TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 108

SECRET

-8-

DSR 11C

the Chinese may be more ready to meet us than they were on

the previous attempt.

11. We should make our approach to the Chinese initially

on the narrow issue of leases, and need to consider what

concessions the Chinese are likely to demand in return for

such a short-term holding measure. On the other hand, th

Chinese may not agree to such a step without dealing at the

same time with fundamentals, and since the latter have to be

faced in any case within the next 8 or 9 years, the longer

action on the medium-term issue is delayed the smaller the

concession it would be worth making to secure it as a means

of postponing the long-term problem.

Possible Chinese Demands in Medium-Term

12. During discussions on land leases one possibility is

SECRET

!