Background
1.
The Governor of Hong Kong announced in October 1989 that Hong Kong had decided to build a new airport, together with related infrastructure projects. These ambitious projects
were estimated to cost some £8.5 billion over 15 years.
2. Expert talks with the Chinese were held in Hong Kong in October 1990, at which it became apparent that the Chinese were very concerned about the possible adverse impact the project would have on Hong Kong's fiscal reserves and the financial strength of the future Special Administrative Region Government.
3. A second round of expert talks was held in Peking in mid-January. These went badly. The Chinese insisted on an effective suspension of the project as a condition of continued discussions. They also repeated their concerns about the size and scope of the project.
4. The Governor visited Peking in late January. His discussions broke the impasse and he agreed that the Hong Kong Government would produce a range of options for reducing the scope of the projects or deferring non essential
elements.
These will be discussed in a third round of talks in late February.
5. One costly aspect of the plan is a rail link: estimated to cost £1 billion. This is not thought to be essential for the initial opening of the airport but probably is necessary when it is running at full development.
6. The Hong Kong Government are currently studying the rail link option in the context of the options to be put to the Chinese. It would not be appropriate for HMG to express a view at this time. The draft reply is recommended by Lord Caithness, who is currently in Hong Kong.
EELAKL CVL