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taken when Sir S Y Chung called on Mr Pym on 4 May. The use of this

formula in the Secretary of State's message and the Queen's Speech therefore repeated a position to which HMG had already committed itself. The use of the word "aim" is important. Although Ministers

have expressed confidence about the outcome, we cannot of course

guarantee that we will be able to achieve this objective. We have

committed ourselves to try.

4.

However, no public view by HMG has been given on the specific

form of consultation that should take place with the people of Hong

Kong, beyond the involvement of EXCO. In the House of Commons on 22

December Mr Pym said in reply to a question from Mr Hal Miller MP

that "the views of the people of Hong Kong will be taken fully into

account in our talks with the Chinese". This same wording was used

by the Prime Minister on 4 July in response to a written PQ by Mr

Miller on how HMG proposed to consult the people of Hong Kong on any solution that may be reached with China. She added that "as part of the regular process of consultation, the Governor and the Unofficial

Members of the Executive Council are now in London. Other groups and individuals in Hong Kong regularly make their views known to the

Hong Kong Government directly or through channels such as the

District Boards."

5.

In practical terms therefore, we have so far concentrated on consultation with EXCO. They expect to be consulted and that their views will be taken fully into account in London, but they accept that their advice may not necessarily always be followed and that the final decision rests with Ministers. This arrangement has

worked well and EXCO have shown themselves realistic and flexible.

It is clear therefore, that they do not see themselves as having the power of veto; on the other hand, we would obviously not wish to be in a situation where we were following a strategy that we knew was opposed by them. By bringing them fully into the picture, we are more likely to be able to carry them with us as negotiations proceed. Thus, it is the Governor's judgement that if the time comes when it is clear that the Chinese will not accept our objective of a sovereignty/administration deal in any form, EXCO will themselves be prepared to offer realistic suggestions as what HMG's next negotiating position should be.

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