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CONFIDENTIAL

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clear that the SAR

legislature shall be constituted by elections (and not through consultation).

4.

These remarks are most unhelpful. The Hang Seng Stock Market index fell 50 points in Hong Kong in the

course of today and the Governor's view, which is no doubt

correct, is that this storm is unlikely to die quickly.

5.

I discussed with Dr Wilson, who is at present in Hong

Kong before travelling to Peking for next week's

week's meeting

of the Joint Liaison Group, whether the Embassy in Peking

should formally express ou r displeasure to the Chinese,

given that this i s the first ti me that either side has

publicly accused the other of not sticking to the

agreement. Dr Wilson's view, which he confirmed was also

the view of the Hong Kong Political Adviser, was that we

should not over-react. Mr Xu's remarks had not been part

of the prepared statement which he read ou t at the beginning of the conference but had been delivered at the

end in response to questions.

He proposed that the Embassy should

nevertheless express surprise at Mr Xu's remarks.

6.

After consultation with Mr Renton, we sent the attached telegram to Peking. As you will see, in addition to instructing the Embassy to express surprise at Mr Xu's remarks, it instructs Dr Wilson to repeat the point during JLG discussion. It also instructs him to pick up Mr Xu's

remark that the

the future SAR legislature might be formed by

"consultations".

THIS IS A COPY

THE ORIGINAL HAS BEEN

CLOSED UNDER

FOI EXEMPTION NO. 27(1)

22 November 1985

L.c. Chum

W G Ehrman

Hong Kong Department

CONFIDENTIAL

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