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THE MONDAY CLUB
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4 AND COMMONWEALTH
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- 1 SEP 1983
Foreign Affairs Policy Committee
122 Newgate Street LONDON EC1
Telephone: 01-606 1910/7815
Chairman: The Earl of Kimberley Vice-chairman: Richard Stallabrass Secretary: Glen A. Payne
OFFICE
The Rt. Hon. Sir G. Howe, QC,MP,
Secretary of State,
Foreign and Commonwealth office, Downing Street,
London,
SWLA 2AL.
MKK040/1
RECEIVED IN REGISTRY
JEP 1983
DEST OFFICER
INDEX
31st August 1983.
PA
REGISTRY
Action Taken
my KM1619
Dear Secretary of State,
I have pleasure in enclosing our policy paper on the future of Hong Kong.
The Committee hopes that a satisfactory solution can be found and that the points mentioned in the paper will assist you.
A copy has also been sent to the Prime Minister, and to Conservative Members of Parliament who are likely to express an interest in this aspect of foreign policy.
Encl.
Yours sincerely,
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R.A Stalla brass, Vice-Chairman.
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Monday Club President: The Viscount Massereene and Ferrard
Chairman: David E. Storey Treasurer: Cedric Gunnery
•MONDAY CLUB
CONSERVATIVE
AND UNIONIST
POLICY PAPER
FOREIGN AFFAIRS POLICY COMMITTEE
Chairman: The Rt. Hon. The Earl of Kimberley
PRICE 20p
No. F.A.2.
AUGUST, 1983
X widening
THE FUTURE OF HONG KONG
Once described by Lord Palmerston as a barren rock with hardly a house upon it, and now in 1983 a bustling metro- polis that is Britain's only major colonial outpost, Hong Kong and its future are likely to cause significant problems for Britain in the latter part of 1983 and 1984. This paper sets out the historical background to Hong Kong, summarises the present political situation there and the ways that this could affect Britain, and suggests some possible conclusions.
HISTORY
Hong Kong is made up in three parts. The first part to be acquired was the island of Hong Kong itself in 1842. In 1860 a further small area, part of the peninsula of Kowloon, was acquired. Both these acquisitions were permanent. The final and much the largest area to be acquired was the New Territories, including "New Kowloon”, in 1898. This final area was leased to Britain for only 99 years, the lease expiring on 30th June 1997. Since the last war the three parts have always been treated as one, and it would be inconceivable now for any part to be separated from the others. Many important facil- ities such as giant power stations, major new towns and the airport lie in the New Territories. If the lease were strictly com- plied with and the New Territories alone returned to China, the boundary would be astride the main east-west artery of Kowloon. Unless one sought a "Vatican type solution", it would be totally unrealistic to sub-divide the areas of Hong Kong.
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Hong Kong is run politically by a Governor and Executive Council, assisted by a Legislative Council. Members of these bodies are appointed and are largely drawn from the local business community. Some are Chinese. Additionally, functioning as a sort of "town council", is the "Urban Council". This is half elected and half appointed. Until the franchise was enlarged in 1982 derisory numbers of electors bothered to vote; on one occasion only some 6,000 people voted. In March 1983 over of 100,000 people voted, reflecting a growing concern for the future. Below the Urban Council are District Boards. They have
minor functions and are a recent introduction. Half the members are elected and half appointed. The first elections for these were held in 1982, and the turnout was high by Hong Kong standards. There are no political parties, although some "assoc- iations" exist. Elected members tend to be independent. No openly declared Communist or Nationalist Candidates stand at the election.
At all times China has insisted that the three treaties by which Hong Kong was ceded to Britain were 'unequal' and there- fore invalid. Although Peking has always maintained this, it has done little to assert it until recent times. China derives enor- mous advantages from Hong Kong. A large percentage of China's trade passes through Hong Kong. 40% of China's foreign exchange is earned in Hong Kong. She has massive investments in Hong Kong. Hong Kong in turn relies heavily upon China for basic products, food stuffs and even water. China could simply apply pressure on Hong Kong by restricting the flow of these items into the territory. The economics of Hong Kong and China are already interdependent. Logically therefore China should have a vested interest in maintaining the stability and prosperity of Hong Kong as it is presently constituted. However, logic and politics do not always mix. To the Chinese Government, the matter of "loss of face", insignificant when 1997 was a long way off, becomes more serious as the 1997 deadline approaches.
PRESENT POSITION
The status quo that existed until 1982 has already been shattered. Prior to that time investors were content with the knowledge that China told them to "put their hearts at ease". As the 15 year deadline to the lease approached in 1982 (its fer significance being that this is the longest normal term available for mortgage finance) pressure mounted in Hong Kong for
the lease problem to be solved. The pressure came from investors and others in Hong Kong who hoped for a clear extension of the lease, as indeed did much of the local population if limited opinion polls are to be believed.
In September 1982, Mrs. Thatcher visited Peking. The Chinese publicly repeated their stance on the unequal treaties, whilst the Prime Minister upheld their validity. It was agreed that secret negotiations should commence on the future of Hong Kong with confidentiality being observed by both parties. The Chinese have repeatedly breached this principle by commenting on the future of Hong Kong, whilst the British and Hong Kong Governments have abided by the principle.
It has become clearer that, as time has progressed, China's attitude has hardened. It appears that China is now stating that the return of all Hong Kong in 1997 is essential and that it is only prepared to discuss the interim period of 14 years as a transition period to Chinese rule. Reports suggest that in due course Hong Kong would become a "Special Admini- strative Region" of China, retaining its own administrative system and having a capitalist economy. Whilst China no doubt wishes to retain the benefits of Hong Kong it is difficult to envisage how a capitalist economy could survive under communism.
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Private notes are available after approval.