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(e) The leases issue was not immediately urgent. If there were no
signs of movement on the Chinese side we could delay taking the initiative until at least the autumn of 1981. Thereafter, we would probably have to initiate talks.
(f) Whilst the Chinese might not make the same distinction as we
do between the long and short-term aspects of the problem, we should avoid getting into a situation where either side was taking up positions on a long-term solution. We should build up towards the latter by gradual steps through finding answers to the short-term problems.
(g) There would be a greater need for informal contact with the
Chinese over the future of Hong Kong in order to "improve their brief" on the subject.
(h) Intermediaries might seek a role; they would need careful
guidance.
(i) The Secretary of State would be bound to raise the matter of
confidence in Hong Kong with the Chinese in view of earlier discussions but leases would not be formally on the agenda and would be tackled under the general heading of "Hong Kong"
(j) If the Chinese asked the Secretary of State to suggest a way
round the leases problem, he could suggest detailed discussions by officials of the alternative scenarios in (c) and (d) above.
(k) The Secretary of State could usefully ask the Chinese whether
their "hearts at ease" statements applied to leaseholders as well as investors.
(1) The speaking note for the Secretary of State's brief should
begin by referring to exchanges over the past year and, in particular, Vice Premier Gu Mu's remarks to Sir P Haddon-Cave and then develop the theme of the need for confidence-building in Hong Kong. There would be a separate brief on leases in case detailed discussion developed on this.
(m) The Hong Kong Government would provide a note on the economic
consequences for Hong Kong of a failure to come to an arrange- ment with the Chinese on leases, as a contribution to the back- ground briefing for the Secretary of State.
Distribution:
Sir E Youde
Sir M MacLehose
Sir P Cradock
HKGD FED
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