TNAG-1171-FCO40-1452-Future-of-Hong-Kong-1982 — Page 22

SECRET

- 3

3. Hong Kong attitude

Hong Kong has lived with uncertainty for some

time and survived. Past tendency to shun 1997

question because:

a)

b)

relations with China unsure and risk

of exacerbation;

despite a) Chinese apparently avoiding

extreme action (e.g. in 1967);

c) most investors short-term (5 years)

But 80's have brought 1997 into next decade.

Crown leases in NTs only till 1997.

15 year mortgages.

Now subject of debate.

Good relations with China and Chinese reassurances

(hearts at ease hav

hearts at ease have helped but have not been

sufficient.