CONFIDENTIAL

6. It is recognised here that if this fails

it is as far as we should go in making concessions

in Hong Kong to gain access to Grey. To go

further might put at risk our position in Hong

Kong; we would be abandoning a policy of firmndsc

in our dealings that has brought us through the

recent troubles and would encourage Chinese

hopes that we can still be pushed into making

substantial concessions there.

7.

Detailed suggestions on how this exercise

should be handled with the Chinese are contained

in m.i.f.t.

CONFIDENTIAL

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