TNAG-2477-FCO40-3607-The-Hong-Kong-Association-1992 — Page 65

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I very much enjoyed your speech at the UK-Japan 2000 Group conference. In particular I thought you were spot on in saying that British

overseas investment is too often treated as the Cinderella of British interests abroad. That is a very short-sighted attitude and nowhere more so than in Hong Kong, British-managed and controlled investment in Hong Kong is very substantial indeed, some £30 billion. While in constitutional theory the position of British and local Chinese investors in Hong Kong may be the same, in practice it will not be after 1997. We shall be regarded as foreign.

That is why some of us are going to so much trouble to re-position ourselves now, so that we do not fall under Beijing's non-statutory regulation after 1997. There is no point in making British investment unnecessarily vulnerable when that can be avoided.

In Jardine's case we are making progress, with the move to a primary Stock Exchange listing in London, with a secondary listing only in Hong Kong, almost agreed. But we still face the task of finding a way to free ourselves from the non-statutory regulation of the Hong Kong Takeover Code by 1997. We do not object to it now but it could be a vehicle for imposing all sorts of unrelated regulatory constraints after 1997. Once again it is simply a case of wise precautions.

It would be helpful to have the active support of the Hong Kong Administration for that, while it is still in British hands, because it is in the United Kingdom's long-term interest to see major British-owned investments in Hong Kong continue to flourish after 1997.

I don't know if the job of Permanent Under Secretary includes the role of Fairy Godmother. I suspect that it may, because on the whole we have had sympathetic understanding from the FCO. Unfortunately it seems to be an area where the FCO do not call the shots. But if you could use your magic wand to encourage a more open-minded and flexible approach from the Hong Kong Administration on this issue, in pursuit of the objective of defending British investment which you have yourself identified, we would be enormously grateful.

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