TNAG-0943-FCO40-1162-Future-of-Hong-Kong-1980 — Page 293

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Mr Munpay

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⠀ SECRELNO. 51 4 MAR 090

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FUTURE OF HONG KONG: NEW TERRITORIES LEASES

1.

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I discussed this with the Governor and Political Adviser in Hong Kong and saw a copy of the Governor's letter of 22 February to Mr Cradock in Peking.

2.

The Governor fully accepts the need to move cautiously and not to appear to bounce the Chinese with another proposal which they must refuse. His line of concentrating on the assurances which the Chinese have already given to investors seems to me the right one. So does the idea of holding our horses until the Secretary of State's visit to Peking in the autumn although there may be an opportunity for the Governor to mention the subject in very general terms to the Chinese Foreign Minister when he is in Hong Kong next week.

3. Both the Governor and the Political Adviser believe that the Chinese might respond to our nudging by political demands in varying degree, from a renewed request for a Chinese Commissioner in Hong Kong to some kind of British acknowledgement of ultimate Chinese sovereignty. This is certainly possible, although I myself think that the political delicacy of the problem for the Deng administration inside China is more likely to restrain them for the time being. But we must certainly be prepared.

4. Partly for this reason I agreed with the Governor that we should start to look jointly at a number of legal problems. These are:

a) From the Hong Kong point of view whether the Government

has the right to issue Leases for a fixed term beyond 1997, eg for 25 years. Legal opinion in Hong Kong itself has varied on this point;

b) The implications for HMG of the appointment of a Chinese

Commissioner in Hong Kong;

c) The implications of any agreement or joint statement:t

with the Chinese which referred to Hong Kong being under "Chinese sovereignty" or a "Chinese territory" perhaps with the rider that it remained under British administration for an indefinite or fixed or stated term; (I do not know whether there are any precedents or pitfalls either in the US negotiations on the Panama Canal Zone or on the position of the Sovereign bases in Cyprus).

d) Any citizenship implications arising from (c) above.

What would be the effect on Hong Kong passport holders

if the area were stated to be a part of China?

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