CONFIDENTIAL

5. THE DIFFICULT THING IS TO DECIDE HOW TO MOVE ON FROM THIS POINT. IT IS NOW CLEAR THAT (NOT ANEXPECTEDLY) THE CHINESE SIDE WILL CWNTINUE TO PRESS FOR THIS DIALOGUE TO TAKE PLACE IN THE JOINT LIAISON GROUP: IT IS UNLIKELY THAT THEY WILL AGREE TO DISCUSSIONS ELSEWHERE UNLESS THIS POINT IS CONCEDD.

6. AS WE SEE IT, WE HAVE THREE OPTIONS:

(A) TO INSIST ON INFORMAL DISCUSSIONS ONLY AND TO DECLINE TO

AGREE TO ANY FURTHER EXCHANGES IN THE JOINT LIAISON GROUP:

(B) TO ARGUE FOR INFORMAL DISCUSSIONS, AND TO SAY THAT WE CAN DECIDE AT A FUTURE POINT IN THE LIGHT OF THESE INFORMAL DISCUSSIONS WHETHER ANOTHER XCHANGE IN THE JOINT LIAISON GROUP IS

NECESSARY:

(C) TO SETTLE ON A MECHANISM FOR INFORMAL DISCUSSIONS, BUT TO PAY THE REQUIRED PRICE OF DISCUSSION IN THE JOINT LIAISON GROUP AT THE NEXT ROUND (AND BY IMPLICATION AT FURTHER ROUNDS IN THE

FUTURE).

IN ALL THESE OPTIONS THE OB ECT WOULD HAVE TO BE TO SEE THAT THE EXCHANGE WAS TWO-WAY, AND NOT JUST A DISCUSSION OF BRITISH

PROPOSALS FOR REFORM.

7. OPTION (A) HAS TO BE EXAMINED. BUT GIVEN THE STEAM BEHIND THE

CHINESE POSITION THEY WILL REJECT IT. THE RESULTING CONFRONTATION WILL SPILL OVER INTO OTHER AREAS OF WORK OF THE JLG. IT WOULD

OF COURSE DEFEAT THE OBJECT OF ACHIEVING THE INFORMAL DIALOGUE ON

CONSTITUTIONAL DEVELOPMENT AND THE BASIC LAW WHICH WE PERCEIVE

AS NECESSARY.

8. WE SEE THE EFFECT E CHOICE AS BEING BETWEEN OPTIONS B AND C,

WITH B STRONGLY PREFERRED.

9. WE WOULD PROPOSE TO CONTINUE DISCUSSION OF THIS ON THURSDAY BY SAYING (PICKING UPGFROM PARA 4 ABOVE) THAT WE ACCEPT THAT A PROPER OBJECTIVE OF THE TWO SIDES IS TO SEEK TO ACHIEVE CONVERGENCE

BETWEEN ANY REFORMS TO GOVERNMENT STRUCTURE IN HONG KONG BEFORE 1997 AND THE SAR GOVERNMENT STRUCTURE POST 1997. THERE IS CLEARLY A NEED FOR CO-ORDINATION (AS KE HIMSELF NOTED - PARA 15 OF PEKING TELNO 1730). WE WOULD REITERATE THAT AT PRESENT WE HAVE NO FIRM PLANS OR BRECONCEIVED IDEAS ABOUT WHAT WILL EMERGE FROM THE 1987 REVIEW.

NEVERTHELESS, THE REVIEW MUST TAKE PLACE, THE BRITISH AND HONG KONG

GOVERNMENTS ARE COMMITTED TO IT, AND COMMITTED AS A RESULT OF WIDESPREAD PUBLIC DEMAND IN HONG KONG. NOR CAN IT BE AN EMPTY

EXERCISE. THERE ARE MANY IDEAS AND STRANDS OF OPINION UNDER PUBLIC

DEBATE IN HONG KONG, AND THESE SHOULD NOT BE IGNORED ON EITHER SIDE.

WE WOULD LIKE AS SOON AS POSSIBLE TO INITIATE AN INFORMAL DIALOGUE

WITH THE CHINESE SIDE IN WHICH BOTH SIDES COULD EXCHANGE VIEWS ON

HOW IDEAS ABOUT POLITICAL REFORM BEFORE 1997 AND IDEAS ABOUT

9-34,.3,5

547:5743 095 1997 CAN CONVERGE. THIS SHOULD BE A GENUINE DISCUSSION WITH NO PRECONCEPTIONS ON EITHER SIDE.

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110.

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