XN000022-1985-01-22 — Page 35

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15.

I recall these facts, not because they will be new to many

of you, but as a reminder of the conditions which have contributed so

Hong Kong's success, to the resilience of its economy, and hence its

ability to rebound successfully from the set-backs which affect all

economies from time to time.

Background to the Negotiations

16.

—

But, at the beginning of this decade, there was a growing

shadow over that scene the shadow of uncertainty about the future of

Hong Kong in 1997. When I arrived in May 1982, the shortening of the

period of the New Territories lease had already begun to cause anxiety and doubts among the community and investors alike..

17.

The British and Hong Kong Goverments had, therefore, little

choice about the timing of negotiations. With such large issues at

stake, whose resolution would affect the lives of so many people and

their children, we could not leave those people in doubt about their

future. We could not sit back and watch business confidence erode as

1997 got closer. An early start had to be made, and that start had to be made at the highest level. The Prime Minister's visit in September 1982 provided the opportunity.

18.

There were other reasons too for looking for a settlement. The Hong Kong property market had reached its peak in late 1981. The signs of an over-supply, became apparent by early 1982, and the collapse in land and property prices was only too obvious by the summer.

I

19.

This would have been difficult enough in itself, given the amount of bank lending associated directly with property, but at the same time we felt the effects of the very sharp recession of 1982 in

the United States. We were confident that recovery would come, but if

Hong Kong was to take advantage of it, confidence in its future had to

be restored.

/20.