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3. Continuing, the Governor said that the talks were now being

conducted in a calmer atmosphere than in September 1983.

A very

important issue, bearing in mind that any agreement had to be

acceptable to China, the British Parliament and the people of

Hong Kong, was the attitude of people in Hong Kong to whatever

agreement was reached. Unless confidence could be maintained in Hong Kong, the objective (shared by China) of continued prosperity

and stability in Hong Kong would not be achieved. The Chinese

plan had been well publicised and, on the face of it, was reasonable.

But in the light of recent Chinese history, Hong Kong people were

looking for guarantees that it would work. It was not easy, now

in 1984, to provide credible guarantees in relation to a situation

which would arise in 13 years, but it was essential that any

agreement should be credible. Most Hong Kong people would have no choice but to stay. However, the professional and middle classes,

who were key to the economic success of Hong Kong, were mobile;

many of them could leave, and it was therefore important that they

should have confidence in the integrity of any agreement. So the dimensions of the problem were first, the realities of the Chinese

position, secondly, the acceptability of any agreement to the UK

Parliament, and thirdly, the achievement of an agreement credible to the people of Hong Kong.

4.

The Governor said that the Chinese were continuing to

publicize their intention to make an announcement in September.

They were probably now committed to making some announcement.

But they could not themselves determine the effects in Hong Kong of what they would say. So the terms of an announcement and

whether HMG could be associated with it were crucial.

In reply to

a question, the Governor said HMG would prefer any announcement to be a joint one, but much would depend on its terms.

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