TNAG-1039-FCO40-1289-Future-of-Hong-Kong-1981 — Page 204

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CALL ON MR RIDLEY BY THE GOVERNOR OF HONG KONG: 22 JUNE 1981

Present:

Mr Nicholas Ridley MP

Mr RJT McLaren

Mr R D Clift

Mr K D Temple

£25.6. pa

ра

Sir Murray Maclenose GBE KCMG KCVO

HKK 040/1

FUTURE OF HONG KONG

Plze

1. Sir M MacLehose described the present position following the Secretary of State's visit in April. He believed that we had wrongly assessed the position of Deng Xiaoping in 1979 and had thus gone in too early with our proposal for an interim solution on land leases. Looking ahead, it was wrong to pin down any particular date as being critical but there was general agreement that something would need to be done in a more concrete form before 1985. Meanwhile, the maximum possible should be made of China's economic involvement with Hong Kong in trade and in two-way investment. Mr Ridley asked about the development of joint ventures in Southern Guangdong. To what extent was free enterprise allowed?

Sir M MacLehose said that the normal system was for a Hong Kong

In return entrepreneur to be given the use of land for 25 years.

he would provide machinery, management down to foreman level and marketing services. There would be an agreement on the share-out of the product and profits. The Chinese were going to accept incentive schemes and piece rates but there was no guarantee that the individual worker benefitted from these incentives.

2.

Sir M MacLehose said that this position would be satisfactory if there were no 'time-bomb' in the form of the New Territories Lease. The Chinese were moving very slowly in considering the problem but there were signs that some studies were taking place. It was not a priority for Peking. Our tactics must be to keep needling but not banging the table, while emphasising that there was a mutual problem about which both sides must think carefully. A paper was being prepared in consultation between the FCO,

HM Embassy, Peking and Hong Kong, in case we had to move quickly if there were a slide of confidence in Hong Kong or if the Chinese showed themselves ready to talk.

3. Mr Ridley asked why leases could not be issued beyond 1997. Sir M MacLehose explained that legally he might be liable to be aused by a sub-tenant.

4.

Mr Ridley asked about the extent of weakening confidence in Hong Kong. Sir M MacLehose said that there was none in the economic sense but general concern had grown. The British Nationality Bill had focussed people's minds on the future and the press were keeping speculation going. Investors were not unduly troubled yet although there were limitations to the Chinese assurances, in particular the lack of realism in any notion that the Chinese could themselves

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