TNAG-2892-FCO40-4165-Transfer-of-assets-from-the-Hong-Kong-Government-to-the-Spec-1993 — Page 28

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Possible Solution

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

mdmght of 30 sime

A

the HKG to pass to the CPG on July 1997 all its rights and asgeks

to obligations and that the CPG should immediatay pass these to

the newly created SARG, and which would not involve the physical movement of assets.

8.

It would be virtually impossible for us to negotiate an

instrument of this sort as the Chinese would not be prepared

to commit themselves to inheriting all the obligations of the HKG, particularly with some years to go to the transition. It would also be a tactical mistake to try to do so as it would strengthen their hand in demanding that we seek their agreement to all HKG obligations spanning 1997.

9.

A better approach would be to negotiate an instrument which covers only assets. Such an instrument would probably

as well on the epa need HMG HKG and the SARG as parties. It is difficult to

predict how the Chinese would react to this proposal. It could have some attraction for them, particularly if they were

concerned that in the absence of an agreement HMG might syphon

off HKG assets before 1997. On the other hand they could:

MB NA tho SARG

because ht would not

yet exist.

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

-argue that our proposar accepts their interpretation of the

MB if they argued this, both sides. constitutional position

would reach apreement.

before the -demand that HKG cannot dispose of any assets from the date thing

operation of the agreement

^

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

into

assets.paper/MONEY/bp

CONFIDENTIAL