TNAG-0850-FCO40-1060-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 230

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SPEAKING NOTE ON NEW TERRITORIES LEASES

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CHINESE ASSISTANT FOREIGN MINISTER, SONG ZHIGUANG, BY THE BRITISH AMBASSADOR ON 5 JULY 1979.

When Vice Premier Deng Xiaoping saw the Governor on 30 March, the Vice Premier spoke about the future of Hong Kong, the part it could play in the modernisation programme, and the need to maintain business confidence and investment. He said that he regarded Hong Kong as part of China and that one day China would wish to make political changes. But he could not say whether this would be before 1997 or even as late as the next century. However, whatever happened, special arrangements would be made to maintain living standards and guarantee investment. He therefore formally invited the Governor to tell investors in Hong Kong to put their hearts at ease. The Governor passed on this message when he returned to Hong Kong. This had a good effect. But as the Governor explained to the Vice Premier, there is a short-term problem about land leases which cannot be dealt with by general assurances of this kind, helpful though they are.

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The problem is that, at present, all individual leases for land in the New Territories end in 1997. The Hong Kong Government cannot grant leases beyond that period without speical legal authority. The remaining period of existing leases, and the period for which new leases can be granted are therefore steadily getting shorter. This does not prevent speculative investment, which also has the effect of inflating the price of land.

But it is already beginning to deter the type of industrial development of most value to the economy. Some very large and beneficial long-term investments are being made. But we know of many other cases in which the comparatively short length of lease offered by the Hong Kong Government has proved a deterrent. Such investors are not generally deterred by their assessemtn of the future policy of China towards

Hong Kong. But they are concerned about the legal limitation on their period of ownership imposed by the terms of the leases

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