CONFIDENTIAL
013544
MDHOAN 3310
HAVE WISHED. OUR TALKS FOCUSSED ON TWO AREAS: PADS AND CONSULTATION. WE HAVE NOT MANAGED TO SATISFY ALL CHINA'S CONCERNS ABOUT PADS. THE HONG KONG GOVERNMENT WILL NOW NEED TO REFLECT FURTHER ON HOW TO MEET HONG KONG'S NEED FOR IMPROVED AIRPORT FACILITIES. WE ALSO NEED TO CONTINUE OUR DISCUSSIONS WITH CHINA ABOUT HOW BEST TO INTENSIFY OUR GENERAL COOPERATION TO ENSURE A SMOOTH TRANSITION IN 1997: WE HAVE AGREED/PROPOSED THAT THE JLG CARRY THIS FORWARD AT THE MEETING STARTING ON 10 JUNE. I HOPE THAT WE CAN REACH AGREEMENT SOON. MEANWHILE I SHALL BE REPORTING BACK TO THE GOVERNOR OF HONG KONG AND TO MINISTERS IN LONDON.
ATTRIBUTABLE BACKGROUND
THESE TALKS BEGAN WHEN THE FOREIGN SECRETARY VISITED PEKING. WE HAVE BEEN LOOKING AT TWO ISSUES WHICH HE RAISED: HOW TO IMPROVE OUR GENERAL COOPERATION OVER HONG KONG QUESTIONS IN THE PERIOD UP TO 1997 AND WHETHER THE CHINESE GOVERNMENT CAN GIVE THEIR SUPPORT TO THE CHEK LAP KOK AIRPORT PROJECT.
- ON THE AIRPORT, DISCUSSIONS BETWEEN HKG AND CHINESE OFFICIALS BEGAN LAST AUTUMN. EVERYONE AGREES THAT HONG KONG NEEDS A NEW AIRPORT. HKG DREW UP AN AMBITIOUS AND EXCITING PROPOSAL PADS. INVESTORS NATURALLY WANTED TO KNOW THAT CHINA WAS HAPPY WITH THIS PROJECT. THE CHINESE SIDE EXPRESSED SOME DOUBTS ABOUT IT PARTICULARLY ITS IMPACT ON THE FINANCES OF THE FUTURE SAR. HONG KONG GOVERNMENT HAVE BEEN SEEKING TO ADDRESS THESE CONCERNS. THE DIFFERENCES GRADUALLY NARROWED AND IN APRIL THE FOREIGN SECRETARY AND GOVERNOR ASKED ME TO SEE IF WE COULD RESOLVE THOSE WHICH REMAINED. WE HAVE TRIED HARD TO DO SO, BOTH DURING THE APRIL ROUND AND AGAIN THIS WEEK.
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HKG HAVE OFFERED TO MAKE IMPORTANT ASSURANCES IN RETURN FOR
CLEAR CHINESE SUPPORT FOR ALL ASPECTS OF THE PROJECT AND RECOGNITION OF HONG KONG GOVERNMENT'S RESPONSIBILITY FOR MANAGING THE CONSTRUCTION OF THE AIRPORT UP TO 1997, INCLUDING:
A) TO HELP ENSURE THAT THE NEW SAR HAS A GOOD FINANCIAL BASIS BY PLANNING FOR A SUBSTANTIAL BALANCE TO REMAIN IN THE FISCAL RESERVES IN 1997, ON TOP OF THE LAND FUND AND EXCHANGE FUND BALANCES: A LARGE SUM WOULD BE SET-ASIDE FROM THE RESERVES AT ONCE.
B) NOT TO EXCEED A REASONABLE SUM FOR BORROWING OUTSTANDING IN
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