TNAG-1041-FCO40-1291-Future-of-Hong-Kong-1981 — Page 53

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SECRET

DESKBY 681030Z

FM HONG KONG 080939Z DEC 81

TO IMMEDIATE F C O

TELEGRAM NUMBER 1098 OF 8 DECEMBER

INFO IMMEDIATE PEKING FOR AMBASSADOR)

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PERSONAL FOR CLIFF FROM GOVERNOR.

Here

RILLAVID Hd MAGISTRY NO. 3

1 1 DEC1981

DEC INDEK

PA

Anno: Taken

filmiyle

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YOUR TELNOS 924 AND 925 : FUTURE OF HONG KONG

1. I READ PARAGRAPHS 2 AND 3 TO IMPLY AN OFFICE DECISION TO PUSH

DURING THE P.M.'S VISIT AND TO GIVE NOTICE DURING THAT OF THE LPS.

AS YOU KNOW I SEE DANGER IN COMMITTING OURSELVES SO FAR IN ADVANCE

OF THE EVENT, IN CIRCUMSTANCES WHICH CANNOT BE FORESEEN, BUT IN

WHICH THE CHINESE LEADERSHIP MAY WELL BE HEAVILY PREOCCUPIED WITH TO THEM MORE PRESSING ISSUES E.G. THE PARTY CONGRESS, RELATIONS WITH THE U.S. OVER TAIWAN ETC.. I WOULD PREFER TO WAIT UNTIL THE

NEED TO ACT TO PROTECT THEIR AND OUR INTERESTS IN H.K. IS MORE

APPARENT TO THE CHINESE. WE HAVE ACTED ONCE PREMATURELY AND I

WISH TO AVOID DOING IT AGAIN.

2. HOWEVER THERE MAY NEVER BE A RIGHT TIME, THERE ARE STRONG CONTRARY ARGUMENTS RELATED TO THE P.M.'S VISIT, AND IF THEY ARE

TO PREVAIL I THINK MR ATKINS SHOULD GIVE A FULLER EXPLANATION OF

THE PROBLEM THAN THE OUTLINE IN PARA 2 OF YOUR SECOND TUR: DESPITE

THE EFFORTS MADE OVER THE PAST TWO AND A HALF YEARS WE CANNOT BE

SURE THAT THE CHINESE HAVE FULLY GRASPED THE NATURE OF THE ''LEGAL

PROBLEM' 1 SHOULD ALSO PREFER TO PUT LESS EMPHASIS ON LAND

LEASES. A LIMITED MOVE IN THAT AREA WOULD HAVE BEEN ENOUGH, COUPLED WITH DENG'S ASSURANCES, TO MAINTAIN CONFIDENCE FOR SOME YEARS IF IT HAD BEEN MADE IN 1979. IT WOULD NOT BE SUFFICIENT IN

1982 OR 1983.

3. AGAINST THAT BACKGROUND, I SUGGEST THAT A SPEAKING NOTE,

SOMETHING LIKE THE FOLLOWING BE ANNEXED IN AMPLIFICATION OF

PARA 2: QUOTE AS LORD CARRINGTON EXPLAINED, THERE IS GROWING CONCERN ABOUT THE FUTURE IN HONG KONG AND THIS COULD SOON AFFECT

INVESTMENT. THE ASSURANCES GIVEN BY THE CHINESE GOVERNMENT HAVE BEEN OF GREAT VALUE, AND THEY WOULD BE ENOUGH TO MAINTAIN CONFIDENCE

INDEFINITELY WERE IT NOT FOR THE FACT THAT THEIR EFFECT IS UNDERMINED BY THE ORDER-IN-COUNCIL WHICH IS THE LEGAL BASIS FOR THE PRESENT ADMINISTRATION. THE PROBLEM IS NOT THE CREDIBILITY OF

CHINESE ASSURANCES, BUT THE TIME LIMIT IMPOSED BY BRITISH LAW. AS IT NOW STANDS, THIS ORDER REQUIRES UK ADMINISTRATION, INCLUDING LAND LEASES GRANTED BY THE HONG KONG GOVERNMENT, TO END IN THE NEW TERRITORIES IN 1997, AND THERE IS NO QUESTION OF BRITISH ADMINISTRATION CONTINUING IN THE REST OF H.K. IF IT CEASES IN THE NEW TERRITORIES. LOCAL AND OVERSEAS INVESTORS (AND THEIR LAWYERS AND ACCOUNTANTS) THEREFORE HAVE TO ASSUME THAT THE PRESENT ARRANGEMENTS IN HONG KONG, INCLUDING ITS LAWS, CURRENCY AND TRADE

AGREEMENTS, WILL COME TO AN END ON THAT DATE. THEY DO NOT KNOW WHAT SUCCESSOR ARRANGEMENTS MIGHT BE MADE.

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