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Subsequently, we have had some initial discussion both with Sir Y K's representative in London (Mr Stephen Pan) and with the Chinese authorities. It is not yet clear how the latter intend to contribute: they can be expected to try to minimise their foreign exchange commitment. We have this week sent Sir Y K a paper, of which I enclose a copy, explaining how we would like to see the scheme operate. We hope that we can reach broad agreement with him on it during his visit to London (he will be seeing Mr Raison and the Director General of the British Council).
6. I doubt whether Sir Y K will seek to discuss all this in detail with the Minister. I suggest that if the subject comes up, Mr Luce simply welcomes the initiative and underlines our commitment to making rapid progress with its implementation.
Development of Reprsentative Government in Hong Kong
7. Sir Y K may well seek to raise the issue of constitutional development in Hong Kong. In the second half of last year the Chinese Government expressed concern, through a variety of official and unofficial channels, at the pace and direction on these developments in Hong Kong. Their concern focussed particularly upon the public review which the Hong Kong Govern- ment has promised will take place in 1987 of developments thus far (primarily the introduction of indirect elections last September to choose 24 of the Territory's 56 member Legislative Council): this review must include the question of whether direct elections should be now also introduced to choose some of the Council's members. The Chinese are concerned that this review is an attempt by HMG to introduce far-reaching "democratic reforms" and thus preempt the constitutional arrangements which they are now drafting for the territory, and which will not be published (as a draft "Basic Law") until 1988. We have been at pains to reassure the Chinese that we are committed to the 1987 review; but that we have no prearranged scheme to preempt the Basic Law as they fear; and that our intention is to maintain a dialogue with them as the likely outcome of the 1987 review emerges in order to ensure far as possible that this "converges" with the plans that they are now formulating in their draft Basic Law.
8. The Chinese have been somewhat reassured by this dialogue, but remain suspicious of our long term intentions on con- stitutional development. It may well be that Sir Y K seeks to raise these continuing Chinese concerns with the Minister
(he did so with senior FCO officials here a year ago). If he does, the Minister might wish to explain that these developments in Hong Kong are no longer part of his responsbilities, but that he understands that HMG have every intention of acting prudently in this regard; that we are committed to the 1987 review; that we have no preconceived ideas of what should emerge from that review; and that we accept the need for convergence, which can best be assured by continuing the present fruitful dialogue between our two governments.
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