CONFIDENTIAL

MUST WE STICK TO THE TERMS OF THE MEMORANDUM?

On the one hand

I have no doubt

The Memorandum represents a commitment by HMG.

people in Hong Kong will expect us to stand by it.

that this was fundamental to their acceptance of the agreement as a

whole. On the other hand the Chinese will certainly expect us to

remain within its terms.

I f we do not keep our commitments we

cannot expect others to keep theirs.

CONFIDENTIAL

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