CONFIDENTIAL
RECORD OF CONVERSATION
I had a talk over tea during my visit to Macao on May 19 with the Governor of Macao on relationships with the Chinese.
From this conversation the present status of Macao emerged fairly clearly. The Governor did not indicate that any secret agreement was in existence; but he did indicate that there was an understanding between China and Portugal under which Macao is regarded as "Chinese territory" but "under Portuguese administration". The Governor referred to Macao being "Chinese territory" even during his briefing on the situation in Macao which was given to the whole of the Hong Kong party during the morning session. He added that if Portugal were to leave Macao the only "destination" for the territory would naturally be the Peoples Republic and it was understood that "certain procedures" would have to be agreed in order to ensure that the change was orderly and not sudden. (It was part of his task to convince investors of this.)
He said that relations with China were conducted on two parallel axes. The first was between Lisbon and Peking. Once diplomatic relations had been established between Portugal and Peoples Republic of China in 1979 inter- governmental business was conducted on this channel but the Chinese did not take the initiative in raising the question of Macao even when their Ministers and Vice Ministers visited Portugal. The second axis ran between Macao and Guangdong and practical matters were dealt with on this channel. But the Governor was not entirely satisfied with the way it worked. He had the feeling that there were factions in Canton who had different channels to Macao and there were occasions on which he was not sure who he was talking to or what authority they had. Mr Ho Yin still tried to maintain
CONFIDENTIAL
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