TNAG-1173-FCO40-1465-Future-of-Hong-Kong-special-study-by-FCO-for-the-Prime-Minis-1982 — Page 96

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THE FUTURE OF HONG KONG

PART I

The Problem

1. Although Hong Kong is a British colony, the United Kingdom

has sovereignty without limitation of time only over the island

of Hong Kong, one other small island and the tip of the Kowloon

peninsula, which were ceded to the UK under the Treaties of 1842

and 1860 (copies attached at Annex A). 92% of the land area of

the colony consists of the New Territories, which are held under

an international lease from China, the Convention of 1898 (copy

attached at Annex B) which is due to expire on 30 June 1997 (map

attached at Annex C).

2.

Unless other arrangements are made with the People's Republic

of China (PRC), the UK will be obliged to relinquish the New

Territories when the international lease expires in 1997.

3.

Furthermore, unless some accommodation with the PRC about

the future of the territory as a whole after 1997 is reached

fairly soon, and made known, the Governor's advice is that the

colony as it now exists will collapse economically and then politically

through lack of confidence and uncertainty. Early action is therefore desirable and may prove essential.

4.

The approach of 1997 also poses a difficult problem for

China.

Whatever the Chinese view of the status of the 1898

Convention, the termination of the lease is a fact which cannot

simply be ignored and the recovery of Chinese sovereignty in or

before 1997 is a political imperative for the Chinese leaders.

But the Chinese are acutely aware of the economic benefits

/which

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