TNAG-0847-FCO40-1057-Visits-of-Sir-Murray-MacLehose--Governor-of-Hong-Kong--to-th-1979 — Page 52

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NEW TERRITORIES LEASES

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.

2. The solution which we have in mind is to issue future leases in the New Territories without a fixed term, and to convert existing leases into indeterminate leases of the same kind. There would be a need for legislation in Hong Kong and a covering Order in Council in the UK would be highly desirable. This solution would be consistent with the Chinese view that Hong Kong is Chinese territory, and with their desire to keep their options open as to its future. But it would be interpreted by public opinion in Hong Kong as an indication that the Chinese did not rule out the possibility that British administration in Hong Kong might continue after 1997, and it would thus provide a boost to confidence as well as dealing with the legal problem posed by the terminal date in the leases.

3. It would, of course, be essential to ensure that there was no Chinese objection before going ahead. With the authority of the previous Government, therefore, the Governor of Hong Kong outlined the proposed solution to Deng Xiaoping and other Chinese leaders when he visited Peking in March. Deng did not specifically endorse the idea but did not react adversely. Ministers will need to decide in due course what action should be taken to follow up the soundings taken by the Governor.

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