TNAG-1037-FCO40-1287-Future-of-Hong-Kong-1981 — Page 47

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This would have

10. Contacts at ministerial level and between the Governor and

Chinese leaders have produced general assurances for investors but

no specific acceptance of land lease extensions. In particular the

Chinese rejected a British proposal in 1979 which would have

eliminated the terminal date in the 1898 Order in Council of the

Governor's power to grant leases and exercise jurisdiction, without

prejudicing Chinese options in the long-term.

enabled them to ignore 1997 if they so chose. This option does

not exist at present because of the restrictive effect of the 1898

Order in Council. When significant signs of lack of business

confidence appear, the Chinese will be compelled to address themselves

the problem in a way that they were not on the previous attempt

though they are unlikely to agree to the proposal rejected in 1979.

But the signs at present are discouraging. They have shown no

to

11.

willingness to do more than listen to our expositions of the problem.

Any approach to the Chinese should be made initially on the

issues of general confidence and land leases, but need to consider

what concessions the Chinese are likely to demand in return for any

short-term holding measure. On the other hand, the Chinese may

not agree to such a step without dealing at the same time with

fundamentals.

Possible Chinese Demands in Medium-Term

12. During discussions on land leases the likelihood is that the

Chinese would seek concessions on our part to enhance their political

and legal position. They might not press such proposals too far,

recognising the need to maintain confidence within the Territory and

among potential external investors. But they could look for

concessions in the following areas:

a)

Sovereignty; the Chinese might seek a change in our

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