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4. I came away from Peking satisfied that much progress had been

made, but also aware that some major points still needed to be

resolved. An important phase of the negotiations still still lies

ahead, and we still have some way to go before concluding an agreement. The focus of discussion has now moved back to the diffunt

regular rounds of negotiations in Peking, which continue their

useful and constructive course.

5. From Peking I flew on to Hong Kong. Between 18 and 20 April I

held discussions with the Governor and with the unofficial members

of the Executive Council and Legislative Council, I also met

representatives of a wide range of local opinion including elected

and appointed members of the Urban Council and the District Boards.

On 20 April I made a statement about the way in which the Government is approaching the present negociation on Hong Kong's future. Copies of this statement have been deposited in the Library of the

House.

6. In my statement I felt it was right to say that in my view it

would not be realistic to think of an agreement that provided for

continued British administration in Hong Kong after 1997. In

reaching this conclusion we were fully aware of the wish of the Hong

Kong people for the maximum continuity in every respect. I can assure the House that we impressed this on the Chinese Government very strongly. We explained in detail the advantages of the present system and fought very hard for its retention over a long period.

When it became evident that this was not a feasible option, we

concluded that we should concentrate on other ways of securing the

assurances necessary for the continuity of Hong Kong's stability, prosperity and way of life.

The

7. I believe there is a basis on which this can be achieved. Chinese Government have made it clear publicly that they recognise the special circumstances of Hong Kong, and that they want its social and economic systems and lifestyle in many ways so different from those of mainland China - to remain unchanged.

have also underlined their recognition that Hong Kong should

continue as an autonomous unit in the international economic field.

We share with the Chinese Government the strongest possible common

They

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