TNAG-1038-FCO40-1288-Future-of-Hong-Kong-1981 — Page 164

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SECRETARY OF STATE'S VISIT TO CHINA: FUTURE OF HONG KONG

1.

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Sir E Youde has described his discussions in Hong Kong and Peking following the Secretary of State's visit. It will be necessary to see what, if anything, comes of the exchanges between Sir P Cradock and Ambassador Ke Hua (Peking telegrams Nos 272 and 273).

2.

Meanwhile, we must examine possible ways of dealing with a future slide of confidence in Hong Kong, against the background of the Chinese repetition of their assurances. Hong Kong will consider the range of requirements which they would obtain to obtain with the Chinese. They will get HM Ambassador's ́in Peking advice on whether this would be negotiable and what price would be demanded for them.

3.

We should consider the question in parallel in order to be ready to deal quickly with the Hong Kong/Peking proposals. Our aim will be to submit a contingency paper to the Secretary of State.

4.

On the substance, ideas are still unformed but tend to focus on a possible arrangement for the Chinese (or both sides) to give a period of notice (say 15 years) of intent to change the status quo in Hong Kong. There are a number of variations on this which would include the removal in some way of the present legislation limitation on the Governor's authority in the New Territories after 1997 under the 1898 Order in Council. We would need to consider what price we might have to pay to the Chinese for their acquiesence in the removal of that limit, eg a Chinese representative or, more remotely, an acknowledgement of Chinese sovereignty.

5.

Ideas are tending to move away from extensions of land leases for say 25 years. Hong Kong now tend to believe that such concessions would only buy a short period of confidence in Hong Kong, Moreover, the signals from the Chinese are pretty clearly that they they do not want to follow this path.

6. We should at the same time revise the long-term paper which we should re-submit when we put the contingency proposals to the Secretary of State.

Prime Minister's Visit to China and Hong Kong: 1982

7.

There will be some high expectations that the Prime Minister will bring off some sort of agreement on Hong Kong. It will be necessary to time the visit very carefully in order to make success as likely as possible. Early in the year would probably be too soon.

8.

We shall need to be prepared to put the contingency plan to the Prime Minister before her visit if this seems appropriate in the light of the confidence position in Hong Kong.

CODE 18-77

$S 8/78

SECRET

/Confidence