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if the solution we have proposed is not acceptable another
will have to be found. In the meantime, it is, of course,
important to maintain confidentiality about these exchanges.
[If raised] OFFICIAL CHINESE REPRESENTATIVE IN HONG KONG
5. We continue to believe that the time has not yet come
when it would be appropriate to appoint an official Chinese
representative in Hong Kong. Such a move might be mis-
interpreted by the local population and business confidence
would suffer. Our impression is that the present informal
arrangements for Chinese representation are satisfactory.
However, the Hong Kong Government will always be ready to
help find solutions to any practical problems that may arise.
BACKGROUND
HONG KONG/CHINA RELATIONS
6. China has a major interest in the stability and
prosperity of Hong Kong. The territory provides about a third
of Chinese foreign exchange earnings and is an increasingly
important source of investment and expertise. Chinese
organisations are investing heavily in Hong Kong and a growing
number of Hong Kong firms are becoming involved in joint
ventures in China. The present Chinese leadership freely
acknowledge that Hong Kong has an important part to play in the
achievement of their modernisation programme.
7. As a result, the past few years have seen a steady
improvement in Hong Kong/China relations, culminating in the
Governor's official visit to China in March and April this
year, the first since the Communists came to power.
Cooperation at the local level between the Hong Kong Government
and the neighbouring provincial authorities has steadily
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/increased,