- 5

-

1

with fluctuations in annual

long term growth of demand.

rainfall and uncertainties in

Actual quantity of water to be

drawn each year would be notified to the Chinese in

advance, say, in November for the succeeding period from May to April.

5. Shutdown Period

It is accepted that this is necessary, but it must be no greater than one month per year.

6.

7.

Water Quality

A guarantee of water quality must be incorporated in the agreement. The Chinese standard "Environmental Quality Standard for Surface Water

Category II", which is

applicable to "Class I Protection Zone for large scale potable water resources" in China, is comparable international standards and would be acceptable.

to

Adjourning of Negotiations

If we cannot reach agreement on general foregoing of interest, water prices, technical requirements (paragraphs 3, 4 and 5) and water quality, we would adjourn

negotiations.

8.

Agreement

(a)

The Chinese Authority wish to sign an agreement following the negotiation to include both financial and technical aspects. We can only agree to draft an agreement: signing of the agreement is subject to the approval of the Executive Council and Finance Committee of the Legislative Council.

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