TNAG-1167-FCO40-1447-Future-of-Hong-Kong-1982 — Page 19

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need explicitly to make clear the intention of HMG to administer the New Territories beyond 1997. A number of the proposals also include the notion of a relinquishment of sovereignty by HMG. We do not know that the Chinese would in fact demand this but it is a logical move for which we must be prepared.

A)

Reinforcement of existing assurances

The Chinese would talk at a high level to major local investors in Hong Kong to encourage them to retain and increase their invest- ments. They would do the same with selected foreign investors, banks, industrialists and developers. They would reinforce assurances about capitalism continuing in Hong Kong well into the next century and imply that a change of status in 1997 was unlikely.

B)

i) Likelihood. Easiest option for Chinese. Harder as

the assurances about no change become firmer.

ii) Problems for HMG. None, except:

iii) Effect.

At best temporary. Such encouragement and assurances would cause some local Chinese investors to maintain investments. Little effect on foreign investors unless coupled with action on land leases. Not sufficient to halt a serious slide of confidence for long, if at all, because unsupported by either firm and 'bankable' description of conditions under Chinese law, or assurance of continuance of British jurisdiction.

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Declaration by the Chinese that, because Treaties unequal 1997 irrelevant; Hong Kong would revert to China when the time was ripe, with the clear understanding that British administration would continue beyond 1997

i) Likelihood. If as a formal statement a slight but

significant change in present Chinese position. More difficult than (A) for Chinese, however, as it implies continuing British administration beyond 1997. Becomes progressively more difficult for them the more that is said about time not being ripe for many years to come.

ii) Problems for HMG. None: the Chinese already claim

sovereignty. A statement from them that the lease should be ignored would, however, open the way for us to take legal measures that would align the practical reality in Hong Kong with Chinese stated views.

iii) Effect. Would be too vague to have significant effect,

even if coupled with (A) above, unless coupled with agreeemnt to action by HMG to take continuing powers of administration beyond 1997.

R

/ C) Joint

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