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run a capitalist Hong Kong. The aim must therefore be to evolve a system under which the present economic and political structure was largely preserved with some face-saving for the Chinese. The Chinese might conceivably see this as an advantage if it provided a suitable precedent for a solution of the Taiwan problem.

W

DISTRIBUTION:

HKGD (to enter) Private Secretary

PS/Mr Ridley

Sir E Youde o/r

Mr Donald

Mr McLaren, FED

Acting Governor, Hong Kong (Personal)

Mr DR Ford, Hong Kong Government Office, London (Personal)

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