TNAG-0945-FCO40-1164-Future-of-Hong-Kong-1980 — Page 46

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SECRET & PERSONAL

In reaching these conclusions full weight was given to Percy Cradock's view that we should take the initiative in discussing possible solutions to the land leases question with the Chinese, and should seek to establish a dialogue with them. But, on balance, the Secretary of State took the view that, in the short-term at least, we should leave more time for the pressure to be put on Peking by their own people and visitors from Hong Kong than by

us.

6 We will of course need to work out a position during 1981 in the light of the Secretary of State's visit and any Chinese moves. It may be that they will not be prepared to examine practical solutions in any detail until they see clearer signs of business confidence slipping in Hong Kong; that might not be until late 1981 or even 1982. Much the most satisfactory course for us would be to use concrete cases (eg Tin Shui Wai) to build up an arrangement which would allow for land leases to run beyond 1997. That would probably lead naturally into a discussion on various possible types of determinate or indeterminate leases, and possibly the question of the need for legislation in Hong Kong.

7 If things work out like that, well and good. If the Chinese remain coy, we may need to take the initiative with more definite proposals. On timing we may be influenced by the timing of the Prime Minister's visit to China, which now looks more likely to take place in 1982 than in 1981. Whether we can wait that long we shall have to decide in the light of what happens during the Secretary of State's visit. Equally we cannot afford to rush things and risk another rebuff.

8 There is however an area where work should start immediately. We need to clear our minds on the issues involved in any change in Hong Kong in the longer term. It is not to be excluded that we shall find ourselves having to face a Chinese counter proposal for some kind of concession on sovereignty on our part at some stage. In any case, Ministers need a full and up-to-date summary of the whole range of problems which a shift in Hong Kong's status could involve. The Secretary of State agreed that a paper should be prepared to consider implications for HMG in a number of possible options, including likely Chinese ideas on the development of a special status for Hong Kong. This will be a highly sensitive study and will have to be handled on a strict need to know basis. HKGD have begun work on this, and we shall be sending you and Percy Cradock an early draft.

cc:

Sir P Cradock KCMG Peking

Упо им hoty

Edward Youde

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SECRET & PERSONAL