TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 45

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Deng Xiaoping 'formally requested the Governor to ask investors to

put their hearts at ease: It was China's long term policy to regard

Hong Kong as a special case, no matter what political solution was

reached by 1997' (record of talks, 29 March 1979). He said 'there

were two solutions by 1997: to take Hong Kong over, or to allow

Whatever political solution was adopted,

present realities to remain.

investors would not be affected'.

But the Chinese have stopped short

of any specific undertaking on the continuance of British administration

beyond 1997. Faced with major internal problems, they have shown no

disposition to come to grips with the Hong Kong issue.

6. Even if the Chinese saw advantage in ignoring the Peking Convention

of 1898 and allowing Hong Kong to continue more or less as at present

beyond 1997, any acts of administration by the Hong Kong Government

relating to the post-1997 period, including issue of leases, would be

ultra vires without amendment of the 1898 Order in Council, which makes

the Governor's powers of jurisdiction co-terminal with the Lease.

7. Within these constraints HMG must examine the problem in the

medium and long-term. For the next 5 years and beyond, the main

objective must be the improvement of Hong Kong's economic potential

and prosperity (and thus its value to China), preservation of

confidence among investors and the public service, and contentment

among the Hong Kong population, against a background of the shortening

Lease of the New Territories. This will become increasingly difficult

and eventually impossible beyond some time in the second half of this

decade in default of arrangements for beyond 1997 that are acceptable

to investors and the population.

It is therefore necessary to consider

possible options for a pre- or post-1997 settlement and the problems

these will raise.

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