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Redacted under FOI exemption section 27 (1)
HKB18212
CONFIDENTIAL
$3
(74)
077465 MDHIAN 5253
la
TOP COPY Q DIST?
CONFIDENTIAL
FM HONG KONG
TO DESKBY 25120OZ FCO
TELNO 581
OF 250945Z FEBRUARY 91
INFO IMMEDIATE PEKING, UKREP JLG HONG KONG
PERSONAL FOR BURNS, AUSS FROM GOVERNOR
MIPT: PADS : THE WAY FORWARD
2. THE CHINESE HAVE A GENUINE IF EXAGGERATED, CONCERN ABOUT THE STATE OF THE RESERVES IN 1997. ALSO A REASONABLE ENOUGH CASE FOR BEING INVOLVED IN THE AIRPORT AUTHORITY IN SOME WAY AS PART OF A PACKAGE IN WHICH THEY MAKE CLEAR THEIR SUPPORT OF THE AIRPORT PROJECT. IF THEY ARE PREPARED TO SHOW FLEXIBILITY, THEN A POSSIBLE WAY FORWARD COULD BE ON THE FOLLOWING LINES :
(I) FINANCIAL. I DO NOT SEE ANY WAY IN WHICH WE CAN SIMPLY HIVE OFF TWO THIRDS OF OUR FISCAL RESERVES. IT WOULD HOWEVER BE POSSIBLE TO SAY THAT WE EXPECTED HONG KONG'S TOTAL RESERVES (IE FISCAL RESERVES PLUS LAND FUND) TO MAINTAIN A CERTAIN MINIMUM BALANCE UP TO 1997, PROVIDED WE SET THIS AT A LEVEL WHICH LEFT US SUFFICIENT FLEXIBILITY. SHOULD UNFORESEEN CIRCUMSTANCES INDICATE THAT WE WOULD NEED TO GO BELOW THIS BALANCE, WE COULD UNDERTAKE TO CONSULT THE CHINESE. WE WILL BE GIVING FURTHER THOUGHT TO WHAT A REASONABLE FIGURE FOR THIS GUARANTEED MINIMUM MIGHT BE, AND TO ANY OTHER IMPLICATIONS THAT THIS MAY HAVE. AS THE LAND FUND GROWS, SO THE AMOUNT REQUIRED IN THE FISCAL RESERVES TO MAKE UP THE GUARANTEED MINIMUM WOULD DECREASE. IF, AS THE CHINESE SEEM TO FEAR, LAND RESERVE IS NOT AS HEALTHY AS WE ANTICIPATE, THEN WE WOULD BE OBLIGED TO MAINTAIN MORE THAN WE EXPECT IN THE FISCAL RESERVES. UNCOMFORTABLE BUT NOT IMPOSSIBLE.
(II) AIRPORT AUTHORITY. WE COULD APPOINT A BANKER FROM ONE OF THE BANK OF CHINA GROUP OF BANKS TO THE AIRPORT AUTHORITY AND CONSULT PRIVATELY WITH THE CHINESE ON WHO THAT PERSON SHOULD BE. AT A
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