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the leases in isolation, as a matter of British domestic administration. If so, well and good. However once we make the approach we cannot be sure where the discussions will take us, and we must be prepared for the Chinese to put counter- suggestions. To take account of this possibility, we have prepared a note on the type of demands the Chinese might make when we are asked for their agreement to our proposal on the leases. This is attached at Annex C. Our starting point must be that we want their concurrence, including agreement to say if necessary that we have consulted them and they have raised no objection, but without giving them anything in return. This is not unreasonable because the step proposed is in our mutual interest and is without prejudice to China's long-standing position on Hong Kong. With this background, the paper considers the form of response we should make to each of the possible Chinese demands. Of course anything is possible, but we hope we have covered the most likely points.
Timing
11.
The prerequisites as we then saw them were set out in paragraphs 2 - 5 of Sir Denys Roberts' letter to you of 6 July, ie:-
a)
That the successor regime to Mao/Chou En-lai should be firmly in the saddle.
Comment: Percy Cradock made clear in his letter of 8 August that this condition was met. I agree.
But still feel that the new regime remains very preoccupied with domestic and external adjustments. I therefore suggest that the timing is not yet idea 1.
b) That the situation over the leases can be
seen by the Chinese to be an actual and urgent one. They would understand that we would not wish to wait until things began to slide, but on the other hand they might be suspicious and impatient of an approach about a situation they considered still some years off.
Comment: It must be quite clear to Chinese officials in Hong Kong that the leases are going to present a very real problem and already present a minor one. But the excessively high price of land in the New Territories, and the absence of problems connected with major
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