CON.IDENTIAL

10. WE WOULD THEN PROPOSE TO FLESH OUT THE CONCEPT OF INFORMAL DIALOGUE OFFERED AT THE DINNER LAST NIGHT. WE WOULD SAY THAT JI PENGFEI'S VISIT TO HONG KONG (FROM ABOUT 10 DECEMBER) WOULD PROVIDE AN IDEAL STRTING POINT.FA DISCUSSION AT GOVERNMENT HOUSE DURING HIS VISIT COULD BE FOLLOWED UP BY FURTHER TALKS BETWEENPO

XU OR

OTHER MEMBERS OF NCNA AND THE GOVERNOR AND OTHER HONG KONG OFFICIALS. WE ALSO NOTE THAT LU PING IS DUE TO GO TO HONG KONG AGAIN SHORTLY (HE TOLD US SO LAST NIGHT). THIS WOULD PROVIDE FURTHER OPPORTUNITIES FOR DISCUSSION. WE WOULD ALSO LKE INCREASED INFORMAL CONTACT BETWEEN THE AMBASSADOR AND BOTH THE MFA AND THE HONG KONG AND MACAO AFFAIRS OFFICE OF THE STATE JUNCIL. WE WOULD ARGCE THAT THESE CHANNELS SHOULD OFFER AN EXCELLENT MEANS OF EXCHANGING IDEAS WITHOUT THE NEED FOR EITHER SIDE TO BECOME ENTRENCHED IN A FIXED POSITION. THPSH WOULD ALSO PROVIDE A MEANS OF RESOLVING QUICKLY ANY MISUNDERSTANDINGS WHICH MIGHT ARISE FROM MISGUIDED PUBLICITY IN A WATH WHICH DISCUSSION AT FOUR-MONTHLY MEETINGS OF THE JOINT LIAISON GROUP COULD NEVER DO.

11. WE WOULD THEN ADD THAT WE PROPOSE TO LOOK AGAIN AT THE QUESTION OF WHETHER OR NOT THE NEXT JOINT LIAISON GROUP SHOULD CONTINUE DISCUSSION ON THIS SUBJECT AT A DATE NEARER TO THE TIME OF THAT MEETING WHEN BOTH SIDES WILL BE ABLE TO SEE WHERE THEY

STAND.

12. WE MUST ACCEPT THAT THE CHANCES OF THE CHINESE ACCEPTING OPTION B TOUT COURT ARE NOT GREAT. WE SHALL THEREFORE NEED TO HAVE DISCRETION TO FALL BACK TO OPTION C, IN WHICH CASE WE WOULD AIM TO AGREE THAT THE NEXT RLG SHOULD HAVE A FURTHER EXCHANGE OF VIEWS ON THE SUBJECT PROVIDING THE INFORMAL DIALOGUE WERE

ALREADY IN PROGRESS AND IF (REPEAT IF) THE CHINESE SIDE HAD POINTS

THEY WISHED TO RAISE.

13. ASSUMING WE MAKE PROGRESS IN THURSDAY'S DISCUSSION, WE SHALL

WANT TO TRY ON THE CHINESE A PASSAGE FOR INCLUSION IN THE PRESS

COMMUNIQUE ON THE FOLLOWING LINES (THOUGH THIS WILL NOT BE EASY

TO ACHIEVE) THE TWO SIDES EXCHANGED VIEWS ON RECENT DEVELOPMENTS IN THE POLITICAL SYSTEM IN HONG KONG AND DISCUSSED METHODS OF ENSURING CONVERGENCE BETWEEN CONSTITUTIONAL DEVELOPMENTS IN HONG KONG BEFORE 1997 AND THE RELEVANT PROVISIONS OF THE BASIC LAW.

THEY AGREED TO KEEP IN CLOSE CONTACT ON THIS SUBJECT''.

14. GRATEFUL FOR INSTRUCTIONS DESKBY 2723OOZ. EVANS

HONG KONG AGREEMENT

COPIES TO: (VIA ADR)

LIMITED

HD/HKD

HD/FED

HD/PLANNING STAFF

HD/PUSD

DEP HD/PUSD

RES (MR WALKER)

PS

PS/MR RENTON

PS/PUS

SIR W HARDING

MR WILSON

SIR J FREELAND

MR J CROWLEY PUSD

MR ROBERTS NEWS DEPT MR FIFOOT LEGAL ADVS MR MARTIN ASST STAFF

CABINET OFFICE

MR MALLABY CABINET OFFICE MR DRC CHRISTOPHER

CABINET OFFICE

SIR P CRADDOCK NO 10 DOWNING ST. MR WOOD LEGAL ADVISERS

-3-

CONTIDENTIAL

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