CONFIDENTIAL
032716
MDHOAN 6557
RECENT REPORT BY HEADS OF MISSION IN PEKING CPE/PRES/HAG 292(1/2)). IT HAS HOWEVER LONG BEEN THE POSITION OF THE COMMUNITY THAT, BECAUSE OF HONG KONG, THE UK SHOULD PACE ITS CONTACTS WITH CHINA AT A SPEED WHICH BEST TAKES ACCOUNT OF THE NEED TO MANAGE SUCCESSFULLY THE INTERVENING YEARS OF THE TRANSITION IN THAT TERRITORY. IN ADDITION WE HAVE NOTED THAT MR ANDREOTTI HAS TENTATIVE PLANS TO VISIT CHINA IN THE AUTUMN. MR KAIFU IS ALSO TO DO SO IN AUGUST.
4.
THE AGREEMENT ON THE AIRPORT IS A GOOD ONE, WHICH GIVES THE HONG KONG GOVERNMENT THE CERTAINTY IT NEEDS TO PROCEED WITH THE PROJECT. EQUALLY IMPORTANTLY, IT SHOULD PROVIDE A MAJOR BOOST TO INVESTOR CONFIDENCE BY DEMONSTRATING THAT HONG KONG IS NOW ABLE TO PRESS AHEAD, WITH CHINESE BLESSING, WITH A KEY ELEMENT IN ITS FUTURE DEVELOPMENT STRATEGY. AGREEMENT WITH CHINA ON THIS ISSUE, WHICH HAS BEEN A BONE OF CONTENTION SINCE TIANANMEN, SHOULD MARK A NEW PHASE OF CLOSER SINO-BRITISH COOPERATION OVER THE FUTURE OF HONG KONG, WITH BENEFICIAL EFFECTS FOR THE TERRITORY ACROSS THE BOARD. A
BACKGROUND
5. (TO BE DRAWN ON AS APPROPRIATE). FOLLOWING SEVERAL MONTHS OF OFTEN DIFFICULT DISCUSSIONS BETWEEN BRITAIN AND CHINA ABOUT THE CONSTRUCTION OF A NEW AIRPORT IN HONG KONG, SIR PERCY CRADOCK, THE PRIME MINISTER'S PERSONAL ADVISER ON FOREIGN AFFAIRS VISITED PEKING FROM 26 30 JUNE. THE VISIT WAS IN RESPONSE TO SIGNALS FROM PEKING THAT THE CHINESE LEADERSHIP, LIKE HMG, WAS ANXIOUS TO SEEK A MUTUALLY ACCEPTABLE SOLUTION OVER THE AIRPORT. NEITHER SIDE WAS KEEN TO FACE THE ALTERNATIVE OF FURTHER MONTHS OF ACRIMONY AND UNCERTAINTY WHICH WOULD NOT ONLY AFFECT BILATERAL RELATIONS BUT, MORE IMPORTANTLY SERIOUSLY DISRUPT INVESTOR AND BUSINESS CONFIDENCE IN HONG KONG.
6.
AT THE END OF SIR P CRADOCK'S DISCUSSIONS IN PEKING WITH THE CHINESE LEADERSHIP, AN MOU WAS INITIALLED BY HIM AND MR LU PING (DIRECTOR OF HONG KONG AND MACAO OFFICE, STATE COUNCIL) SETTING OUT HEADS OF AGREEMENT BETWEEN THE TWO COUNTRIES ON IMPORTANT ISSUES RELATING TO THE AIRPORT, TO ITS FINANCING (INCLUDING CHINESE CONCERNS ABOUT THE FINANCIAL RESERVES TO BE INHERITED BY THE SAR GOVERNMENT IN 1997), AND OTHER MAJOR ISSUES ON WHICH COOPERATION BETWEEN CHINA, BRITAIN AND HONG KONG WILL BE NECESSARY IN THE TRANSITION PERIOD. IT WAS AGREED THAT THE MOU WOULD TAKE FORMAL EFFECT UPON SIGNATURE BY: THE TWO HEADS OF GOVERNMENT AT A TIME TO BE DETERMINED IN THE NOT TOO DISTANT
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