}

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2. THERE HAVE BEEN TWO MAJOR CULTURAL EVENTS THIS YEAR A CHINESE

CULTURAL TREASURE S EXHIBITION AND THE VISIT OF THE PERFORMING A COMPANY OF CHINA - THROUGH WHICH THE CHINESE HAVE SOUGHT, AND BE GIVEN, RECOGNITION OF THE IMPORTANCE WHICH WE ATTACH TO OUR RELATIONS WITH CHINA. A MORE DIRECTLY POLITICAL GESTURE WAS MADE ON 7 SEPTEMBER WHEN THE NEWLY-ARRIVED HEAD OF THE LOCAL BRANCH OF THE NEW CHINA NEWS AGENCY, WANG KUANG, CALLED ON ME AT HIS. °. REQUEST. THIS IS A FIRST TIME.

3. THESE DEVELOPMENTS IN CHINA'S POLICY TOWARDS HONG KONG ARE

PART OF THE REDEFINITION OF NATIONAL GOALS SINCE MAO'S DEATH,

PARTICULARLY THE COMMITMENT TO THE RAPID MODERNISATION OF CHINA'S ECONOMY. HONG KONG HAS A MAJOR ROLE IN THIS, AS A SOURCE OF FOREIGN EXCHANGE AND OF OPPORTUNITIES TO ENGAGE IN MORE FLEXIBLE RELATIONSHIPS WITH WESTERN COMMERCE AND INDUSTRY.

4. THESE DEVELOPMENTS ARE NOT SURPRISING BUT THEY HAVE BEEN

FAIRLY RAPID AND MAY WELL REFLECT CAREFUL DECISIONS IN PEKING CONCERNING NEW ASPECTS OF A RELATIONSHIP WHICH HAS ALWAYS BEEN A SPECIAL ONE FOR CHINA. THEY FOLLOW SEVERAL YEARS OF INCREASED

CHINESE INVESTMENT, AND ALSO RECIPROCAL MOVES BY MYSELF AND THE DIRECTOR, AND BY THE POLITICAL ADVISER AND NCNA STAFF AND OCCASIONALLY OFFICIALS IN CANTON,

MACLEHOSE

FILES

FED

PS

HK & GD

PS/TORD GORONWY

PUSD

ROBERTS

NEWS D OID

PS/PUS

MR MURRAY

2

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4

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