TNAG-1166-FCO40-1446-Future-of-Hong-Kong-1982 — Page 8

CONFIDENTIAL

MALAYA BEFEORE INDEPENDENCE. THE SULTAN WOULD NOT TAKE THE

INITIATIVE BUT IF WE WERE TO DO SO HE WOULD AGREE AND THE MALAYSIANS

WOULD BE ABLE TO FOLLOW SUIT. LORD CARRINGTON ASKED WHAT

PRACTICAL ADVANTAGE WOULD RESULT. GHAZALI SAID THAT THE MALAYSI ANS

WOULD BE ABLE TO SEND MORE SENIOR REPRESENTATIVES TO BRUNE! AND THUS

TO WORK MORE EFFECTIVELEY. LORD CARRINGTON INDICATED THAT HE

SAW SOME MERIT IN THE IDEA AND UNDERTOOK TO HAVE THE QUESTION

LOOKED INTO.

BURMA

6. GHAZALI SAID THAT HE WOULD WECOME IT IF BURMA WERE TO JOIN ASEAN

BUT THAT HIS MAIN CONCERN AT PRESENT WAS TO IMPROVE BILATERAL

RELATIONS.

AFGHANISTAN

7. GHAZALI DID NOT RESPOND WHEN LORD CARRINGTON FLOATED THE IDEA OF

A CONFERENCE ON REFUGEES.

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CONFIDENTIAL

FM FCO 040945Z FEBRUARY 82

TO ROUTINE PEKING

TELEGRAM NUMBER 48 OF 04 FEBRUARY

912 Paniola

AND TO HONG KONG (PERSONAL FOR GOVERNOR AND POLITICAL ADVISER)

FUTURE OF HONG KONG

attached

1. AFP DESPATCH FROM PEKING, DATED 19 JANUARY, REPORTED AN

UNIDENTIFIED 'HIGH RANKING DIPLOMAT' AS SAYING INTER ALIA THAT

'CHINA HOPES TO RESOLVE THE PROBLEM OF HONG KONG'S FUTURE SO AS

TO ENSURE A CONTINUED BRITISH PRESENCE, WHILE NOT JEOPARDISING HER

OWN SOVEREIGNTY' AND 'CHINA HAS MADE NO DECISION ON THE BRITISH

COLONY

BUT WILL OPEN NEGOTIATIONS ON THE MATTER WITH 2RITAIN

ONCE IT HAS REACHED A DECISION'.

2. THIS REPORT WAS CARRIED BY SEVERAL HONG KONG NEWSPAPERS ON

20 JANUARY. HONG KONG DAILY NEWS REPORTED ON 21 JANUARY THAT THE

DIPLOMAT CONCERNED HAD BEEN ACCUSED OF 'LEAKING A STATE SECRET'

AND SHOCKING THE UPPER ECHELON OF THE CHINESE GOVERNMENT.

3. GRATEFUL FOR COMMENTS.

CARRINGTON

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FUTURE OF HONG KONG

1.

HKK

912 fm 9/2

दिल oxol1 E84 1981

Thank you for your minute of 24 December which we read with interest. I have the following comments.

Slide in Confidence (your paragraph 3 and 4)

2.

See (87)

LOGA

гд

No-one can of course be absolutely sure that the absence of a deal with China will lead to an early, serious decline in confidence. Opinions differ on this, particularly on timing. However the Governor believes that the risk is a real one, not simply because of business considerations, but because of growing concern among individuals in Hong Kong about their and their children's future. What is undoubtedly true is that public speculation about the future has increased markedly in the last three years and expectation that some kind of a deal will be made soon is very strong. I take your,point that the pay-back period on much investment in Hong Kong is still very short. But I am less sure than you that the Hong Kong economy can do without an increase in bigger scale industrial projects in the New Territories. Since the issue of a special report on the subject in 1980, there has been much emphasis in Hong Kong on the need for a diversification of the economy with greater emphasis on new types of industry. This is because the Hong Kong economy, although buoyant, is over dependent on service industries, financial institutions etc. The Hong Kong Government are therefore actively encouraging investors to set up new industries, some of which will require a fairly long term pay-back. Another important point is that there will be at least one very major project in the New Territories in the late 80s and 90s which the Hong Kong economy cannot do without. This is the construction of a new airport either on Lantau Island or in Deep Bay. This will require massive investment which financial institutions may be very reluctant to provide unless they see some clarification of the future problem. The construction of the airport will indeed be. something of a touchstone in the maintenance of confidence.

3. What is certainly clear is that if confidence does start to slide it will go very quickly, seriously prejudicing the chances of finding an orderly solution to the problem of the future.

British Interests and the Loss to Hong Kong (your paragraphs 5 and 6, 11 and 12)

4. You put considerable emphasis on the large British-run companies. I would not for a moment deny that the big trading houses are attempting, so far as possible in the face of local Chinese competition, to consolidate their position in Hong Kong rather than disinvesting. This is partly because there are still important

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