TNAG-1038-FCO40-1288-Future-of-Hong-Kong-1981 — Page 178

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HE SAID THAT HE HAD NOT OF COURSE ASKED DENG, BUT, AS HE UNDERSTOOD IT, ALL DENG INTENDED WAS TO REITERATE

THAT INVESTORS SHOULD PUT THEIR MINDS AT EASE. TAIWAN AND TIBET

WERE SIMPLY ADDUCED AS EXAMPLES TO SHOW HOW CHINA WAS

PREPARED TO LIVE WITH A DIVERSITY OF SYSTEMS.

5. I SAID I UNDERSTOOD FROM HIS REMARKS SO FAR THAT THERE

WAS NO CONTRADICTION BETWEEN DENG'S COMMENTS AND OUR OWN

INFORMAL CHAT. IT WAS IMPORTANT TO BE CLEAR ABOUT THIS

SINCE THERE WAS LITTLE POINT IN OUR DISCUSSION IF IT WAS

CONTRARY TO THE VICE-CHAIRMAN'S WISHES. HE REITERATED

THAT THERE WAS NO CONTRADICTION AND THAT IT WOULD ON

THE CONTRARY BE BENEFICIAL TO DISCUSS DETAILS IN AN INFORMAL

WAY.

6. I EXPLAINED TO HIM THE IMMEDIATE HONG KONG PROBLEM AS I

SAW IT, SAYING I WAS PUTTING IN MY OWN WORDS WHAT HAD ALREADY BEEN EXPLAINED BY THE GOVERNOR IN 1979 AND LORD CARRINGTON IN THE LAST WEEK. I SPOKE ABOUT INDIVIDUAL LAND LEASES, THE MORTGAGE PROBLEM AND THE DATE OF 1982, THE FACT THAT CONFIDENCE

COULD GO RAPIDLY AND A SLIDE WOULD BE DIFFICULT TO STOP ONCE

STARTED. THIS WAS SOMETHING INDEPENDENT OF THE VOLITION OF EITHER CHINESE OR BRITISH GOVERNMENTS, IT WAS A MATTER OF INVESTORS' CONFIDENCE. GENERAL ASSURANCES, HOWEVER WELCOME AND FULLY BELIEVED, WOULD NOT SUFFICE. MORE CONCRETE ARRANGEMENTS WERE ESSENTIAL. A LOSS OF CONFIDENCE AND THE RESULTING DAMAGE TO THE HONG KONG ECONOMY WOULD BE TO THE SERIOUS DETRIMENT OF THE CHINESE AS WELL AS THE BRITISH SIDE. THE TIMING OF SUCH A CRISIS COULD NOT BE PREDICTED ACCURATELY BUT IT COULD COME

BEFORE VERY LONG AND IT WOULD COME UNLESS SOMETHING WAS DONE ABOUT IT. IT WAS THEREFORE IMPORTANT THAT WE SHOULD PUT

OUR HEADS TOGETHER IN TIME TO DEVISE A MEANS OF AVOIDING THIS

DAMAGE WITHOUT PREJUDICING IN ANY WAY THE CHINESE GOVERNMENT'S POSITION.

7. I MADE THE ABOVE EXPOSITION AS CONCRETE AS POSSIBLE AND MADE

SURE THAT KE HUA GRASPED AT LEAST ITS MAIN FEATURES.

8. HE THEN ASKED ME TO PUT FORWARD OUR PROPOSALS FOR A

SOLUTION. I SAID WE HAD NOT GONE TOO FAR INTO THIS SINCE WE WERE NOT CLEAR ON THE CHINESE POSITION AND WE HAD

NO INTENTION OF ACTING CONTRARY TO CHINESE WISHES. THE 1979

PROPOSAL WAS ONE IDEA, BUT SINCE THE CHINESE HAD NOT APPROVED

IT WE HAD NOT PURSUED IT. BUT THE PROBLEM WAS STILL THERE. OTHER IDEAS WERE THE GRANT OF FIXED TERM INDIVIDUAL LEASES, SAY 20 TO 25 YEARS. ALTERNATIVELY, THERE COULD BE ROLLING

LEASES, IE EXTENDED FROM YEAR TO YEAR AUTOMATICALLY UNLESS THE HONG KONG GOVERNMENT SHOULD DECIDE THAT IT WISHED THE LAND

TO BE TAKEN FOR PUBLIC PURPOSES. THIS WAS PERHAPS LESS

ATTRACTIVE AS AN AID TO CONFIDENCE THAN THE FIRST OPTION.

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/HOWEVER

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