SECRET

PORTUGUESE TO RESPECT THE PRIVATE CHARACTER OF THESE EXCHANGES). IN THESE CIRCUMSTANCES BRITISH POLICY IS TO CONTINUE TO ADMINISTER THE TERRITORY IN THE INTERESTS OF THOSE WHO LIVE THERE, ANGLO/ CHINESE AND HONG KONG/CHINESE RELATIONS ARE AT PRESENT EXCELLENT.

3. YOU HAVE DISCRETION TO GIVE THE POLITICAL DIRECTOR THE DOCUMENTS

LISTED IN PARAGRAPH 1 EXPLAINING THAT THEY ARE FOR BACKGROUND AND

HISTORICAL PURPOSES ONLY, AND SPEAK ON THE LINES OF PARAGRAPH 2 ABOVE (WITHOUT HANDING OVER A SPEAKING NOTE). IN THE MEANTIME, IT WOULD BE HELPFUL TO HAVE YOUR OWN ASSESSMENT OF THE LINE WHICH THE PORTUGUESE ARE LIKELY TO TAKE ON MACAO IN THEIR DISCUSSIONS

WITH THE CHINESE OVER THE ESTABLISHMENT OF DIPLOMATIC RELATIONS.

IF IT BECAME KNOWN THAT THE PORTUGUESE HAD OFFERED TO RETURN

MACAU TO CHINA, BUSINESS CONFIDENCE IN HONG KONG COULD BE SERIOUSLY

AFFECTED, EVEN IF THE OFFER WERE TURNED DOWN. WE ARE THEREFORE

BRIEFING THE SECRETARY OF STATE TO RAISE THE QUESTION WITH DR SA

MACHADO WHEN HE SEES HIM ON 30 JUNE.

4. WE HAVE SEEN HONG KONG TELNO, 799. WE SHOULD BE GRATEFUL IF THE

GOVERNOR OF HONG KONG AND HM AMBASSADOR IN PEKING COULD TELEGRAPH

ANY FURTHER COMMENTS BY 1200Z ON 29 JUNE. YOUR OWN ASSESSMENT SHOULD

REACH US AS SOON AS POSSIBLE.

OWEN

FILES

HRGD (6)

FED

SED

NTD

LEGAL ADVISERS

RESEARCH D

PS/LORD GORON WY ROBERTS

MR HIBB SAT

MR

CORTAZZI

MR MURRAY

MR FERGUSSON

2

SECAFT.

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