China raises stakes in Hong Kong dispute

December 01, 1992|By New York Times News Service

BEIJING -- China significantly raised the stakes yesterday in its dispute with Britain over Hong Kong by declaring that all contracts signed by the territorial government and not approved by Beijing will become invalid when London ends its rule there in 1997.

The Hong Kong government responded immediately that the declaration violated the Chinese-British Joint Declaration of 1984 and the Basic Law, the documents that govern the transition period and guarantee the territory's economic and political freedoms for 50 years.

"According to the Basic Law, contracts which are valid under Hong Kong's existing laws will continue to be valid and recognized and protected by the Hong Kong special administrative region, provided that they do not contravene the Basic Law," the Hong Kong government said in a written statement.

It was the first substantial step taken by China to retaliate against British plans to bring greater democracy to Hong Kong, plans that Beijing says violate the agreements it signed with Britain.

Even if the announcement does not derail the plans for a peaceful transfer of control over the territory, it is certain to cause confusion and grave concern among a wide variety of local and international companies that do business with the territorial government.

By undermining Hong Kong's authority to issue contracts extending beyond 1997, the Beijing statement seemed particularly intended to prevent Britain from continuing its efforts to build a new airport and a new container port in the territory.

The Hong Kong government recently announced that it would pursue plans to build a new airport even if China did not give its final approval to the proposed financing arrangements, and the Hong Kong legislature narrowly approved an initial allocation of funds last week.

The Chinese announcement was made after the Hong Kong stock exchange was closed for trading yesterday.

The stock market index had lost 2.9 percent of its value yesterday in reaction to a far more limited Chinese threat made Friday -- that it might not honor contracts relating to the new container port.

Yesterday's announcement reflects the extreme irritation that China feels toward new British proposals to make the territory a bit more democratic, coupled with Britain's increasing willingness to make decisions about Hong Kong without Beijing's approval.

Since the new Hong Kong governor, Christopher Patten, took office in July, Britain has taken a much more confrontational approach in dealing with China.

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