TNAG-0848-FCO40-1058-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 42

Mr Murray

Private

Private Secretary

57

AKK 040/1

SECRET

RIZE:VIS

7 APR 1979

/

No £27.0

A

B/

(47

HONG KONG: NEW TERRITORIES LEASES

1. HM Ambassador in Peking has now reported on the conversations which took place on 29 March between the Governor of Hong Kong and Deng Xiaoping and other Chinese leaders, during which Sir M MacLehose raised the question of the New Territories leases (Peking telegram No 345).

2.

We will need to study the full records of conversation when they are available. In the meantime I agree generally with the comments in Peking telegram No 346. Our proposals for dealing with the leases problem have now been put to the Chinese leadership.

Deng Xiaoping's response suggests that he may not have fully under- stood the nature of the action we have in mind or the reasons why we think something like it will be necessary. But at least the reaction was not immediately negative, and Deng's general remarks about the future of Hong Kong were encouraging, particularly his

concern to reassure investors that whatever happened in 1997

investment would not be affected.

3. I agree with the Governor and Mr Cradock that we should now

let the matter rest for a while so that the Chinese can absorb

what has been said to them and consider the implications. There

will then be a need for further discussions. (I do not agree with the statement in paragraph 6 of Peking telegram No 346 that "when we are ready for the next step it may be enough to inform the Chinese of what we intend to do and when": we have not yet been given the green light). But it is unlikely that any decisions will need to be taken during the course of the next few weeks.

4. In his letter of 26 March to the Private Secretary Mr Cartledge

said that the Prime Minister considered that DOP should be informed

of any Chinese reactions to the Governor's soundings before the Secretary of State's departure for China. Although the situation has now altered, and there is clearly no need for Ministerial

discussion

SECRET