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7. Mr Banks will be in Hong Kong next week and will inform Dr Wilson. I will also write to the latter. I have some scepticism about the ideas, particularly the first, quite apart from the contrary indi- cations in Hong Kong. Mr Banks claims that the "licence" idea is consistent with English law and that such waivers can be given. trouble is that it would involve, on the face of it, Chinese recog- nition of the 1898 lease and, presumably, their taking some kind of legal initiative towards the "tenant" in the shape of HMG. But nothing is impossible and, even if Mr Wu has got the details wrong, there is a hint here that the Chinese may not be totally inflexible.
8. The reinsurance idea is intriguing. Mr Banks thinks it could catch on, since commercially the risk is rather attractive for insurers, even without Chinese Insurance cover. But the key to a confidence-boosting device would be in the latter; it is the sort of thing the Chinese would consider very cautiously. But it is not impossible.
5 February 1981
cc: Mr McLaren, FED
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RD Clift
Hong Kong and General Department
1. Mr Li Jusheng was quite categorical (see paragraph 3 of the Record of Discussion attached to Dr Wilson's letter of 17 January at 'E'). It seems clear there has been a lot of misrepresentation by third parties.
2.
I am also sceptical about the ideas expressed by Mr Banks. Here again I have the feeling that these reflect the wishful think- ing and fertile imagination of Hong Kong Chinese but we should be extremely wary about believing that they would find favour in Peking.
3.
Mr Li Jusheng's statement that he hoped the Hong Kong Government (and by extension HMG, I suppose) would not try to use the ''small question'' of local leases as a way of dealing with the large question of the future of Hong Kong is ominous and account must be taken of it in the briefing for the Secretary of State before his visit at the beginning of April.
10 February 1981
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