TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 106

Medium Term

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DSR 11C

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8. It would be surprising if the Chinese Government were

ready to move significantly within the next 5 years on the

problem as a whole.

Without such a move, we will be faced

with a problem of failing confidence amongst investors, the

public service and the public, in which the shortening Fength

of property leases in the New Territories will be a trigger

point. We cannot forecast when this will be a make or break

issue. It will become progressively more acute from 1982

onwards, but it could reach crisis proportions at any time

as a result of extraneous events. It may be expected that

the onset of a slide in confidence would be marked by an

unprecedented crescendo of representations in business

circles and the press, and would be fully apparent to the

Chinese. There could be as long as a year between the onset

of a slide to a complete break in confidence.

9. Something definite on leases which reconciled Chinese

political and British legal requirements would remove this

trigger and sustain confidence for a time at least.

This

extra time could be important in Chinese political terms.

In the final analysis, however, confidence will depend on

agreement on all aspects of administration, not just leases,

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