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DRAFT TELEGRAM

TO IMMEDIATE PEKING

RFI IMMEDIATE HONG KONG

FUTURE OF HONG KONG

SECRET

1.

Following consultation with the Unofficial Members of EXCO,

Ministers have now considered the future course of the talks, in

particular the risk, as a result of Chinese intransigence, of an early breakdown with consequent severe damage to the Hong Kong

economy and to the well-being of its people.

2. The British Government's aim throughout has been to preserve the essential freedoms and commercial and financial vitality of Hong Kong. They continue to see the best interests of Hong Kong people

being served by a negotiated settlement, to the successful

implementation of which both Britain and China would be committed. They recognise that confrontation would bring severe and possibly irretrievable damage in its train, and have therefore considered

other ways of making progress consistent with the Prime Minister's

letter of 10 March.

3. Against this background you should seek an early meeting with

Vice Foreign Minister Yao Guang at which you should convey the

following message, saying you are speaking on the instructions of

the Prime Minister.

Begins.

4.

The Prime Minister recalls her visit to Peking in September 1982

and the important discussions she then held with Chairman Deng

Xiaoping and Premier Zhao Ziyang. At the conclusion of those talks

both sides agreed to hold diplomatic discussions on Hong Kong with the object of maintaining its future stability and prosperity.

The

British Government remain of the view that with statesmanship on

both sides an agreement can be achieved that would be in the

interest of both Britain and China and, most important of all, would

continue to assure the well-being of the people of Hong Kong.

SECRET

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