TNAG-0845-FCO40-1055-Visits-of-Foreign-and-Commonwealth-officials-to-Hong-Kong-1979 — Page 140

SECRET

VISIT BY MR PETER BLAKER MP TO HONG KONG: 23-25 SEPTEMBER 1979

EF NO. HK3c:

SUBJECTS FOR DISCUSSION WITH THE GOVERNOR

NEW TERRITORIES LEASES

THE PROBLEM

1.

Relations between China and Hong Kong are now better than at

any time since 1949. The Chinese have made it plain that Hong Kong

has an important part to play in China's modernisation programme;

that they expect the status quo to remain for a long time to come;

and that investors have no cause for concern about China's intentions.

All this has had a good effect on confidence. But there is one

practical problem which cannot be dealt with by general assurances

of this kind. The bulk of the territory of Hong Kong (the New

Territories) was leased from China in 1898 under an Agreement which

expires in 1997. The many thousands of land leases granted by the

Crown in the New Territories also end in 1997. Although there is no

immediate problem, the increasingly short span of existing leases,

and the inability of the Hong Kong Government to grant new leases

extending beyond 1997, will soon begin to deter investment unless

something is done.

THE PROPOSED SOLUTION

2. The solution which we have in mind is to issue future land leases

in the New Territories without a fixed term, and to convert existing

leases into indeterminate leases of the same kind. If this is to

have the desired effect on confidence, it will be necessary at the

same time to remove any legal obstacles on our side to the continu-

ation of British administration in the New Territories after 1997

provided, of course, that that is acceptable to the Chinese

Government at the time.

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SECRET

13.