TNAG-0944-FCO40-1163-Future-of-Hong-Kong-1980 — Page 47

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LORD CARRINGTON'S VISIT TO CHINA: 2-6 OCTOBER 1980

BRIEF NO 8(b):

LONG TERM FUTURE OF HONG KONG AND INDIVIDUAL

LAND LEASES IN NEW TERRITORIES

POINTS TO MAKE

PREVIOUS CONTACTS

1.

Problem discussed on several occasions between Ministers, most

recently during Chairman Hua Guofeng's visit to London. Also useful

contact with Hong Kong officials. Have noted in particular Vice

Premier Gu Mu's remarks to Sir Philip Haddon-Cave. Note that he

said it was time to begin thinking about the longer term. We agree.

CHINESE ASSURANCES

2.

Appreciate Chinese assurances to intending investors in Hong

Kong. Do these assurances apply equally to leaseholders in the

New Territories?

Would they be prepared to say so publicly, or

confidentially to intending investors? In any case I shall have to

make some public comment for the press about our discussion

on Hong Kong.

LAND LEASES

3. As Gu Mu himself remarked, there are specific practical problems.

These include problem facing investors over land leases in the New

Territories. Legal and financial difficulties will get more acute,

particularly when there are less than 15 years to go to 1997 (mort-

gages normally run for 15 years). Solution has to be found within

12 to 18 months. Otherwise commercial confidence and possibly Hong

Kong dollar could be affected. If there is a loss of business

confidence it would be difficult to recover and Hong Kong economy

could cease to grow.

4. (If the Chinese ask for our views on a solution to leases

Time is right for us to start talking about ways in which

problem)

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/leases