TNAG-0850-FCO40-1060-Future-of-Hong-Kong-New-Territories-leases-1979 — Page 79

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10 OCT 1979

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PRIME MINISTER

1.

Hong Kong: New Territories Leases

*

In my minute of 2 July I said that I had authorised

the Ambassador in Peking to approach the Chinese on the

question of land leases in the New Territories of Hong Kong,

and undertook to keep you informed of developments.

2.

The Ambassador took action on 5 July; on 24 September

the Chinese gave him their reply. While friendly in tone

it referred to the legal steps which we had in mind as

"unnecessary and inappropriate" and warned of adverse repercus-

sions should we persist. The reply recalled the remarks made

to the Governor by Vice-Premier Deng Xiaoping in March, when

he said that China regarded Hong Kong as Chinese territory but

that when the time came to deal with this question in the

future, the Chinese would take account of the special

circumstances of Hong Kong and would not harm the interests of the investors. It suggested that these remarks should

serve to stabilise the confidence of investors. I attach

copies of Peking telegrams Nos 825-827 containing, respectively,

the Ambassador's report on his call at the Foreign Ministry,

the text of the Chinese memorandum, and Mr Cradock's comments; and of Hong Kong telegram No 1343 which records the Governor's

views.

3.

The Chinese response is disappointing, and the reasons

for it are not altogether clear. It may be that they regard our proposal as premature, or that they consider the future of Hong Kong as a matter for their decision alone, and that

they are unwilling to allow us to appear to be taking the lead

in any way. They may also have in mind the implications for their relations with Taiwan. Whatever their reasons, the message

is plain enough and there can be no question of going ahead with our original plans. However, the problem of the land leases

will have to be solved sooner or later if confidence in Hong

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