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repackage their proposal to make it more attractive to HKG. He said that he thought the conclusion of this morning's meeting had been that we should not expand on our ideas until a team went to Hong Kong. I said that I could
understand his not wishing to display his wares to Hong Kong in advance, but that we needed to know ourselves what the parameters might be. He said that an advance payment might be advantageous to HKG ie by paying upfront they would be able to discharge their future liability at a discount. agreed with me that the bottom line, however the idea was packaged, would be that Hong Kong would pay out some of its
reserves before 1997 so that the SARG did not have a
liability thereafter. He said that Treasury could draft a telegram to Hong Kong proposing the visit; they could aim to get us this draft before the end of the week. I said that I
would discuss matters further with you.
He
3. All this rather confirms my view that the objections of principak are so great that there would be little value in sending a team to Hong Kong to explore this proposal
further. The only new factors since the Treasury made that proposal a year ago are: the development of the negotiations on the Hong Kong airport, which showed deep Chinese suspicions that HKG would run down its reserves in order to
line British pockets before 1997; HKG's undertaking "at the
very limit of financial prudence" to plan to leave at least HK$25 billion by 1997; the limitation on HKG borrowing for repayment after 1997; and the LegCo elections which have made it even less likely that ExCo or LegCo would be disposed to help us in this area. HKG and UKRep JLG have also repeatedly told the Chinese that it would be impossible
to capitalise all HKG pensions before 1997 (see expenditure
forecast attached) and that it would be imprudent to tie up
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