TNAG-0848-FCO40-1058-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 22

Paper No:

CONFIDENTIAL

:

HONG KONG

1. With a population of 4,700,000, Hong Kong is by far the most

important of our remaining dependencies. It is a major force in

world trade, and an important financial and commercial centre.

Because China regards Hong Kong as Chinese territory the colony can

never become independent; for the same reason it does not have a

representational form of government.

Relations with China

2. Hong Kong/China relations are better than at any time since the

Communists came to power in China. Hong Kong provides over a third

of China's foreign exchange and is an important source of financial

and commercial expertise. The territory accordingly has a key role

in China's modernisation plans, and the maintenance of its stability

and prosperity is a major Chinese interest. Recent developments

include an official visit by the Governor of Hong Kong to China, the

first since 1949.

A

3. The Chinese have been trying to reassure local opinion and

foreign investors that they have no intention of taking over the

territory for a long time to come. The fact that the lease on the

New Territories is due to expire in 1997 does, however, create a

practical problem which cannot be dealt with by general assurances.

The increasingly short span of property leases in that part of Hong

Kong could soon begin to deter new investment unless some means can

be found to remove the significance of the terminal date. A possible

solution was put to the Chinese leadership during the Governor's visit

to Peking in March. A substantive Chinese reaction is awaited.

CONFIDENTIAL

/UK/Hong