CONFIDENTIAL
4.
continued to reach the colony. There was a lesson here which proved of value in the negotiations on the future. The lesson was that, subject to their political imperatives being met, Hong Kong was an asset to China which the Chinese wished to preserve.
8.
These developments coincided with the steady shrinking of Britain's military presence overseas. Virtually from the time when Ching was strong enough to pose a threat to Hong Kong, Britain was incapable of defending it militarily. Thus, while the link with Britain was vital for the credibility of the system in Hong Kong, the durability of the system rested on the visible, if tacit, acquiescence of the Chinese Government in Hong Kong's continued existence as a separate, capitalist enclave.
9. By the end of the 1970's the steadily shortening period of the international lease of the New Territories was forcing on public attention the parallel shortening of the remaining period of individual land leases there. This led my predecessor to propose that an agreement should be sought with the Chinese on the lines that, without prejudice to the question of how long the United Kingdom would administer Hong Kong, the Hong Kong Government should issue leases in the New Territories which would be valid for the period of that administration. This idea, which would have blurred the 1997 date, was first explored with the Chinese during Lord MacLehose's visit to Peking in March 1979. The Chinese leader, Deng Xiaoping, sensing the need to do something to reassure investors, asked my predecessor to tell them to set their hearts at ease. While underlining the importance of the sovereignty question, he said that, whatever political solution was adopted, investors would not be affected. Such vague assurances did little to assure the population.
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