Foreign and Commonwealth Office London SW1A 2AH
EK L Paw son Esq
Heseltine, Moss & Company
4 King Edward Street OXFORD OX1 4HJ
Telephone 01- 253 5179
M
**
8
Your rufurunce
Our reference
Date 27 January 1978
HKX 040/
JA
No
Thank you for your letter of 17 January.
OFFICER
女
As I told you on the telephone, the New Territories lease expires in 1997, when, according to its terms, the island reverts to China. Hong Kong Island and Kowloon were ceded in perpetuity to the United Kingdom. While we have no doubts about the legality of our position in Hong Kong, the Government of the People's depualle of China do not recognise either of the Agreements on which our position is based, which they believe derived from unequal treaties. They have consistently maintained that the problem of Hong Kong will be resolved when conditions are suitable. Inderd, Li Chiang, the Chinese Minister of Foreign Trade, said last November: "The problem of Hong Kong and Macao is one that has been left over from history and will be settled in an appropriate way when conditions are ripe".
At present Sino-British relations are good, and Hong Kong has considerable practical value to China. Hong Kong is a very valuable source of foreign exchange revenue to China, and is an important staging post for Chinese exports.
With regard to investment prospects, there is nothing to indi- cate that short-term prospects should alter. In the longer term, it is difficult to be certain. Many things could happen between now end 1997. However, our belief is that China's interest in maintaining the health of the Hong Kong economy will certainly
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