TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 146

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B

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should propose official talks forthwith to prod the Chinese into

facing the problem.

The Governor, His views are at Flag A.

however, argues that a premature request for talks might invite

a rebuff and that the Chinese will act only when the consequences

of inaction are made manifest. He feels that talks should be

proposed only if Deng shows clear appreciation of the problem

and its urgency. The Governor's views are at Flag B.

Argument

6.

Handling.

The Governor and the Ambassador have pronounced

views on how the subject should be handled. We cannot discount

the Ambassador's argument that Hong Kong's economy may slide as

a result of procrastination. But, the Governor takes the view

that we should get a reasonable period of warning of such a slide,

which would allow us the latitude we need to get the timing of our

approach right. He must be the best judge of this. We should be

ready, however, to change our tack should circumstances in Hong

Kong require it.

7.

The land lease problem, while not the only factor affecting

confidence, has become something of a symbol in Hong Kong. As

the Governor and the Ambassador point out, the Secretary of State

could hardly go to Peking now and not raise the related matters of

confidence and land leases. But we must take care not to connect

leases too closely with the longer term. Evidence is that the

Chinese are wary of this, and earlier hopes that their stake in the

Tin Shui Wai project might lead to agreement on a new type of lease

have thereby foundered.

8.

Level of Approach. The Secretary of State is bound to mention

these problems initially to his host, the Foreign Minister, but the

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