TNAG-0332-FCO40-368-Visits-of-Secretary-of-State-for-Foreign-and-Commonwealth-Af-1972 — Page 48

Confidential

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11.

S. of S. asked what points were liable to be raised

The Governor said one point of concern in

by UMELCO. Hong Kong was the effect of China's entry into the U.N. and the opening of the American dialogue. S. of S. said he thought that Nixon's intention was to take maximum advantage of China's new policy for personal reasons and also to score a point over the Russians. The Governor said that UMELCO was calm about the Chinese developments, but that concern was being expressed by many people particularly students, who were worried about the future. S. of S. then asked whether UMELCO would raise the question about the future of Hong Kong. The Governor said this was doubtful, though such questions may be raised at the press conference. S. of S. enquired what Hong Kong thought should be done about the lease. The Governor said sooner or later

we would have to discuss with the Chinese but not until a government was in power from which there was some hope of

with getting a satisfactory answer. Meanwhile we had to plan to

Hang Kery. put realism in the best possible posture to face the problems of the approach of 1997. For instance private capital

investment would progressively dry up, recruitment to government of both expatriate and local officers would be progressively affected. There were a host of other similar problems. We had to consider what action we could take now to make this problem more manageable later on. Generally speaking he thought our object should be to ensure in H.K. such a margin of standard of living, sophistication of life, and contentment over conditions in China, that the Chinese would be reluctant to take it over. Their experience in Shanghai might help. In answer to a question of the S. of .. Mr. Haddon-Cave said that investment had not yet fallen off,