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factor was how Hong Kong managed its fiscal affairs and maintained the strength of the Hong Kong dollar. A third factor was confidence. This had two facets. The first was the question of confidence in China. Because of the events of the last twelve years it would take time to rebuild this confidence. This was a fact which had to be faced. The second linked facet was
confidence in Hong Kong. When the Financial Secretary was in Peking he had had a very interesting discussion with Vice Premier Gu Mu. The Vice Premier had repeated what Vice Premier Deng had said about seventeen years not being too far ahead to consider what to do. He had said it was necessary to think how to solve the question of Hong Kong within the guidelines laid down by Deng, adding that, while it was too early for concrete solutions, the matter should be considered.
8. Vice Premier Gu Mu had also drawn a distinction between the major question of the future and technical problems such as the nuclear power plant, water supplies, and a new airport for Hong Kong. The Governor thought that the building of a nuclear power station or a new airport were inseparable from the matter of confidence.
Vice Premier Gu had said that the two sides should continue to discuss and solve technical problems. Although the Vice Premier did not say so, the Governor's own view was that one of these technical matters, which should be dealt with early on and in advance of the main question, was the length of leases to individual land holdings in the New Territories. He was not talking about the lease to the NT itself. These individual leases were now for seventeen years. Once the period got to fifteen or fourteen years, investors would start to move their money elsewhere. This was a technical question which needed to be considered. He himself had no solution to propose but he did think that the matter should be
solved within two or three years.
9.
Mr Liao said he understood. It was necessary to act in accordance with what Vice Premier Deng had said. Seventeen years was not long in terms of relations with Hong Kong. But it was a long time when one considered other changes in the world. He could not be sure what China's northern neighbour would do; what it did could affect the stability of Hong Kong. China was going to study these matters; concrete solutions. in the United States,
they could not yet put forward Liao himself had just spent 2 months but that had not helped him to know
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