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RESULT OF XU'S REMARKS BUT THE RESULT OF THE REFORMS THEMSELVES AND STATEMENTS BY HONG KONG OFFICIALS.

19. KE CONCLUDED THAT HE TOO WOULD REFLECT FURTHER ON THE SUBJECT. THE CHINESE INTENTION WAS TO ENSURE THAT THERE WAS NO CONTRADICTION TWEEN PRESENT REFORMS AND THE BASIC LAW. THIS COULD BE ACIEVED THROUGH CLOSE CONSULTATION AND CO-ORDINATION OF ACTIONS BETWEEN THE TWO SIDES. IT WAS NOT THE CHINESE INTENTION TO MAKE THINGS DIFFICULT FOR THE BRITISH.

MY THIRD INTERVENTION

20. I SAID THAT I WAS DISAPPOINTED AT KE'S REACTION TO MY COMMENTS.

I DID NOT THINK IT WOULD BE PRODUCTIVE TO PICK UP ALL HIS SERIES

OF POINTS SEMICOLON BUT I WISHED NOW TO MAKE CLEAR THAT:

(A) THE SUGGESTION THAT WE SOUGHT A VETO OVER THE BASIC LAW WAS QUITE WRONG.

(B) THERE WAS NO DISTINCTION BETWEEN THE ADMINISTRATION AND THE ''DAY-TO-DAY ADMINISTRATION OF HONG KONG. WE WERE RESPONSIBLE BEFORE 1997. MINISTERS WERE DTERMINED TO DISCHARGE THIS RESPONSIBILITY FAITHFULLY, PRUDENTLY AND SERIOUSLY. WE WERE TRYING TO ENSURE THAT THAT RESPONSIBILITY WAS CARRIED OUT IN SUCH A WAY TO ENSURE A SMOOTH TRANSFER IN 1997 AND TO AVOID DAMAGE TO CONFIDENCE AND HONG KONG'S STABILITY AND PROSPERITY.

1 WELCOMED THE CHINESE SIDE'S INTENTION TO SOLVE THIS PROBLEM AND RECOGNITION THAT IT WAS NOT A SIMPLISTIC ONE. AND EFFECTIVE SOLUTION MUST BE SOUGHT: THIS WAS WHAT LAY BEHIND OUR PROPOSAL FOR DEALING WITH THE SUBJECT. I EXPECTED THAT BOTH SIDES WOULD WISH TO REFLECT AND CONTINUE DISCUSSION OF THE ISSUE LATER DURING THIS JLG MEETING. KE AGREED.

21. WE THEN AGREED THAT TOMORROW WE WOULD DISCUSS RIGHT OF ABODE ENDORSEMENTS AND STATELESSNESS AND MAKE A START ON GATT IF TIME PERMITTED.

22. SEE MY TWO IFTS FOR COMMENTS AND RECOMMENDATIONS.

EVANS

YYYY

DEHDAN!

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