CONFIDENTIAL

(d) Joint Liaison Group and Defence Lands

JLG XIII unlikely to be productive in itself, but should lay

basis for resumption of dialogue and to the necessary work which

needs to be done to secure Hong Kong's interests.

We shall talk firmly and robustly about need for action by both

sides to restore confidence and to maintain Hong Kong's stability and prosperity.

Face some particularly tough negotiations over defence lands. A

sensitive issue for the Chinese on which we must temper firmess

with prudence.

Recent events in China have clearly had major impact on views in

Hong Kong. Concessions to Chinese on urban sites would now be more

difficult than ever.

How strong are feelings now? Does our original concept of four core sites still hold good?

Will also need to reconsider question of naval basin. How should

we handle the Chinese? Are we reaching point where we must take unilateral decision to go ahead?

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CONFIDENTIAL

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