TNAG-0944-FCO40-1163-Future-of-Hong-Kong-1980 — Page 5

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solution needs to be found by the end of 1981 as mortgages generally

run for 15 years. There are indications that the Chinese see the

granting of individual leases beyond 1997 as one way round the problem.

Indeed, although the request has not been confirmed, it has been

reported that a Chinese state trading organisation wants such a lease

for a New Town of 500,000 people it plans to build in the New Terri-

tories. It may be possible to develop an acceptable solution by the

granting of a number of such leases not only to Chinese organisations

but later also to Hong Kong developers, both Chinese and British.

Previous UK Proposal

6. The Chinese rejected a solution we proposed in July 1979. This

would have involved issuing leases without a terminal date. The

Chinese probably objected mainly to proposal for an Order in Council

that would make it possible for British administration to continue

after 1997 should the Chinese (and, of course, the British) Government

so wish.

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