TNAG-2256-FCO40-3240-Hong-Kong-Port-and-Airport-Development-Strategy-(PADS)-gene-1991 — Page 59

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B

(c) whether we are making best use of the leverage

implicit in the Secretary of State's visit.

5. I attach for background:

(i)

C

(ii)

D

(iv)

E

(v)

FCO Telno 67 to The Hague, which reflects the Secretary of State's discussions with Lord Caithness on 12 March.

Sir David Ford's account of the views of EXCO, with our reactions.

The views of Sir David Ford, and of

Mr Galsworthy (JLG) and the Embassy in Peking, together with our reactions.

The Governor's consolidated advice in his Telno 99 from The Hague: this is the key advice.

F

Argument

(a)

6.

Negotiating Figures

-

The dilemma is that, whether the Governor offers HK $10 billion or HK $14 billion for the Fiscal Reserves, the figure is unlikely to be seen by the Chinese as anything other than a negotiating bid. In any case, such a figure may be so low as to invite outright rejection and a refusal to talk further thus leaving the issue firmly on the Secretary of State's plate in Peking. Yet the HKG will be pressed to concede a higher figure and will have difficulty in doing so without severely compromising their financial management in the remaining years to 1997. They might be able to move to HK $20 billion as the absolute maximum, but only if they were able to let the franchise for the Lantau Bridge before 1997

(talk of franchises, however, introduces fresh compolications into this discussion). Since there is still internal debate on this point (in HKG and with EXCO), the Governor is content to try to entice Lu Ping to Fanling on the basis of a generalised readiness to discuss a specific figure. But he fears this may not be sufficient or, alternatively, it may not enable Lu Ping to turn up with flexible enough instructions to strike a deal. The Governor will therefore want to authorise Sir Alan Donald to explain that the figure on offer will not be nearly as high as the Chinese have suggested.

7.

The present version of the draft message to Lu Ping (paragraph 8) no longer specifies a figure. I recommend that we give the Governor discretion to be specific orally as and when he thinks this tactically wise. For the reasons set out below, he needs to try to strike a deal before the Peking visit. Only he can judge how to bring Lu Ping to the point of decision. And it must be for the HKG to get their sums right.

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