MELAAZ (2)

CONFIDENTIAL

Areas where United States could help

Trade and Investment

One important contribution other governments could make is to

maintain level of trade with Hong Kong and investment there. Despite recent events in China, Hong Kong economy and financial institutions have held up well. Hong Kong dollar (linked with US

dollar) also stable. Hong Kong Government will shortly be announcing further development of infrastructure.

Hope US

Administration will encourage US firms to continue to invest in the

territory.

Right of Abode

Hong Kong people increasingly looking for foreign passports as

"insurance". For our part, will do what we can to provide assurance

of right of abode in UK to key personnel both in public and private sector to encourage them to stay in Hong Kong. Have not yet made up

our minds precisely what we can do. But will inevitably fall short

of expectations of many people in Hong Kong.

Would help to promote confidence in Hong Kong if United States

and other governments with important connections with Hong Kong

could make clear publicly that they would be prepared to provide a

home for Hong Kong people if things went disastrously wrong.

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Have noted Congressman Solarz's recent suggestion that United

States might offer Hong Kong people right of abode in US without

them needing to leave Hong Kong. Very similar to our own proposed

measures. Such an initiative would be very welcome.

Asia-Pacific Economic Forum

US could also help to strengthen Hong Kong's international status and thus restore confidence in Hong Kong by supporting Hong Kong's

inclusion in the November ministerial meeting of the Asia Pacific

Economic Forum. Do not see why Chinese should object to this.

Hong Kong has full autonomy in conduct of its external commercial

relations. November meeting purely consultative and non-binding in

CONFIDENTIAL

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