TNAG-0529-FCO40-624-Future-of-Hong-Kong-1976 — Page 27

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Mr Male

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Sir D Watson

HONG KONG: LONG RANGE PLANNING

1.

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I discussed the possibility of permitting official Chinese representation in Hong Kong with Mr Donald when he called on me last week. I found to my surprise that he had now come round to the view that this might be a helpful move in certain circumstances and that it should be seriously considered before the Secretary of State goes to Peking next May. This prompted me to look again at the draft outline paper on the long term future of Hong Kong which I submitted on 15 August for Lord Goronwy-Roberts's consideration.

2.

Mr Donald said that, speaking generally, the future of Hong Kong presented as many difficulties for the Chinese as it did for us. On the one hand they are impelled ideologically to regard this vestige of colonialism on their door-step as highly undesirable while they are likely for the foreseeable future to have strong pragmatic reasons for allowing its continued existence. Furthermore the Chinese, in his view, stand to lose as much as we do by an erosion of confidence which is bound to follow if the current uncertainty were to be prolonged into the 1980s with the problem of 1997 unresolved. They may regard 1997 as of no significance but they should know (and be told if necessary) that it is of great significance to potential investors; and they may well have as great an objection as we would to their being forced to take over Hong Kong prematurely and in a deteriorating situation.

3.

He therefore felt there were some grounds for believing that the Chinese might be open to suggestions for a cooperative future in which the sovereignty issue and 1997 could be blurred. It was most unlikely that they would allow the continued existence of the New Territories de jure e.g. by extending the Lease, but they might be positively willing to allow us to remain in the Territories as good "sitting tenants". He cited the parallel of the treatment of the

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