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BACKGROUND NOTE
1.
Mr Shultz visited Hong Kong from 8 - 10 February after
visiting China from 26 February. The Governor brought him
up to date on the talks and the current situation in Hong Kong,
although he was not then in a position to tell him about
Sir Percy Cradock's call on Vice Foreign Minister Yao Guang on
9 February, when the Chinese position was firmly restated.
2.
Mr Shultz told the Governor that the Hong Kong question
had only come up peripherally during his visit to China. lle
too had gained the clear impression that the Chinese were
insisting on the sovereignty premise before agreeing to
substantive talks. He also detected Chinese ignorance of
how Hong Kong works. He has since been encouraging US
businessmen with interests in Hong Kong to express their
concerns when visiting China.
3. The Hang Seng Index continues to recover from a steep fall
after the Prime Minister's visit and the Hong Kong dollar rate
has steadied against the US$. [According to a senior Hong Kong
official who saw Lord Belstead on 21 February, there are no
obvious signs of large-scale movement of people or money from
the territory].
4. When in Hong Kong Mr Shultz headed off most questions
about the future, taking the line that it was a matter for the
British and Chinese Governments to resolve.
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