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POINTS TO MAKE WITH MR HEATH ON HIS VISITS TO CHINA AND HONG KONG

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1. Interested to hear from you about your talk with Deng last

month. Have seen our Embassy's reporting telegram.

2. Grateful for helpful points you made eg on difference between

systems in China and Hong Kong, and need for practical solution.

3. Press reports of a disagreement between you and UMELCO members

unfortunate. They are of course very sensitive.

4. The EXCO Unofficials were in London last week, with Governor and

Ambassador. Very useful discussions with them. Unanimous on line

to be taken at talks on 19/20 October.

W

5. We are prepared to be flexible in the talks. Must do our best

for people of Hong Kong. Chinese plan, as known so far, does not offer sufficiently strong guarantees of continuity of freedoms, systems, stability and prosperity. We are exploring what

alternative safeguards might be practicable.

6. Talks at very sensitive stage. Parliamentary interest bound to

grow. But important nothing is said or done to damage confidence further in Hong Kong, or harm'atmosphere of talks. Grateful for

your understanding.

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