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DSK TIC
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SECRET
SECRETARY OF STATE'S VISIT TO CHINA: FUTURE OF HONG KONG
Points to Make
1.
Problem discussed on several occasions between Ministers,
most recently during Premier Hua Guofeng's visit to London.
Also useful contact with Hong Kong officials, Have noted in
particular Vice Premier Gu Mu's remarks to Sir P Haddon-Cave.
Note that he said it was time to begin thinking about the
longer term. We agree.
2.
Appreciate Chinese assurances to intending investors in
Hong Kong. Do these assurances apply equally to leaseholders
in the New Territories?
3. As Gu Mu himself remarked, there are certain specific
practical problems. These include the problem facing
investors over land leases in the New Territories. Legal
and financial difficulties will get more acute, particularly
when there are less than 15 years to go to 1997 (mortgages
normally run for 15 years). A solution has to be found within
12 to 18 months. Otherwise commercial confidence and possibly
the Hong Kong dollar could be affected. If there is a loss
of business confidence it would be difficult to recover and
Hong Kong economy could cease to grow.
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4. (If the Chinese ask for our views on a solution to the
leases problem). We need to talk about ways in which leases
might be issued on terms acceptable to investors. Suggest
that officials discuss this. (see supplementary brief)
5. (If the Chinese ask about longer term problems). Not
too soon to open a dialogue on the longer-term future of
Hong Kong. This is in both our interests. Need to understand
each other's position. But we need at the same time a means
of dealing with the New Territories leases question, which
need not affect the position of either side on the longer
term.
SECRET
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