COZAHX

BULL POINTS ON HONG KONG

(FOR USE IN THIRD COUNTRIES)

CONFIDENTIAL

1.

Hong Kong's bright prospects

Joint Declaration is binding international agreement,

registered at UN. PRC has not reneged on any international

agreement.

Joint Declaration sets out framework for continuation of Hong

Kong's economic, legal and social systems for at least 50

years beyond 1997.

Joint Declaration and Basic Law (Hong Kong's

"mini-constitution") provide framework for Hong Kong to continue to flourish and develop in future. Meticulously detailed documents which provide real security and certainty

for the future.

No reason why framework laid down for fifty years should not continue long beyond then, as Chinese leaders have indicated. China seeks to learn from Hong Kong and to model certain

economic functions in the mainland on Hong Kong.

Hong Kong is economically and politically important to China, economically in terms of foreign exchange earnings and access to managerial and entrepreneurial skills, and politically in terms of a model for, and more importantly a litmus test of Chinese good faith on the "one country, two systems" concept

and thus reunification with Taiwan. Therefore in China's own

interest to preserve Hong Kong as a going concern. Hong Kong is an economic and financial centre linking China to the rest

of the world, benefitting both China and Hong Kong.

China has always had the capacity to intervene decisively in Hong Kong's affairs but has consistently refrained from doing so. The "two systems" policy shows that this pragmatic

attitude still prevails.

CONFIDENTIAL

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