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2.
to make fundamental decisions about Hong Kong in the near future, that will face us with a growing problem of confidence amongst investors, the public service, and the public. A trigger point in this process of failing confidence could well be the shortening length of property leases in the NT where most investment in development is now taking place. There is no precise date by which we can forecast that this will be a make or break issue, but it will become progressively more acute from 1982 onwards. It could reach crisis proportions at any time before, in or after 1982 as a result of extraneous events. But generally speaking we expect that the onset of a slide in confidence, whether started by concern about leases or more generally about the absence of agreement on the future of Hong Kong, will be clearly marked by a crescendo of representations in business circles and the press, which would be of a different degree to anything experienced so far and would be apparent to the Chinese, and could grow over a period as long as a year before a complete break in confidence occurred.
.
7a.
Something definite on Leases which reconciled Chinese political and British legal requirements would eliminate this particular trigger and hold up confidence for a time at least. This extra time could be important in Chinese political terms. But, in the final analysis, confidence will depend on agreement about arrangements for all aspects of administration, not just leases, after 1997. There is at present an underlying assumption in Hong Kong that such agreement will be reached, and the real importance of a deal on leases is that it would maintain that assumption for a little longer. But even with something on leases, the main issue of the future could not be evaded indefinitely, and probably not beyond about 1988 or 1990 at the very latest. By then the 1898 Order in Council will no longer provide a credible basis for the future of British administration and must be amended, or replaced by something new that offers a juridical basis for law and administration over a period that passes 1997.
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/contd.
a