TNAG-0850-FCO40-1060-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 121

SECRET

SECRET

GR 600

F

HONG KONG 270645Z SEP

AKKOHO

RECEIVED IN BEAMY 110. $1

PRIORITY FOREIGN AND COMMONWEALTH OFFICE

TELEGRAM MUMBER 1343 OF 27 SEPTEMBER, 1979.

INFO PRIORITY PEKING

(FILE)

195

1961

!

2E SEPAN

DESK O PROY

INDEX

FA

по

дно.

197

PEKING TELNOS 825, 826 AND 827: NEW TERRITORIES LEASES. 198 206

208

1. THE CHINESE ARE ENTITLED TO THEIR VIEW THAT THE LEGAL MEASURES WE PROPOSED TO MEET THE PROBLEM OF THE LEASES ARE INAPPROPRIATE''

AND, AT ANY RATE FOR THE MOMENT UNNECESSARY, BUT IT IS NONSENSE TO CLAIM OR IMPLY THAT THIS IS BECAUSE THE PROBLEM HAS ALREADY BEEN

COVERED BY DENG'S STATEMENT. THE LATTER, WITH ITS ASSURANCE TO INVESTORS, APPEARED TO REFER TO THE CONSEQUENCES OF POLITICAL CHANGE IN THE DISTANT FUTURE (HE DID NOT KNOW WHETHER IT WOULD BE BEFORE OR AFTER 1997 OR EVEN IN THE NEXT CENTURY), BUT THE LENGTH

OF LEASE WE CAN ISSUE IS NOW LESS THAN 10 YEARS AND BY THE TIME IT IS REDUCED TO 15 WILL PROGRESSIVELY DETER NEW INDUSTRY AND DRIVE EXISTING INDUSTRY ELSEWHERE, UNLESS THE CHINESE ARE CONTENT.

TO SEE INVESTMENT AND PRODUCTION IN HONG KONG FALL OFF (AND THIS WAS NOT DENG'S VIEW), THE PROBLEM, CAN BE LEFT FOR A YEAR OR TWO BUT NOT MUCH MORE BECAUSE ONCE THE PROCESS OF DECLINE IS STARTED IT WILL BE HARD TO REVERSE, AND SINGAPORE OR MANILA, NOT CHINA,

WILL DE THE GAINERS, SO IF THE SOLUTION WE HAVE SUGGESTED 13 UNACCEPTABLE ANOTHER MUST BE FOUND FAIRLY SOON,

2. IT IS HARD TO BELIEVE THAT THE MFA DID NOT UNDERSTAND ALL THIS.

SO I PRESUME THAT APART FROM AN UNWILLINGNESS TO TAKE A DIFFICULT DECISION BEFORE IT IS ABSOLUTELY UNAVOIDABLE, THIS RATHER UN- GRACIOUS AND CERTAINLY IRRELEVANT REPLY TO A REASONABLE PROPOSAL IS TO GAIN TIME, ON THE PRINCIPLE THAT THE LATER THE PROBLEM IS DEALT WITH, THE EASIER IT WILL BE TO DO SO ON THEIR TERMS -- PROBABLY WITHOUT ANY VERY CLEAR IDEA AT THE MOMENT WHAT THESE

MIGHT BE.

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See Hire 040/!.

1981

3. BUT WHATEVER THEIR REASONS FOR REJECTING OUR PROPOSAL TO ACT

NOW, THEY WILL FIND THAT AS TIME PASSES PRESSURE WILL MOUNT ON

THEM FROM THEIR OWN TRADING ORGAFISATIONS AND BUSINESS CONTACTS

IN HONG KONG TO SOLVE THE PROBLEM. AS AN EXTENSIVE MORTGAGE

HOLDER THE BANK OF CHINA HILL HAVE A SPECIAL

COURSE PARALLEL PRESSURES KILL MOUNT ON US.

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