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By the beginning of February, we thought that we had succeeded

in getting the Chinese to drop the link between our conduct in

Hong Kong and our Mission in China and to equate Pritish

officials in Peking with Chinese officials in London.

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8. Thus Io's statement on 8 March (Peking telegran No. 176), insofar as it reintroduced this link, represented a setback;

but its significance is not entirely clear.

(a) By Chinese standards it was moderate in tone. (Peking

telegram No. 179). It asked us, not to accept, but to

"reply to" the various devands made to us. It included

the first reference to Mr. Brown's letter to Ch'en Yi.

It is just open to the interpretation that the Chinese

intended to put on record their stand of principle over

Hong Kong but that, while paying lip service to that

principle, they would nevertheless be prepared to make

some progress on "secondary metters".

(b) On the other hand, it wae quite uncompromising in tone.

It would be imprudent therefore not to face up to the

possibility that the Chinese meent exactly what they

said, and that they are fully ready to hold our Mission

as hostages until we make concessions in Hong Kong.

Meantine the position has been further complicated by

various acts of unfriendliness on the part of the Chinese:

the sentencing of Hr. Watt; the refusal to accept at the

frontier two communist film stars previously held in priacn

in Hong Kong whom the Hong Kong authorities, as a test of

/Chinezo

9.

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