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5. Lord Carrington said he accepted that we should hold action, apart from selective education of the Chinese through inter- mediaries, until his own visit. He asked about the extent of the interest of Chinese-associated firms in Hong Kong.
Sir M MacLehose cited the involvement of the Bank of China
in the Hong Kong Government Home Ownership Scheme. This brought them up against the problem of financing 15-year mortgages beyond 1997 from 1982 on.
6. Lord Carrington suggested that Chinese communist companies would be confident of their own future even after a Chinese
take-over. Sir M MacLehose said that their potential customers or tenants would nevertheless be worried and the problem would force itself on Chinese-associated firms.
LONG-TERM FUTURE
7. Sir M MacLehose said that the final Chinese solution was
the incorporation of Hong Kong in China. But this was too far ahead for them. Meanwhile they appeared to have in mind an intermediate stage in which they would run Hong Kong as a separate, capitalist part of China outside the RMB currency area. This was crazy. The Chinese had not yet concentrated
properly on the problem. We did, however, need to consider our own position on the long-term future in a paper, looking particularly at the implications if the Chinese proposed an acknowledgement by us of their sovereignty.
8. Lord Carrington ́asked whether the Chinese recognised any difference between the New Territories and Hong Kong Island/ Kowloon. Sir M MacLehose said that while their legal stand was that all the Treaties were invald, in fact they sometimes acted in practice as if there was a difference in the position of
the New Territories. Thus it was wrong to suppose that 1997 was of no significance to the Chinese. They must keep open the option of trading on 1997, not least because the whole
question was politically very hot for them. They would at some stage need a new political arrangement to which they could
point.
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