TNAG-1041-FCO40-1291-Future-of-Hong-Kong-1981 — Page 107

DRAFT OD PAPER

SECRET

DSR 11C

THIS DOCUMENT IS THE PROPERTY OF HER BRITANNIC. MAJESTY'S GOVERNMENT

[ PAPER NO ]

[ DATE ]

CABINET

COPY NO

DEFENCE AND OVERSEAS POLICY COMMITTEE

FUTURE OF HONG KONG CONTINGENCY OPTIONS

Memorandum by the Secretary of State for Foreign and Commonwealth Affairs

1.

The attached paper outlines problems over Hong Kong's

future as the end of the New Territories Lease in 1997

approaches. The present Chinese administration value the grea

economic benefits that China derives from Hong Kong, and have

2.

They have prob-

given general assurances to investors there.

ably not decided what to do about its future.

ignore 1997.

British administration continuing beyond then, but might

contemplate this in return for a major concession by us.

HMG could continue with the present position except

that the legal basis of our administration of the New Terri-

tories will expire in 1997. Meanwhile concern about the

future is growing in Hong Kong. When confidence falters it

could slide quickly, leading to financial collapse while

responsibility still rested squarely with HMG. We would face

major problems (including possible immigration pressures)

necessitating immediate negotiations with the Chinese to

agree arrangements to re-establish confidence. Without such

arrangements Hong Kong might not remain governable for long.

Unilateral withdrawal is not an option. It would spark

off the problems described above in a more aggravated form,

while complicating relations with China.

But they cannot

They will be very unlikely to acquiesce in

3.

SECRET

/4.