TNAG-0849-FCO40-1059-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 112

HKK OYOLL

RASCO IN RIGSTY NC

1 6 AUG 1979

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HONG KONG IN THE 1980s

INTRODUCTION

1.

The last 12 months have seen dramatic changes in Chinese

attitudes towards the outside world, and towards Western countries

in particular. There have been no less striking developments in the relationship between China and Hong Kong, which is now better than at any time since 1949. What could become a dialogue about the future of Hong Kong was initiated during the recent visit of the Governor of Hong Kong to Peking. We cannot be sure where this will lead. But the Chinese have been put on notice that the expiry of the New Territories Lease in 1997 will begin to deter new

investment fairly soon unless corrective action is taken, and there seems a reasonable possibility that they will agree to a satisfactory arrangement. Barring a complete reversal of the policies of the present Chinese leadership, the continuation of British rule in Hong Kong through the 1980s should then be assured. It is possible that the status quo could be maintained for some considerable time after that, but we cannot realistically look further ahead than the

next ten years.

2.

Against this background, this paper considers British interests in Hong Kong, compares them with those of the Chinese, and sets out some of the issues which are likely to arise over the years and some of the considerations which will affect the formulation of British policy.

BRITISH INTERESTS

3. There are advantages and disadvantages for Britain in the Hong Kong connection. The advantages are now perhaps more apparent than they were a few years' ago. In the post-Mao era Hong Kong has proved a very positive factor in the development of relations between Britain and China (see paragraph 6 below). Hong Kong is in itself an increasingly important market for British goods.

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