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CONFIDENTIAL

DSR 11C

"In a class by itself in importance is Hong Kong.

rounds have now been held in the second, more detailed

Six

phase of the confidential Sino-British talks on Hong Kong's

future. The British and Chinese Governments are in

agreement on the common aim of maintaining Hong Kong's

stability and prosperity. We aim to seek an arrangement

that is acceptable to Parliament, China and the people of

Hong Kong. Within these criteria our approach is flexible.

The Chinese position on matters of principle makes.

negotiation an arduous task. No overall timetable has been

agreed for the talks, but we are proceeding as quickly as

we can. It is clear that confidence in Hong Kong will not

hold up indefinitely against uncertainty over the future."

CONFIDENTIAL

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