TNAG-1161-FCO40-1441-Visit-by-Margaret-Thatcher--UK-Prime-Minister--to-Hong-Kong--1982 — Page 128

SELIMINARY

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The proposal conte ed harcin is one of the schemes formulated with an eye to solving the urgent issue of the "Status of

Hongkong". As the lease of the New Territories and North Kowloon will expire in a relatively short time, the inhabitants

of Hongkong and other people involved in this matter are increasingly concerned over the problems arising from Hongkong's changing status and political future. A number of schemes have evolved during the past year, and, from the Chinese side, it has been reported that the idea of a "special economic zone" was brought up, and the notion of a "free port" was also mentioned. A "special economic zone", applied to areas which

had all along been under the existing system at work in China, may yield certain results, but, if a similar scheme were to be applied to Hongkong, it would imply the bringing about of a series of extreme changes which will have drastic impacts upon Hongkong's political, economical and social structures. The existing rule of law in Hongkong, with its legal impli- cation for foreign investors, as well as the status of Hongkong

as a financial centre based on the Hongkong Dollar as the

medium of exchange, will all undergo drastic change. With the tremendous impacts brought about by such changes, it would be inevitable for Hongkong to lose its characteristic functions and would have to depend, instead, upon China for help in its effort to adjust itself to the new system. The upshot is that, should the "special economic zone" scheme be introduced for Hongkong, China not only could not expect to get any benefit from Hongkong in her modernization programmes, but would have to make very considerable efforts, in terms of both manpower and expenditure, to help Hongkong undergo the metamorphosis. From the viewpoint of China's national needs and priority, the idea of turning Hongkong into a "special economic zone" is detrimental to her interests rather than beneficial. The

Chinese authorities, it would appear, have gradually come to realise this point. As to the suggestion of a "free port",