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3. There is, I think, much sound sense in the Governor's draft

paper. But, as I explained on Thursday, I am not yet quite so

convinced of the wisdom of going too far down the democratic

road. In Sir Percy Cradock's last round of informal talks in

Peking, there was some signs of Chinese reservations on this

point for example, from Ji Pengfei. And we both, I think,

have some anxieties about the risk that elections might stir

up conflict in Hong Kong itself. Even so, we cannot escape the

need to suggest some mechanism to replace existing procedures,

so as to avoid leaving a constitutional vacuum which the Chinese

could exploit.

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4. This is a key question in our strategy for the future of

Hong Kong and we must consider it with great care. I believe that includes getting the views of the Hong Kong Executive

Council. We shall have a chance of talking to them in January but the Governor feels strongly that. these discussions will only

be productive if EXCO have had a chance to consider the issue beforehand on the basis of a discussion paper.

5. As I explained, I wanted you to see now the full paper with the Governor's ideas. But I am sure that it would not be right

for him to put it to EXCO until we have had more time to consider

it. I have, therefore, asked Sir E Youde to recast the paper in shorter and more interrogative form, rather than as proposals

for a set course of action. He will report EXCO's views after their discussion and we can then decide what we might put to colleagues on this subject before the meeting of OD(K) on

11 January.

Ι

6. I should add that while I am against rushing things, believe that we should aim to reach agreement at least on certain basic points quickly. The negotiations require this. Sir P Cradock and the Governor are agreed that it is important for us to keep up the momentum by putting in further working papers on central issues, including future constitutional arrangements for Hong Kong. We shall need to know our own minds, and to agree with EXCO at any rate on the

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