TNAG-1039-FCO40-1289-Future-of-Hong-Kong-1981 — Page 184

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€ 8 JUL 1981

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REGIST: Action, Tok

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THE FUTURE OF HONG KONG

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In 1979 and 1980 consideration was given in the FCO to the problem of the preservation of public and business confidence in the future of Hong Kong in the face of the existing limitations om British administration in the New Territories based on the 1898 Convention of Peking and the associated Order in Council which extended British administration to the New Territories. In 1979 the Governor's idea was to get round this by a new Order in Council with a reference to possible continuing British administration after 1997. This proposal was put to the Chinese but they turned it down flat.

Although commercial confidence in Hong Kong remains high, the subject of the future is absorbing much more public attention. Interest was revived when the Foreign and Commonwealth Secretary visited Hong Kong and Peking in March and April and although a reiteration of the earlier general assurances by the Chinese leadership was obtained, it is unlikely that these will continue to be adequate indefinitely.

For its part, the FCO recognise that HMG are not going to be able to get a quick solution out of the Chinese. They have made their reluctance to tackle it very clear. But HMG do need to be prepared for two contingencies. The first, perhaps the least likely, is that the Chinese will over the next year or so show themselves ready to discuss the problem substantively. The second is that doubts over the future and particularly over land leases in the New Territories might start a slide in business and public confidence in Hong Kong which would require very rapid action on HMG's part.

To meet these a draft paper has been prepared setting out various options and a copy of the present version of the draft is attached. Any views, both on the general question of possible abrogation or limitation by HMG of British sovereignty, and specifically on how HMG might tackle the problem of the 1898 Order in Council, would be very helpful.

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