CONFIDENTIAL

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GOING INTO THE HONG KONG INFRASTRUCTURE, THE MONEY BEING DIVERTED INSTEAD INTO THE RESETTLEMENT FUND.

3. ACCORDING TO HIS LETTER TO CHEUNG, SIR PHILIP WILL BE PUTTING THIS SUGGESTION TO THE HONG KONG GOVERNMENT, THE FCO AND TO NUMBER 10 BUT WOULD WELCOME CHUNG'S VIEWS AS A MEMBER OF EXCO AND AS A STEWARD OF THE JOCKEY CLUB.

COMMENT

4.

THIS IS MOST UNHELPFUL. THERE IS NO INDICATION IN THE LETTER THAT SIR PHILIP DISCUSSED THIS IDEA WITH YOU OR WITH ANYONE IN THE HONG KONG GOVERNMENT DURING HIS VISIT LAST MONTH. WE ARE NOT AWARE OF HIS HAVING WRITTEN YET TO ANYONE ELSE HERE. WE DO NOT KNOW EITHER WHETHER CHEUNG HAS RAISED STR PHILIP'S LETTER WITH YOU OR WITH OTHER MEMBERS OF EXCO. BEFORE A REPLY IS SUBMITTED

WE SHOULD BE GRATEFUL FOR YOUR COMMENTS, IF POSSIBLE BY 111000Z.

HOWE

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DISTRIBUTION

LIMITED

HKD

FED

PS

PS/MR LUCE

MR GIFFARD

MR DONALD

2

CONFIDENTIAL

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