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ALL THIS IS CONSISTENT WITH THE LINE IN THE FOREIGN

MINISTER'S REPLY OF 24 SEPTEMBER AND SUPPORTS THE INTERPRETATION

THAT THE LATTER IS MORE THAN A SIME-SEEKING DEVICE. THERE !S

NO DOUBT MUCH IGNORANCE IN PEKING OF ACTUAL CONDITIONS IN

HONG KONG AND PROBABLY UNCERTAINTY ABOUT THE MODALITIES OF

TRANSITION TO CHINESE RULE. BUT THE CHINESE ALMOST CERTAINLY

SEE THE ONLY WAY AHEAD AS ONE REQUIRING SOME FORM OF RECOGNI-

TION OF CHINESE SOVEREIGNTY, AND THEY WILL JUDGE THAT IN THE

LAST RESORT THEY CAN IMPOSE THIS POINT OF VIEW UPON US.

5.

AGAINST THIS BACKGROUND, I AGREE WITH THE PROPOSAL THAT

YOU SPEAK TO HUANG HUA, MAKING THE POINT THAT CHINESE GENERAL ASSURANCES FAIL TO BITE ON THE REAL PROBLEM AND INVITING THEM TO THINK AGAIN. BUT THE MOST IMPORTANT THING, I SUGGEST, IS TO ENCOURAGE THEM TO DEVELOP THEIR IDEAS ON THE FUTURE IN

CONCERT WITH US RATHER THAN EXPECT THEM IN TIME TO COME ROUND TO OUR WAY OF THINKING. THE LATTER MAY HAPPEN BUT THE CHANCES:

ARE NOT GOOD AND IT IS THEREFORE IMPORTANT THAT WE MAINTAIN SOME SORT OF DIALOGUE, 1 I SUGGEST ALSO THAT WE BEGIN OURSELVES PRIVATELY TO LOOK AFRESH AT THE VARIOUS POSSIBLE WAYS OF SOLVING

CUR PROBLEM AND OF COOPERATING WITH THE CHINESE IN MAINTAINING

CONFIDENCE.

6. PARA 7 OF TUR. I AGREE THE CHINESE RECORD FOR SECRECY

1S GENERALLY GOOD. BUT WE HAD THE DISTURBING CASE OF SONG'S

TALK ON HONG KONG WITH FRENCH REPORTERS IN MAY(HONG KONG TELNOS. 54:3 AND 559 OF 8 MAY) AND IT SEEMS WISER TO UNDERLINE THE NEED FOR

GREAT DISCRETION.

ARADOCK

FILES

KK & GD

DEF D

PRD

TUSD PS

PS/MR BLAKER PS/PUS

SIR A DUFF

MR CORTAZZI MR MURRAY

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