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CODE 18-77

HKD 406/1

CONFIDENTIAL

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CONSULATE-GENERAL: RESIDENCE

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Mr Morris, Mr Woodrow and I talked about this with Mr Hum and Mr Bertram (OED) today, and Mr Woodrow is dfafting a short briefing note to Mr Patten. As I may not be around while next this is discussed, I should like to record some of the reasons why I think we should continue to push for Victoria House:

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(a) Hong Kong owes us a lot. The Governments of former DTs often gave HMG good properties at the time of independence. Hong Kong can well afford to give us Victoria House, as well as the site of the Consulate-General (we are having to pay to construct the CG). It has long associations with this country. The SARG Chief Executive and Secretary for Administration should be housed in new buildings, looking forward to Hong Kong's new future.

(b) HKG's advice about what local opinion will approve is notoriously unreliable. We are seeing this now on locals' reactions to our proposed HMOCS arrangements. I believe that when the CG site was discussed, the expatriate officials were keen to give HMG nothing, and it was local officers who recognised that a gift of the site was an entirely reasonable gesture.

(c) The Chinese would of course be glum, but they like it when we do something which is not altruistic: they then find us easier to understand, because we are acting as they would if in our place. They might try to get some quid pro quo, but it could be pretty minimal, and the negotiation could be interesting.

(d) It would be salutary to tackle the Chinese head on about their notion that we must hand over to them every asset of the HKG. So long as we do not go in for comprehenesive asset-stripping, we can do what we like.

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(e) We are likely to have to dip deep into our pockets for HMOCS perhaps £40 million or more, even if the sterling safeguard is never triggered. This should have been Hong Kong's responsibility, just as other DTS which could afford to pay have done so. Here is an area where Hong Kong can make some recompense to the UK tax-payer.

(f) We would do best to make the move well before 1997, to reduce its sensitivity. The logic might be to swap the Albany flat for Victoria House when Sir D Ford retires.

clone. Mr Wystrow 27/6.

CONFIDENTIAL

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