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CONFIDENTIAL

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FAC REPORT ON HONG KONG: SHORT COMMENTARY ON RECOMMENDATIONS

JOINT DECLARATION AND BASIC LAW

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Tearing up Joint Declaration, reneging on Joint Declaration and breaking off all negotiations with China is not an option:

Agreed. We have stated that the Joint Declaration remains the cornerstone of our policy, and that it is better for Hong Kong to return to China under the terms of the Joint Declaration than without an agreement.

PRC may need to give stronger guarantees through Basic Law to re-establish confidence and trust:

Agreed. Much depends on China's future words and, most importantly, actions. Must demonstrate full commitment to Joint Declaration and, in revising Basic Law, must demonstrate willingness to take account of Hong Kong concerns.

Joint Declaration remains surest base for Hong Kong's future. concentrate on implementation of provisions, especially through Basic Law:

Must

Agreed. We have already taken this line. We will need to review carefully what aspects of the Basic Law need revision, and the programme of work in JLG.

Basic Law must "build up" details of SAR's Government and administrative system:

Agreed in principle. Basic Law already gives broad outline of future structure of government. But care must be taken to avoid too much detail which would only bind the SAR Government too closely.

CONFIDENTIAL

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