TNAG-2727-FCO40-3933-Hong-Kong-political-parties-Association-for-Democracy-and-Pe-1993 — Page 53

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CALL ON THE SECRETARY OF STATE BY MR FREDERICK FUNG, 18 MAY

Background

THE AIRPORT

1.

When Mr Fung met Chen Zuoer of the Hong Kong and Macao

Affairs Office in Peking recently, Chen apparently told him that the Chinese were prepared:

- to be flexible over the $5 billion borrowing ceiling, and

- to allow the HKG share of the Land Fund to be used

together with HKG Reserves subject to the $25 billion limit

in the MOU.

Mr Fung also has a pet idea about the HKG borrowing from the SAR

Land Fund. He claims Chen said that in principle the Chinese

would not reject the idea.

2. There are in practice no new concessions in these suggestions and we have dealt with them in the points-to-make.

3.

Now for me

The HKG have drawn up a third financing package which has

been passed in confidence to the Chinese side and is not yet

public knowledge. The main features of the package which will appeal to the Chinese are:

- a small increase in HKG equity injection and consequently a reduction in borrowing.

- no 'callable equity'.

- no suggestion that the Chinese share of land premium for

airport railway sites be used as equity before 1997.

sos.call.PR

SLM

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