TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 46

A&

Medium Term

8. It would be surprising if the Chinese Government were ready to

move significantly within the next 5 years on the problem as a whole.

Without such a move, we will be faced with a problem of failing

confidence amongst investors, the public service and the public, in

which the shortening length of property leases in the New Territories

will be a trigger point. We cannot forecast when this will be a make

or break issue. It will become progressively more acute from 1982

onwards, but it could reach crisis proportions at any time as a result

of extraneous events. It may be expected that the onset of a slide

in confidence would be marked by an unprecedented crescendo of

representations in business circles and the press, and would be fully

apparent to the Chinese. There could be as long as a year between the

onset of a slide to a complete break in confidence.

9.

Something definite on individual land leases which reconciled

Chinese political and British legal requirements would sustain

confidence for a time at least. This extra time could be important

in Chinese political terms. In the final analysis, however, confidence

will depend on agreement on all aspects of administration, not just

leases, post-1997. There is at present an underlying assumption in

Hong Kong that such agreement will be reached, and the real importance

of a deal on leases is that it would maintain that assumption a little

longer. But even with something on leases, the main issue of the

future could not be evaded indefinitely, and probably not beyond about

1989 or 1990 at the very latest. By then the 1898 Order in Council

will no longer provide a credible basis for the future of British

administration and must be amended, or replaced by something new that

offers a judicial basis for law and administration over a period that

passes 1997.

SECRET

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