DAWAAL ( 3 )

asked that the scheme be as generous as possible. He said that he did not think most people would take up the option. In his view if all 3.25 million were given passports, then only 10% would take up

the offer. He said that it was in China's interests to keep key

personnel and they would honour their commitment. Therefore Britain

could afford to be generous.

10. Mr Maude said that the scheme would be as generous as possible. It would be designed to encourage the people who mattered most to stay in Hong Kong. Mr Li noted that these people were very likley already to have passports and to be able to afford to buy their way

out.

11. Mr Li then turned to the question of Vietnamese boat people (VBPs). He considered that mandatory repatriation was the right solution. He suggested that HMG should talk to the Chinese authorities about giving some financial inducement to them to stop

the flow of VBPS via China. Mr Maude thought this was an

interesting idea, however it had political problems. HMG were under pressure from the USA, UNHCR and "liberal opinion" in the UK which

were opposed to mandatory repatriation. There was also sensitivity

at present to dealing with the Chinese Government following events

in early June.

12.

Turning to the question of how to restore confidence in Hong Kong Mr Li thought that one way to deal with the Chinese would be for someone they respected to give them advice on what action to

take. In his discussions with senior Chinese officials they had said "we know your problems but you don't know ours". Clearly HMG/HKG and China all needed to work together on this issue.

13.

Mr Li thought that at the upcoming JLG meeting the Chinese were unlikely to be willing to get down to real business: there would be a slanging match. But he thought it would be most useful if Mr Maude

and the Governor could go to Peking before December to talk about

Hong Kong matters. He thought that this type of bilateral exchange

was important on the Basic Law. On constitutional development, the

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