TNAG-2892-FCO40-4165-Transfer-of-assets-from-the-Hong-Kong-Government-to-the-Spec-1993 — Page 14

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assets of the HKG. They have also asked for a full list of

HKG's assets (these assets range from liquid assets such as

the Exchange Fund and the Reserves to fixed assets such as

hospitals and schools, and also all other items owned by the HKG). We have so far declined to produce such a list on grounds of impractibility.

The Legal Position

It

5.

The customary international law position is that assets which are the physical and fiscal property of an extinct or totally absorbed state are assumed by the absorbing state. is for the successor state to determine whether the property becomes vested in the State itself or in a component part of

the state such as a territorial subdivision. Although Hong Kong is not a state the Chinese may argue by analogy that this requires that all physical property which makes up Hong Kong,

Mont and its financial assets, be passed to them on 30 June 1997 and

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6.

If the Chinese adopt this position, as seems likely, and

if we have reason to believe that the SARG would not inherit

take the following Ime. We could

HKG's assets, we could maintain that Hong Kong is a unique

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case governed by the JD and that the JD contains no

requirement for HKG assets to be passed to the PRC and that

this is therefore a matter to be resolved between the two

sides. The logical extension of this argument is that in the d

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absence of an agreement, we reserved the right to transfer

HKG's financial assets to HMG before or on 30 June 1997, and then to grant them direct to the SARG. This approach would of course be wholly unacceptable to the Chinese, and probably also to the public in Hong Kong. It is however a position which might encourage the Chinese to negotiate a satisfactory

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