ONFIDENPLAL

Note also that Basic Law is quite clear (Article 4) that

socialist system and policies will not be practised in SAR and that Hong Kong will retain its capitalist system and lifestyle for 50

years. These provisions displace corresponding points of Chinese

constitution so far as its application to the SAR is concerned.

PROVISIONS ON THE ECONOMY

Have noted widespread comment that certain provisions on

economy (balanced budget, low tax) seem inconsistent with autonomy

of SAR Government in economic policy. See considerable force in

these arguments.

EXECUTIVE NOT SUFFICIENTLY ACCOUNTABLE TO LEGISLATURE?

Draft Basic Law makes specific provision:

Article 43 : The Chief Executive of the Hong Kong

SAR shall be accountable to the Central People's

Government and the Hong Kong SAR in accordance with the

provisions of this Law".

Article 64 : The executive authorities of the Hong Kong

SAR must abide by the law and shall be accountable to the

Legislative Council of the Hong Kong SAR.

The key requirement for Hong Kong is for a system which

provides for both checks and balance, as well as co-operation

between the executive and the legislature. Not appropriate simply to import system practised elsewhere, founded on a different

political tradition.

Believe the future arrangements for SAR should evolve from present system, which has worked well and is suited to Hong Kong's

unique circumstances.

ELIGIBILITY OF HONG KONG PEOPLE WITH FOREIGN PASSPORTS FOR CERTAIN

POLITICAL AND CIVIL SERVICE POSTS?

- I am aware of concerns expressed about this. It is a complex question which depends on interpretation of Chinese nationality law.

Aware from recent comments by Chinese officials that they are

fully seized of the problem. Sure they will be studying it very

carefully with a view to meeting the concerns felt by Hong Kong

people.

CONFIDENTIAL

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