TNAG-2892-FCO40-4165-Transfer-of-assets-from-the-Hong-Kong-Government-to-the-Spec-1993 — Page 15

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Negotiate a binding agreement with the Chinese

7.

The solution to this problem is to negotiate with the Chinese a legally binding instrument which would require the

HKG to pass to the CPG on midnight of 30 June 1997 all its assets and the CPG immediately to pass these to the newly created SARG. This would probably be a relatively short and

simple document which would not spell out in detail all the

assets of HKG, and which preferably would deny the CPG the ability to move physically any of the liquid assets. Such an instrument would need \HMG, HKG and the CPG as parties.

need\HMG,

8.

It is difficult to predict how the Chinese would react to this proposal

It could be attractive to them, particularly if they are concerned that in the absence of an agreement HMG might syphon off HKG's liquid assets before 1997. On the

other hand they could:

demand a full list of HKG's assets and their value

Insist

demand that HKG cannot dispose of any assets before the coming into operation of the agreement without their consent and try to use this as a means of reopening the issue of the

amount of reserves to be left to the SARG

argue that an instrument of this sort is not necessary as all HKG's assets will pass to the CPG anyway.

When to raise this issue with the Chinese

9.

We should avoid raising this difficult issue with the

Chinese until after conclusion of the talks on constitutional

development and after agreement has been reached on overall

financing for the airport. We might therefore aim to

introduce the subject into the JLG in early 1994. In the

meantime, we should consider whether there would be any

assets.

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