETS.
3. THESE TWO ASPECTS ARE INTERRELATED. A SATISFACTORY ARRANGEMENT. ABOUT (A) WOULD SOLVE (B) AND THIS WOULD BE IDEAL. A REALLY SATISFACTORY ARRANGEMENT ABOUT (B) COULD GAIN A YEAR OR TWO
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FOR (A).
SECRET
14. BUT (A),