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DSR 11C
policy had been seen to be consistent and stable over a
considerable period investors would have no faith that any
of these conditions would be met under Chinese rule.
8.
A solution to the Crown land leases problem might in
the short term boost confidence in Hong Kong's future, but
it will be insufficient as a confidence-builder unless it
happens soon. Although business confidence is reasonably
high at present, it is brittle, and already under pressure,
largely as a result of world economic uncertainty. In
addition there are other, non-commercial political causes
of strain (eg worry over nationality status). Without clear evidence of Chinese acquiescence in continuing
British administration after 1997, disinvestment will start
probably by 1985 and possibly at any time from 1982 onwards.
9. An obvious slide in confidence and in particular a
collapse of the Hong Kong dollar, might shock the Chinese
leadership sufficiently to make them ready to discuss
practical ways of bolstering confidence (although we have
to accept the possibility that they might be prepared to lose most or even all of their present economic advantages from the territory if they found the question politically too hot to handle). Alternatively, but much less probably, the
Chinese may over the next two or three years, be ready to enter a dialogue without such a threatening incentive. Actions to halt a slide in confidence or to respond to a
Chinese initiative
10.. The following possible actions are graded in a rough order of ascending difficulty for the Chinese. An important
feature of most of the proposals is that any action to extend British administration would, to be credible, require amendment or replacement of the 1898 Order in Council providing for and defining the length of jurisdiction in the New Territories (Annex B), almost certainly with Chinese agreement or at least their readiness not to object to the legislation if challenged. The Departmental Legal Adviser and the Attorney-General's Office are of the opinion that any amendment would need explicitly to make clear the intention of HMG to administer the New Territories beyond 1997. A number of the proposals also
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