SECRET

VISIT OF PUS TO WASHINGTION 21-24 JUNE 1983

FUTURE OF HONG KONG

BACKGROUND

1.

The PUS is familiar with the background.

2. With the Prime Minister's agreement the Americans have been kept

generally abreast of developments. Sir Oliver Wright last brought

Mr Shultz up to date before the latter visited China in February 1983.

3. Since then we have had further contacts with the Chinese in

Peking and there has been an exchange of messages between the Prime

Minister and Premier Zhao. Indications are that the Chinese are keen

to begin substantive talks and we are now working on a mutually

acceptable agenda for them.

NATIONAL PEOPLE'S CONGRESS

4. At the opening session on 6 June, Premier Zhao limited his

remarks on Hong Kong to the following :-

"We shall, at an opportune moment, recover Chinese

sovereignty over Hong Kong and take appropriate

measures to maintain its prosperity".

SECRET

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