TNAG-2354-FCO40-3424-Visits-by-members-of-the-House-of-Lords-to-Hong-Kong-1991 — Page 20

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DATE:

FRY

CC:

PS/Lord Caithness

19 December 1990

Private Secretary

Mr McLaren

Mr Burns

Mr Davies, FED

HKD 026/2

RECEIVER

17 JAN 1991

DESK OFFICER

INDEX

Mr Paul, HKD

PA

(2).

CALL BY LORD YOUNG, 18 DECEMBER

1.

Lord Young called on Lord Caithness yesterday to brief him on his recent visit to China (in October) and Hong Kong (last week).

2.

Lord Young said that the Chinese were still smarting over the announcement of contracts for the fixed link on 5 October. When he had met Li Peng shortly after the announcement there had been no mention of it. But last week Zhou Nan had brought it up in uncompromising terms as an example of lack of proper consultation. Zhou Nan said that it made his own position very difficult. He recognised the need for the airport and that decisions regarding it were still at this stage for the Hong Kong Government to take. But incidents like the

5 October announcement were damaging to a mutually beneficial working relationship. He asked Lord Young to convey to HMG the message that he hoped that HMG and China could work together for a smooth handover in 1997.

3. Lord Young said that the problem over PADS was clearly Chinese suspicion and lack of understanding of the financing arrangements. He had a number of suggestions which he thought might help:

a)

He wondered whether the new airport could not better be funded by floating a bond secured on the development value of Kai Tak and the lifting of height restrictions in Kowloon. This might be expensive but would help demonstrate to the Chinese that the new airport was being financed without raiding Hong Kong Government funds.

b) He thought it would be worthwhile to consider posting an officer (either from London or the Hong Kong Government) to Peking to explain at every stage developments on PADS to the Chinese Government. China was suspicious of the project and did not understand capitalist finance. Permanent and persistent explanation was necessary to overcome their

objections.

/c) He travelled

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