TNAG-0944-FCO40-1163-Future-of-Hong-Kong-1980 — Page 20

GR 460

SECRET

SECRET

FM HONG KONG 290953Z SEP

TO IMMEDIATE FOREIGN AND COMMONWEALTH OFFICE-CCT 1980 TELEGRAM NUMBER 1265 OF 29 SEPTEMBER 1980,

INFO IMMEDIATE PEKINGG

Никоно

7 5 MO. $1

Мо

$3.10.

113A)

MY TELNO 1260: NOTE ON LEASES FOR POSSIBLE USE BY ŠIR E. YOUDE WITH CHINESE OFFICIALS

BACKGROUND

1. CHINESE OFFICIALS MAY ATTEMPT TO SOUND YOU OUT ON THE SIDE

ABOUT HOW TO TACKLE THE LAND LEASES PROBLEM. IF THEY TAKE THE

INITIATIVE IN THIS WAY, I THINK YOU SHOULD AVOID SUGGESTING

THAT WE HAVE REACHED FIRM CONCLUSIONS, AND ONLY GIVE GENERAL POINTERS.

2. IN THIS EVENTUALITY I SUGGEST THE FOLLOWING TALKING POINTS:-

TALKING POINTS

3. AS I SEE IT, THERE ARE TWO ASPECTS TO THE HONG KONG PROBLEM: LONG-TERM AND SHORT-TERM. WE ARE BOTH AGREED THAT MEANS MUST BE FOUND OF MAINTAINING HONG KONG'S PROSPERITY. THIS MEANS TAKING SOME SHORT-TERM ACTIONS TO GAIN TIME BEFORE CIRCUMSTANCES ARE RIGHT FOR A LONG-TERM SOLUTION.

4. THE KEY QUESTION IS RIGHTS TO LAND IN THE NEW TERRITORIES. THE DIMINISHING PERIOD OF LAND LEASES WILL SOON BE A SERIOUS DETERRENT

TO INVESTORS. THE CRUNCH IS LIKELY TO COME IN 1982.

5. WE MUST FIND A MEANS OF GIVING RIGHTS TO PROPERTY WHICH DO NOT AUTOMATICALLY END IN 1997. OF COURSE WE MUST DO THIS IN A WAY WHICH DOES NOT PREJUDICE CHINA'S POSITION ON THE LONG-TERM

FUTURE OF HONG KONG.

6. WE PUT FORWARD LAST YEAR THE IDEA OF LEASES WITHOUT A FIXED

TERMINATION DATE. BECAUSE OF BRITISH LAW THIS WOULD HAVE REQUIRED

LEGISLATION TO MAKE THE LEASES VALID. YOU MADE IT CLEAR THAT YOU

DID NOT LIKE THIS SOLUTION. WE HAVE THEREFORE NOT PURSUED IT.

7. WE HAVE NO FIXED IDEAS ABOUT WHAT THE ALTERNATIVES MIGHT BE.

HONG KONG PROPERTY DEVELOPERS, INCLUDING YOUR OWN AGENCIES IN HONG KONG LIKE CHINA RESOURCES, MAY SUGGEST SCHEMS WHICH WOULD

GIVE THE ASSURANCE NEEDED. WE ARE CERTAINLY OPEN TO SUGGESTIONS.

8. ONE POSSIBLE SOLUTION WOULD BE TO ISSUE STRAIGHT-FORWARD LEASES FOR SAY 25 YEARS. THIS WOULD BE LIKE PRACTICE IN MACAU.

SUCH LEASES WOULD GIVE CONFIDENCE TO INVESTORS. BUT THERE IS A THEORETICAL AND RATHER REMOTE POSSIBILITY OF A LEASE IN THE

NEW TERRITORIES STRETCHING BEYOND 1997 BEING CHALLENGED AT ANY

TIME IN THE COURTS. IF SO ITS VALIDITY COULD BE QUICKLY RE-

ESTABLISHED BY LEGISLATION.

SECRET

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