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SECRET
DSK TIC
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 Philip Haddon-Cave,
Note that he said it was time to
We agree.
begin thinking about the longer term.
2.
Appreciate Chinese assurances to intending investors
in Hong Kong. Do these assurances apply equally to lease-
holders in the New Territories? Would they be prepared to say
so publicly, or confidentially to intending investors?
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.
4.
(If the Chinese ask for our views on a solution to the
leases problem). The time is right for us to start talking
about ways in which leases might be issued on terms
acceptable to investors.
Suggest that officials open
discussions and that an exchange of views with
HM Ambassador continues after the visit (see supplementary
brief).
SECRET
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