Redacted under FOI Exemption S 27(1)

| CONFIDENTIAL |

24.

The Chinese have long been highly suspicious about direct

elections (although, as noted below, they maintain to us that they

are not opposed to them in principle). Their concern about the possible effects of direct elections appears

elections appears to have grown in the past few months, probably as a result of divisions and confrontation

in the Legislative Council over construction of the Daya Bay nuclear

plant in Guangdong province of China, near Hong Kong. Hong Kong

business leaders in contact with the Chinese tend to oppose direct

elections and to tell them so. Moreover, the sub-committee of the

Basic Law Drafting Committee drafting the relevant section of the

Basic Law at present has a substantial majority against direct

Not even the Hong Kong members are unanimously in

elections.

favour.

Exchanges with the Chinese

25.

In order to overcome

this mistrust and lessen the risk of

conflict over the 1987 review and the Basic Law we have sought since

May 1986 to intensify contacts with the Chinese and to establish an

informal dialogue on the issues involved. There have been three

discussions at Foreign Minister level and detailed exchanges between

officials, in which the Governor of Hong Kong has participated.

26.

On general issues connected with "convergence" and the drafting of the Basic Law we have managed to put across our ideas better than we had anticipated. We have passed to the Chinese a

series of papers on various aspects: they have accepted and even

welcomed our involvement. We hope this will help to fashion a Basic Law acceptable and appropriate to Hong Kong.

| CONFIDENTIAL |

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