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restrictions Further information is given in the enclosed Terms and Conditions of supply of

Please note that this copy is supplied subject to the National Archives' terms and conditions and that your use of it may be subject to copyright

National Archives' leaflet.

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over Hong Kong and the termination of the existing lease of the New Territories and that we should take the initiative by approaching the Chinese Government with a view to discussions on that basis.

I submit an alternative draft reply to Mr. Dening in which, after explaining that we cannot accept the Foreign Office memorandum as a basis for discussion, I have taken the line that these questions are so very much a matter for Ministers to determine in the light of political considerations that we should not attempt to reach any conclusions on the official level. The draft goes on to suggest that we should aim at producing a paper which would first set out the pros and cons of the question of opening up negotiations with the Chinese and then examine what line should be taken in the event of negotiations, whether on our own initiative or that of the Chinese, I think that this would give us a fair chance of ensuring that the case against our going to the Chinese with concessions on Hong Kong will be properly and fully represented on the paper if and when the matter gets to Ministerial level. There would, in my view, be no such assurance if we were to proceed with a paper on the lines of the Foreign Office memorandum.

My own views are that any negotiations with the Chinese should be strictly limited to the New Territories and should be conducted on the basis

of a joint examination of the provisions or the New Territories lease in the light of present-day circumstances and factors, including the limitation which is necessarily imposed on expenditure on projects in the New Territories by reason of the termination of the existing lease in 1997 and the absence of any arrangements for its renewal. (This would, I suggest, be in accord with the statement on Chinese policy made by Generalissimo Chiang Kai Shek on the 24th August, 1945 quoted

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in paragraph 5 of the Foreign Office memorandum.) It would also accord with the opinion which was expressed by the Generalissimo in the course of his farewell talk with Sir Horace Seymour that "it would not be difficult to find a solution under which the material interests of all were safeguarded", except that this apparently applied to Hong Kong as well as the New Territories.

Assuming that the Chinese agree to the

limitation of discussions as above and, when invited to express their views, as I think they might be, asked for our agreement to the immediate cancellation of the lease, we could, I think, be prepared to agree to atte a revision of the boundaries of Kowloon so as to include the whole of the built-up area within the Colony of Hong Kong and to the retention of some form of control over the projects in the New Territories such as water supply, airfield, etc. Sir Mark Young would apparently see no objection to this see paragraph 9 of his memorandum, but he goes on to say that he thinks that it would be quite unacceptable to the Chinese. But I certainly would not favour any initiative on our part to open negotiations, especially in the present uncertain political situation in China, and I would have it clearly understood by all

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concerned

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Ref.:

THE NATIONAL ARCHIVES

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CO 537/1649 restrictions Further information is given in the enclosed Terms and Conditions of supply of National Archives' leaflet Please note that this copy is supplied subject to the National Archives' terms and conditions and that your use of it may be subject to copyright