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(iii) Content of talks confidential.
(iv)
(v)
(vi)
(vii)
Our aim is to seek a settlement acceptable to Britain,
China and people of Hong Kong. Their views made known to us and Governor 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.
Central issue is to devise package in which Hong Kong people will have confidence. Must therefore agree arrangements which will reassure them. Given joint Sino-British aim, confident such an arrangement can be
worked out.
Meanwhile important nothing said or done to damage confidence in Hong Kong. Grateful your understanding.
British Government obtains no revenue from Hong Kong other than that of normal trading partner, contrary to
what Chinese seem to think.
(viii) Chinese propaganda has floated idea of Hong Kong as
Special Administrative Region (SAR) under Chinese constitution, with considerable autonomy and functioning essentially as it does now.
(ix)
Evidence
Most people in Hong Kong sceptical of SAR idea. suggests Chinese have not thought through detailed issue: involved. They seem to assume by saying Hong Kong will continue to be financial/commercial centre or that currency will continue to be internationally tradable, this will just happen. Hong Kong people and investors need proof of effective guarantees against Chinese
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