TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 145

Private Secretary

SECRET

HONG KONG: NEW TERRITORIES LAND LEASES AND THE FUTURE

Problem

1.

To agree tactics on:

i) land leases in the New Territories; and

ii) the future of Hong Kong

which the Secretary of State might deploy during his visit to Peking.

Recommendation

2.

I recommend that the Secretary of State endorse the line

taken in the attached draft brief.

Background

3.

There has been substantial correspondence on these subjects

since the Secretary of State discussed tactics on land leases and

the future with the Governor last November. Although the Governor

and Sir P Cradock agree generally on the tactics to be adopted

with the Chinese, they disagree on certain important points. The

areas of agreement and disagreement are summarised below.

4.

Areas of Agreement. They agree that the Secretary of State

should raise with the Chinese the problem of land leases and that

this should be done with both Huang Hua, the Foreign Minister, and

Vice Chairman Deng Xiaoping. Both agree that the Chinese seem

reluctant to act over leases and that this may result in a run on

confidence in Hong Kong at some point in the future.

5.

Areas of Disagreement.

Where they disagree is on how far

to go with the Chinese now. The Ambassador feels that it would be

folly to delay practical discussion of leases until Hong Kong's

economy begins visibly to slide and that the Secretary of State

SECRET

/should