TNAG-0850-FCO40-1060-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 106

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Department of Industry

DIVED IN REGA

- 9 OCT 1979

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NO. 51

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Abell House John Islip Street London SW1P 4LNA

Telex 918829 Telegrams Advantage: London SW1

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Telephone Direct Line 01-211 6950

Switchboard 01-211 3000

¡Mr Willia

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return tome.

RJ T MacLaren Esq

Hong Kong and General Department Foreign Office

Your reference

Our reference

Date

5 October 1979

SECRET AND PERSONAL

Dace Blac.

HONG KONG NEW TERRITORIES LEASES

-

Many thanks for your letter of 21 September and the attachment.

221

This is indeed a very important aspect for future commercial activity with Hong Kong the recent mission were at pains to criticize the apparently slow response of UK industry in investing in Hong Kong, and clearly uncertainty about the post-treaty period is an important factor.

It does seem to us, however, that the concept of an indeterminate lease has some legal and indeed commercial problems: one would need to convince business opinion that the indeterminacy reflected a longer rather than a shorter assumption of duration.

But, and no doubt you have already explored this aspect, a conversion of a finite lease into an indefinite lease could have a very significant bearing on the asset valuation of the investment an effect which could indeed be in both directions, depending upon the prevailing presumption.

It does just occur to us as a thought, though again we must be forgiven if you've trampled this path several times before, that it might be preferable to seek periodic duration pledges, to be endorsed by some agency of the Chinese Government e.g. some indication that the lease was regarded as having a perpetuity for, say, another 50 years. We recognise that this has the disadvantage of creating a boiling point at some date in the future, but these need to be weighed against the problems of the indeterminate concept.

We would very much appreciate it if you could keep us in touch with the way in which this issue is moving.

fun

Clin

C B BENJAMIN

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