TNAG-0849-FCO40-1059-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 154

SECRET

020/393/2

RJT McLaren Esq HK & GD FCO

BRITISH EMBASSY,

PEKING.

23 April 1979

Fran Romin

VISIT TO CHINA AND THE LEASES

If he the

I agree

I have seen the Governor's letter to you of 10 April with the general comments he makes on his visit The Chinese clearly put themselves out for him.

So far as the future of Hong Kong is concerned, Deng spoke boldly and, by Chinese standards, clearly, I agree, he also coupled Taiwan and Hong Kong. This may be the first time Deng has done it; but it was virtually inevitable The Chinese tendency all along has been to mention compatriots in terra IrredentaTaiwan, Hong Kong, Macao in one breath. And Deng, now personally occupied with the Taiwan issue, could not do or say anything about Hong Kong that might cut across his Taiwan policy. No surprises here. But there is the difference in practice that for China Hong Kong is an economic bird in the hand, which she will certainly not wish for the moment to endanger. I am sure that the Chinese will take this difference into account in framing public statements about the future

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3. There is not a great deal that we can do to prevent the Chinese saying what they will. However, I should still expect it to be on the lines that investors should feel at ease put that, on sovereignty, China's position was unchanged Hong Kong (without differentiation between the New Territories and the rest) was Chinese territory, and would at the appropriate moment return to the motherland. The essence of what Deng said was, as I see it, just that that sovereignty certainly belonged to China (which is hardly new), but that the time when sovereignty might be exercised was uncertain. On this he kept his options open, and in his later remarks he clearly recognised the possibility of "allowing present realities to remain" after 1997. I thus see problems 1 and 2 posed by the Governor, in a slightly different and perhaps more reassuring light.

4.

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So far as problem 3(i) is concerned, I agree that Deng did formally object to the use of (or rather said, as an immediate response, that it would be best to avoid) a phrase which mentioned the continuation of British administration. Furthermore in the afternoon Liao Chengzhi said he could go no further than what Deng has said. As the Governor acknowledges, the issue was put virtually cold to Deng, and it is uncertain how clearly he understood it. Nevertheless it might be advisable to have another phrase, if one can be found without too much effort.

15. On the