Hong Kong property

How Britain’s post-war debt turned a small US outpost in Hong Kong into a staging area for its cold war operations in Asia

Declassified British government documents show negotiations that eventually led to 999-year lease for consulate in city began in 1946, and governor Alexander Grantham warned against granting it in 1949

PUBLISHED : Saturday, 18 August, 2018, 6:00pm
UPDATED : Sunday, 19 August, 2018, 12:06pm

The diplomatic negotiations between the American and Hong Kong governments which eventually led to the US consulate’s highly unusual 999-year lease in a prime city location actually began in 1946, declassified British government documents obtained by the Post show.

That was three years before the Communist Party established the People’s Republic of China, and a year after Britain and the United States signed an agreement under which Britain would give money to the US for the purposes of acquiring land in the UK and its colonies, according to the archived documents.

In a clause under the “Lend-Lease Settlement Statement”, which was part of the Anglo-American Financial and Commercial Agreements signed between the two sides in December, 1945, to help Britain cover the cost of its post-war spending, the US was allowed to buy land or erect buildings in Britain and its colonies.

The caveat was that the money could only be used for government or education purposes. Also, the request should be made by 1951, and the cash aggregate should not exceed US$50 million.

Files show that the US consul general approached the Hong Kong governor in 1946 expressing its interest in buying a suitable site for a consulate building. It was ultimately offered “a well-situated area of about 47,000 square feet with 75-year lease”.

In March 1947, the US informed Hong Kong that it would like to pay under the 1945 agreement. The request was approved three months later.

A further request from Washington to acquire permanent ownership of the site was not quite so smooth.

On April 19, 1949, Hong Kong governor Alexander Grantham wrote to Arthur Creech Jones, the British secretary of state for the colonies. He said the request made by the US during the negotiations on the land acquisition, to either buy the site in fee simple, or on condition America could convert it to freehold, was “a radical departure” from the established law and practice in Hong Kong.

“The fact that there are leases for 999 years in existence has already been found to be an embarrassment in connection with the re-planning of the colony’s urban areas,” Grantham wrote. “If later on such properties were to be sold, it would mean that transactions in freehold on the open market would commence.”

Despite the governor’s cautious attitude, the Foreign Office was more positive. On June 4, 1949, it wrote to Grantham expressing willingness to modify the instructions against granting land in fee simple to a foreign government for consular premises if “there is in existence an agreement between that government and His Majesty’s Government for reciprocal concessions in this matter”.

He added that “with sufficiently exact terms and limited scope in modification”, the governor could “continue maintaining the general rule without embarrassment”.

While no formal agreement was identified by the Post after this correspondence, a copy of the original lease included an option for the US to buy the site as freehold, according to the Land Registry.

On 28 April 1950, the Post reported that the US consulate would construct its own building on Garden Road, Central.

Four years later, the consulate announced that plans for the new building were being drawn up, noting that the then offices of the American consulate were scattered across three locations, including the HSBC Building, an office on MacDonnell Road, and a temporary building on Garden Road.

The new building was completed in June, 1957.

In the same month, the US consulate staff in Hong Kong moved into their newly erected four-storey building. But the land lease was not signed until 1960, despite being said to have commenced in 1950.

Dr Chi-Kwan Mark, a senior lecturer at Royal Holloway, University of London, specialising in the cold war, said the negotiations dragging on for more than 10 years reflected a wider historical theme: the dynamic and complicated relationships between the US, Britain and Hong Kong during that period.

Mark said ties improved in the 1950s and reached a peak in 1960, when the three sides enjoyed “the best relationship ever since 1949 with closer economic, political and military connections”.

While the US has had a diplomatic presence in the city since 1843, Mark said “it wasn’t until after the establishment of the People’s Republic of China that the US attached more political and economic importance to Hong Kong.”

He added: “After the establishment of the PRC, the US could no longer maintain any diplomatic presence in mainland China. So, they saw Hong Kong as the base for China watching.”

Free market advocate David Webb revealed two weeks ago that the US was granted the rare 999-year lease for its consulate on Garden Road at the cost of HK$44 million by the Tung Chee-hwa administration in 1999.

US consulate staying put on billion-dollar site – lease has 931 years to run, anyway

Last Friday, the government revealed that the US informed the British colonial government of its intention to acquire the site as freehold in January 1997, six months before the city’s handover from British rule to Chinese. The proposal was rejected and the deal was amended to a 999-year lease in 1999, with sale restrictions removed.

The only freehold site known to exist in Hong Kong is for the site of St John’s Cathedral which was given perpetual ownership – on condition that the land is used for a church – in 1847.