TNAG-1040-FCO40-1290-Future-of-Hong-Kong-1981 — Page 46

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DSR 11C

On the British side, the

Unless new powers are taken,

the significance to them of 1997.

legal position is clear cut.

the Governor's right to administer in the New Territories

ceases in 1997. In British law there is a distinction between

the New Territories and the rest of Hong Kong which is held

in perpetuity. But, in practical terms, the whole territory

is now indivisible. The Lease problem therefore affects the

future of the whole of Hong Kong.

5. So far attempts to get the Chinese to focus on this

problem, including specific suggestions for an interim solution

made in 1979, have failed. For the Chinese leadership, doing

anything to prolong British administration is a political

minefield. They are happy with the present position by

which Britain administers Hong Kong and China gains great

economic benefit from it. But they have made it clear that

they are in no hurry to deal with the problem of the future.

They believe that the generalised assurances they have

already given (investors should 'put their hearts at ease'

whatever happens their interests will be looked after) are

sufficient. This is not the case because unless uncertainty

over the Governor's powers after 1997 is removed, confidence

will fade quite soon. Moreover, administration will become

increasingly difficult as the time for which the Government

can legally commit itself shortens.

6. When the Chinese are prepared to discuss the future,

parallels with their policy towards Taiwan suggest that they

might concede a wide degree of autonomy in return for a

British concession on sovereignty.

It is uncertain whether

the Chinese would be able to accept a form of autonomy includ-

ing formal agreement to continuing British administration.

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