TNAG-0943-FCO40-1162-Future-of-Hong-Kong-1980 — Page 164

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FM PEKING 2707172 MAY 80

TO PRIORITY HONG KONG:

TELEGRAM NUMBER 62 OF 27 MAY 1980

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HKK OHo.

RECEDED

INFO PRIORITY FCO (PERSONAL FOR MURRAY AUSS)NDEK

PERSONAL FOR GOVERNOR

- 2 JUN 1930

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9019/31

MY LETTER OF 13 MAY: LEASES AND THE FUTURE OF HONG KONG.

1. WHEN I WAS IN HONG KONG WE AGREED THAT WE WOULD REVIEW MATTERS AFTER THE FINANCIAL SECRETARY'S VISIT (YOUR TELNO 593 TO THE FCO). PHILIP HADDON-CAVE'S INTERVIEW WITH GU MU TAKES US SOME WAY FORWARD. GU HAS IMPROVED ON DENG'S ASSURANCES TO INVESTORS BY EFFECTIVELY AFFIRMING A CAPITALIST FUTURE FOR HONG KONG IRRESPECTIVE OF THE STATUS OF THE NEW TERRITORIES AFTER 1997. HE ALSO BROUGHT INTO THE OPEN THE LINK BETWEEN CONFIDENCE AND THE FUTURE, BY APPARENTLY TAKING THE POINT THAT THE CONFIDENCE WHICH IS ESSENTIAL IF HONG KONG IS TO PROCEED WITH MAJOR PROJECTS LIKE THE AIRPORT (WHETHER AS A COOPERATIVE VENTURE OR NOT) WILL NEED TO BE UNDERPINNED BY A PRACTICAL SOLUTION TO ISSUES LIKE THAT OF THE LAND LEASES, SO AS

TO GET BOTH CHINA AND THE UNITED KINGDOM OFF THE HOOK WHICH 1997 REPRESENTS. MOST IMPORTANT, WHILE SUGGESTING THAT A SOLUTION TO THE LONGER TERM FUTURE OF HONG KONG CANNOT BE DECIDED OR ANNOUNCED IMMEDIATELY, GU HAS SAID THAT IT IS HIGH TIME TO CONSIDER WHAT THE SOLUTION SHOULD BE. IT MAY BE (IN HIS WORDS) FOR CHINA TO FIND, BUT THE PROCESS OF DISCOVERING IT IS A MATTER FOR REFLECTION ON BOTH SIDES, AND WE ARE INVITED TO MOVE FORWARD WITH CHINA THROUGH CONSULTATION AND COOPERATION.

2. 1 AM SURE IT IS RIGHT THAT WE SHOULD PROCEED WITH CAUTION AND AVOID A REBUFF. BUT IT WOULD BE ODD IF HAVING BEEN GIVEN THIS OPENING WE DID NOT EXPLOIT IT. WE VERY MUCH NEED A CONFIDENTIAL DIALOGUE WITH THE CHINESE, THOUGH ADMITTEDLY IT MAY BE HARD TO ARRANGE ONE WHICH IS BOTH INFORMAL AND RELIABLE.

3.

ONE COURSE WOULD BE TO DO NOTHING UNTIL THE SECRETARY OF STATE'S VISIT IN OCTOBER AND THEN PICK UP THE POINT ABOUT CONSULTATION AND COOPERATION AND AFFIRM OUR WISH FOR A FRANK

DIALOGUE.

4. ANOTHER WOULD BE FOR ME TO CALL ON VICE FOREIGN MINISTER HAN KEHUA AND SUGGEST A CONTINUING DIALOGUE IN THE LIGHT OF GU MU'S REMARKS. THE FOREIGN MINISTRY WERE NOT AT GU'S MEETING SO THAT THERE WOULD BE THIS OPENING. HAN KEHUA IS AN AGREEABLE

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