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Deng Xiaoping 'formally requested the Governor to ask investors to
put their hearts at ease: It was China's long term policy to regard
Hong Kong as a special case, no matter what political solution was
reached by 1997' (record of talks, 29 March 1979). He said 'there
were two solutions by 1997: to take Hong Kong over, or to allow
Whatever political solution was adopted,
present realities to remain.
investors would not be affected'.
But the Chinese have stopped short
of any specific undertaking on the continuance of British administration
beyond 1997. Faced with major internal problems, they have shown no
disposition to come to grips with the Hong Kong issue.
6. Even if the Chinese saw advantage in ignoring the Peking Convention
of 1898 and allowing Hong Kong to continue more or less as at present
beyond 1997, any acts of administration by the Hong Kong Government
relating to the post-1997 period, including issue of leases, would be
ultra vires without amendment of the 1898 Order in Council, which makes
the Governor's powers of jurisdiction co-terminal with the Lease.
7. Within these constraints HMG must examine the problem in the
medium and long-term. For the next 5 years and beyond, the main
objective must be the improvement of Hong Kong's economic potential
and prosperity (and thus its value to China), preservation of
confidence among investors and the public service, and contentment
among the Hong Kong population, against a background of the shortening
Lease of the New Territories. This will become increasingly difficult
and eventually impossible beyond some time in the second half of this
decade in default of arrangements for beyond 1997 that are acceptable
to investors and the population.
It is therefore necessary to consider
possible options for a pre- or post-1997 settlement and the problems
these will raise.
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