TNAG-1036-FCO40-1286-Future-of-Hong-Kong-1981 — Page 87

DRAFT

SECRET

FUTURE OF HONG KONG

OPTIONS AND PROBLEMS

DSR 11C

1.

The attached paper reviews possible options for the

future of Hong Kong in the medium and long term and the

implications for HMG. This note summarises the main points

and draws conclusions.

BRITISH AND CHINESE POSITIONS

2. The present British interest in maintaining confidence

in the Territory is complicated by, legal problems over the

expiry of the New Territories lease in 1997. China, which

shares this interest, is not however under similar constraints

The Chinese Government are likely to reserve their position

while giving general encouragement to Hong Kong's economic

stability. They will probably delay coming to grips with the

long-term issues until much nearer 1997, but will not feel tied to action geared to that particular date.

MEDIUM TERM

3.

We need to reach agreement with the Chinese by the end

of 1982 on a means of extending individual land leases in the

New Territories; this is the most immediate problem affecting

confidence. The Chinese may meet us on this, probably

through pragmatic moves rather than formal agreement.

they might in return seek concessions from HMG on;

SECRET

However

Dd 0532000 400 M 5178 HMSO Bracknell

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