TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 38

DRAFT

SECRET

FUTURE OF HONG KONG: OPTIONS AND PROBLEMS

SUMMARY

1.

The attached paper reviews possible options for the future of

Hong Kong in the medium and long-term and the implications for

HMG.

conclusions.

This note summarises the main points and draws provisional

They will be greatly affected by the attitudes of the

Chinese. We know very little of their intentions and indeed it

is highly likely that they have not yet faced up to the issues

involved.

BRITISH AND CHINESE POSITIONS

2. HMG's interest in maintaining confidence in the Territory is

complicated by legal problems over the expiry of the New Territories

Lease in 1997. The Chinese Government share this interest, but

are not under similar constraints, and are likely to reserve their

position while giving general encouragement to Hong Kong's economic

stability. They will probably wish to delay coming to grips with

the long-term issues until much nearer 1997.

MEDIUM TERM

3. We need to reach agreement with the Chinese as soon as is

practicable on ways of maintaining confidence within the Territory

and among outside investors; the problem of individual land leases

is important here. The Chinese may meet us on this, possibly

through acquiescence in our actions rather than by formal

agreement.

In any

But it is equally possible that they may be reluctant

to admit the need for a solution, at least at present.

case, they might in return seek concessions from HMG on:

a) a British acknowledgement of ultimate Chinese sovereignty;

b) agreement to the appointment of a Chinese Government

SECRET

/representative

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