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(v)
(vi)
(vii)
arrangements acceptable to Britain, China and people of
Hong Kong.
Second, more detailed, phase of talks began July. Next session 22/23 September. Chinese delegation led by Vice
Foreign Minister Yao Guang, British delegation by HMA
Peking. Governor of Hong Kong participating as appropriate on British side.
We have
Content of talks confidential. Atmosphere generally friendly though Chinese line tough on substance. given nothing away.
We aim to seek settlement acceptable to Britain, China
and people of Hong Kong. Their views taken fully into account. Made known to us through many channels. We are in close consultation through the Governor with Hong
Kong's Executive Council. Mr Luce visiting Hong Kong
24-28 September.
(viii) Chinese propaganda has floated idea of Hong Kong coming
within the Chinese State but with considerable autonomy
and functioning essentially as it does now. In the talks with us they have taken a similar line. Their
main points are:
(ix)
(a) Hong Kong would become a Special Administrative Region of China under Article 31 of the Constitution. (b) The Government would be drawn from the local people
of Hong Kong.
(c) The economy and basic freedoms would be "protected" and the laws would be "basically unchanged". There woul be an independent convertible currency and "existing external relations in the economic and cultural fields"
would be maintained.
Most people in Hong Kong sceptical of this SAR idea. It is superficially attractive but lacks key ingredient for confidence, an insulator against Chinese interferenc in Hong Kong. At present this is provided by
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