TNAG-0944-FCO40-1163-Future-of-Hong-Kong-1980 — Page 65

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SECRET

DSK TIC

SECRETARY OF STATE'S VISIT TO CHINA: FUTURE OF HONG KONG

Points to Make

1.

Problem discussed on several occasions between

Ministers, most recently during Premier 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

We agree.

begin thinking about the longer term.

2.

Appreciate Chinese assurances to intending investors

in Hong Kong. Do these assurances apply equally to lease-

holders in the New Territories? Would they be prepared to say

so publicly, or confidentially to intending investors?

3.

As Gu Mu himself remarked, there are certain specific

practical problems. These include the 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 (mortgages

normally run for 15 years). A solution has to be found

within 12 to 18 months. Otherwise commercial confidence

and possibly the 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 the

leases problem). The time is right for us to start talking

about ways in which leases might be issued on terms

acceptable to investors.

Suggest that officials open

discussions and that an exchange of views with

HM Ambassador continues after the visit (see supplementary

brief).

SECRET

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