CONFIDENTIAL

(b) Future political system: model endorsed by BLDC provides for

full direct elections for Legislature and Chief Executive from 2011

and 2012 respectively, subject to approval of at least 30% of

eligible voters in referenda. But strict conditions attached to holding of referenda: majority vote of Legislature, consent of Chief

Executive and approval of NPC. Many people in Hong Kong consider

this timetable too slow and conditions for change too strict.

Drafting improvements in part result of our confidential

contacts with Chinese. But we can get no public credit for this.

Will continue our efforts through all possible channels to secure

further improvements. Chinese have made it clear that further

changes can be made.

Wall Street Journal editorial of 24 January contained some particularly grotesque distortions of the facts (eg Joint

Declaration relegated to history; broken promises over introduction of representative government in Hong Kong). We are responding immediately with a firm rebuttal.

We are also aiming to stimulate articles by authoritative

figures in Hong Kong to counter-balance the negative press coverage

and to point up the gains achieved so far in the Basic Law drafting

process.

Will continue to look for opportunities to underline

publicly our firm commitment to Hong Kong and our confidence in its

future.

CONFIDENTIAL

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