TNAG-0944-FCO40-1163-Future-of-Hong-Kong-1980 — Page 50

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are written to expire in 1997; there is a risk that, as this date

draws closer, businessmen will cease to invest there leading to

a serious loss of confidence. The Hong Kong Government's assessment

is at Annex A.

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.

Possible Official Talks

7.

Chinese leaders may not be ready for detailed discussion of the

problem, particularly just after the formation of a new government.

But there may be an opportunity for further talks between officials.

A supplementary brief for this is attached.

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