TNAG-2892-FCO40-4165-Transfer-of-assets-from-the-Hong-Kong-Government-to-the-Spec-1993 — Page 26

CONFIDENTIAL

DISCUSSION PAPER ON TRANSFER OF ASSETS FROM HKG TO SARG

Problem

The Chinese are unlikely to accept direct transfer of

HKG assets to the SARG.

1.

Recommendation

That a fuller paper on this subject be prepared for discussion with HKG, Peking and UKREP JLG.

2.

Background

The JD and Basic hovo

3.

The JD is ambiguous on whether the SAR has to be

established on 1 July 1997. The English version states that

"...the People's Republic of China shall, upon the resumption of the exercise of sovereignty over Hong Kong on 1 July 1997, establish the Hong Kong Special Administrative Region..." The Chinese version of this sentence is, however, more conclusive

definitive in requiring the PRC to establish the SAR on 1 July 1997. The

Decision of the National People', Congress on the Establishment of the Hong Kong Special Adminstrative Region adgled

adopted on 4 A pul 1990 prondes that The SAR" is to be established as of 1 July 1997 Discussions with the Chinese

4.

direct

^

The Chinese have not stated whether the SAR will come into

existence immediately following the end of British

made by the Chinese sovereignty. However, it is clear from statements they have

made in the JLG and during the negotiations on the airport

that they do not see the SARG as the successor to the HKG. Their position is that upon the end of British sovereignty,

the HKG will cease to exist and the PRC will then create the

SAR and the SARG. It follows from this that in the Chinese

view, the assets, rights and obligations of the HKG should,

upon resumption of sovereignty by China, pass to the PRC which

assets.paper/MONEY/bp

CONFIDENTIAL