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(C) THE TALKS WERE MOVING ALONG STEADILY. THE CHINESE POSITION THAT

THEY WOULD MAKE AN ANNOUNCEMENT IN SEPTEMBER WAS WELL KNOWN: OUR POSITION WAS THAT THERE SHOULD BE NO ARTIFICIAL DEADLINE,

IT BEING MORE IMPORTANT THAT WE SHOULD REACH AGREEMENT ON

WORKABLE ARRANGEMENTS FOR THE FUTURE.

4. THE GOVERNOR OF MACAU ASKED WHETHER WE WERE NOW PROPOSING CONSTITUTIONAL CHANGES IN PREPARATION FOR THE FUTURE. SUMMARIZED

FOR HIM THE THINKING BEHIND OUR RECENT PROPOSALS FOR DEVELOPING THE DISTRICT ADMINISTRATION SCHEME, AND INDICATED THAT THE PROCESS OF APPOINTING SOME LEGCO MEMBERS FROM AMONG THE ELECTED DB/URBAN COUNCIL MEMBERS WOULD CONTINUE. FURTHER CONSTITUTIONAL DEVELOPMENT

WOULD HAVE TO BE TAKEN ONE STEP AT A TIME.

5. THE GOVERNOR OF MACAU ASKED WHETHER THE MOTION IN THE LEGISLATIVE COUNCIL HAD BEEN TRIGGERED BY A BELIEF THAT AN AGREEMENT WOULD BE CONCLUDED SOON, AND WHETHER WE WERE AIMING FOR AN AGREEMENT ON BROAD PRINCIPLES BY SEPTEMBER. I SAID THAT A FINAL AGREEMENT BY SEPTEMBER, LET ALONE BY JUNE OR JULY WHICH THE CHINESE HAD ALSO MENTIONED, WAS NOT POSSIBLE. NOR DID WE CONSIDER IT PRACTICABLE TO DISTINGUISH BETWEEN PRINCIPLES AND DETAILS IN OUR DISCUSSIONS, SINCE PEOPLE IN HONG KONG WANTED TO KNOW HOW THE CHINESE PLAN MIGHT WORK IN PRACTICE, AND WHAT ASSURANCES THERE WOULD BE THAT PRESENT SYSTEMS WOULD

CONTINUE UNCHANGED.

6. THE GOVERNOR OF MACAU ALSO SUGGESTED THAT THERE MIGHT BE PROBLEMS DURING A TRANSITION PERIOD, REFERRING TO HIS OWN EXPERIENCES OF MOZAMBIQUE IMMEDIATELY PRIOR TO INDEPENDENCE, AND TO XU JIATUN'S ACTIVITIES. HIS THOUGHT WAS THAT ONCE IT WAS KNOWN THAT BRITISH ADMINISTRATION WOULD COME TO AN END IN 1997 THE AUTHORITY OF THE HONG KONG GOVERNMENT WOULD GRADUALLY BE ERODED. (IT WAS CLEAR THAT XU'S HIGHLY PUBLICISED VISIT TO MACAU AND HIS PUBLIC

STATEMENTS THERE ON ISSUES WHICH WERE WITHIN THE COMPETENCE OF

PORTUGAL AND THE GOVERNOR HAD ANNOYED REAR ADMIRAL ALMEIDA E COSTA).

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