TNAG-0945-FCO40-1164-Future-of-Hong-Kong-1980 — Page 29

4.

The unresolved Lease Problem has held up some major projects in HK, the most important of which is a second airport a contract of at least £1bn. some of wh

could reasonably be expected to come Britain's way. We shall go on to discuss the Lease Problem in the discussion, but its origins, i.e in the differing attitude of the govts. of UK and the PRC as to the legality of the 19th. century Treaties that define lik are relevent here.

Some aspects of aviation and shipping around HK are complicated by the differing attitudes of both sides to the legal position of HK in international law. This has, in the past, held up British Airways securing landing rights in China for many years. China has more than once proposed the stationing of some sort of representative in HK and this proposal has been keenly resisted by the HK Govt. on the grounds (likely enough) that such a representative would become the second Governor and begin the erosion of British sovereignty there. The PRC proposal on representatives has, in the past, been linked to specific agreements in other fields, such as aviation.

What I am trying to say here is that some sections of British industry are seeing the continued British presence in HK as a barrier to expanding trade with China. Only part of this feeling is justified, the rest is more like seeking a scapegoat for the persistent failure of the British share of the market the develop. For them, I may be a useful spot to have a base for sales missions in China, a place where English is widely understood, where you can get roast beef and Yorkshire Fud and telex facilities (neither of which are easily obtainable in Peking ), but not much use for anything else. Insofar as HK does have special expertise and contacts inside China, some businesspeople fear that renting that expertise from the HK-based hongs costs them more than it is worth by the time that agency fees, consultation fees, inside information passed and entertaining are all included in contracts which are negociated in any case to very fine profit margins by the State Trading Corporations in China.

To sum up. Continued Pritish retention of Hongkong is a mixed blessing for Britain: a big gain for the City, a problem for industry and no particular use (and perhaps a barrier) to trade with China. Little of the opposition to HK, aprt from the labour movement, has surfaced, but equally, little evidence (other than some tolerably vacuuous statements of general support) is availble to show Britain digging its heels in to try to retain HK when China indicates the time is up. For instance, no guarantees, such as have been made quite explicitly that no change of status quo contrary to the wishes of the inhabitants of Gibraltar or the Falkland Islands, have ever been made for HK. The PRC seems uninterested in solving the Lease Problem for the colony and no viable solutions have been dreamed up (at least none in public ) on the British side. It is possible to interpret the lack of provision for any change of status quo in HK in the Tory White Paper on Nationality Law (Cmnd. 7987, para 97.) in two ways, Either no change of status is contemplated to my mind an untenable thesis or that a change is on the cards which UK is powerless to resist and/or lukewarm about anyway and the new legislation is designed to prevent any claim on British responsibility after the reversion. The initiative is in China's hands and the date is not very far away.

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The additional troops provided for in the latest defence agreement are NOT recquired for anti-illegal immigration control: this has fallen almost nothing following the abolition of the "touch-base" rule. The first of the extra two battalions arrives in early 1982. Perhaps, by then, the picture will be a little clearer.