TNAG-0945-FCO40-1164-Future-of-Hong-Kong-1980 — Page 4

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SECRET AND PERSONAL

Views may

4. My second point is that time is getting short. differ on the precise point when, in the absence of a satisfactory solution, business confidence in Hong Kong could begin to slide; but it is common ground that the date is not far away.

I had a very useful talk when in Hong Kong in early December with the Governor and some of his advisers. I do not want to misrepresent that talk, and Murray may have his own comments, but I think it was agreed that the deadline at the latest was the end of 1982. By a deadline I mean a date by which a satisfactory solution to the land leases question, agreed with the Chinese and publicly available, would be on hand. Differing views were expressed on the advantages of waiting within that time frame for the problem to begin to show through in the market and hence in more striking fashion to the Chinese. I myself think this a a very risky course; moreover the clearer the financial pressures the greater the need for a really substantial statement or act by the Chinese to restore confidence.

5. Working back from the date of late 1982, which is our deadline, we have to allow a considerable interval for soundings, talks, possibly negotiations, with the Chinese. We would of course try to confine such talks to the narrow technical issue of the individual land leases; but we must allow for a considerable possibility that the Chinese would seek a political quid pro quo and would enlarge the talks to cover the question of sovereignty and/or Chinese representation in Hong Kong. any event, even when a suitable channel for talks was set up, we would have to allow time for submissions to Ministers/leaders on each side as talks proceeded. I think a year for such talks would not be too generous an allowance.

In

6. This brings us back to 1981. At some point in 1981 if nothing satisfactory has emerged we shall have to approach the Chinese with the suggestion of talks. I myself would prefer this proposal to be made during the Secretary of State's visit in April, but I know this is not the Governor's view. However, both Murray and I agree that if nothing adequate has emerged by September/October 1981 we would then have to recommend that a request be put to the Chinese for such talks. There is a drawback that there is no suitable Ministerial visit so far planned for the autumn. But the approach might be made in September when the Secretary of State might be seeing Huang Hua at the United Nations, or another occasion could of course have presented itself by then. We are, therefore, in practice deciding simply between April 1981 and September/October 1981.

7. I now turn to your paragraph 7 with its references to the possible need if the Chinese remain coy for us to take the

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SECRET AND PERSONAL