CONFIDENTIAL
BACKGROUND NOTE
THE FUTURE OF HONG KONG
1.
The island of Hong Kong was ceded to Britain in perpetuity
by the Treaty of Nanking of 1842, which ended the Opium War.
In 1860 the southern part of the Kowloon peninsula was added
to Hong Kong by the First Convertion of Peking. A second
Convertion of Peking, in 1898, enlarged Hong Kong still further
by what is now known as the New Territories.
This latter
portion was however leased, not ceded. On 30 June 1997 the
lease and Britain's legal rights over the New Territories
expire. Without this area, Hong Kong would cease to be viable
as an economic unit.
2. The treaties mentioned above are mong those viewed by the
Government of the People's Republic of China as
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unequal"
•
The Chinese Government nevertheless derives major economic
benefit from Hong Kong. The official Chinese view is that
Hong Kong is part of China temporarily administered by the UK,
a problem left over from history that will be solved when the
time is ripe.
3.
Business and public confidence in Hong Kong, while at
present good, are likely to weaken over the next few years
unless the Chinese give firmer indications about the future.
They have shown themsleves to be aware of the general problem
and have gone some way to providing such assurances. In
March 1979, China's leading political figure, Deng Xiaoping,
asked the Governor of Hong Kong, then paying his first official
visit to China, to tell investors to "put their minds at ease"
over Hong Kong. In May 1980, Vice-Premier Gu Mu went further,
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