CONFIDENTIAL

WHY DID HMG COMPLICATE NEGOT I AT IONS BY PRESSING FOR CONTINUED

BRITISH ADMINISTRATION?

People of Hong Kong would have expected nothing less of HMG.

But this was not attainable.

AGREEMENT FOR DATE 13 YEARS IN FUTURE UNREAL?

29. The agreement is of course a unique one. Dealing with a known

time limit fixed by duration of New Territories lease. Essential

that arrangements for future should be settled and known well in

advance. Important to establish climate of stability in Hong Kong

in which people of Hong Kong can plan ahead.

POSSIBLE CHANGES IN HONG KONG'S NEEDS BETWEEN NOW AND 1997?

* 30.

Of course Hong Kong will continue to develop between now and

1997. But believe consistent need is for assurance that Hong Kong

can remain stable and prosperous. Agreement provides such

assurance. Sets out in clear, detailed and binding form, framework

of arrangements which are best possible guarantee of continuing stability/prosperity up to and after 1997.

SURGE OF EMIGRATION APPLICATIONS SINCE INITIALLING OF AGREEMENT

* 31.

No evidence of upsurge in number of applications for emigration

since publication of draft agreement. Numbers of Hong Kong people emigrating to other places in the past five years have remained

fairly steady.

HOW MUCH HAS BRITISH SIDE ADDED TO POLICIES UNILATERALLY DECIDED BY

CHINESE SIDE?

32. Annex I represents a highly detailed statement of Chinese policies towards Hong Kong after 1997. Over the last two years spent much time discussing with the Chinese the way Hong Kong works, and these discussions are fully reflected in the scope and substance of the annex. This wealth of detail will greatly help confidence in

Hong Kong.

CONFIDENTIAL

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