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resumption of control in 1997 would have a disastrous effect

on Hong Kong, notwithstanding Chinese assertions of

willingness to allow the British to continue exercising

administrative control until then and notwithstanding their

promises of a continuation of a free market economy and a

free port thereafter.

Edmund also said that Professor Paul Lin

had seen Liao and his statements in Hong Kong had been made at

the behest of the Chinese leadership.

I told Edmund that I did not know the detail of the

Prime Minister's discussions in Peking nor did I know what had

happened since then. I said I would report our conversation

to you.

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J. Jones:

R. P. Margolis

DPA

18. X. 82

ASPER

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