CONFIDENTIAL

074704 MDHIAN 732

4. ON THE EVENING OF 7 MAY NCNA PUT OUT A PRESS STATEMENT. THIS SAID THAT THE INVESTIGATIONS OF THE GUANGDONG SIDE SHOWED THAT THE

TUG AND LIGHTER HAD BEEN DETAINED BY CHINESE VESSELS IN CHINESE WATERS. THE 5 MEMBER CREW AND ONE CHINESE SMUGGLER HAD ADMITTED THAT THEY HAD ENTERED CHINESE WATERS AND ENCOUNTERED THE CHINESE PATROL VESSEL WHEN ESCAPING FROM THE THE HONG KONG MARINE POLICE. THERE WAS NO QUESTION OF ARMED CHINESE OFFICIALS PARTICIPATING IN THIS INCIDENT. SENIOR OFFICIALS IN THE HONG KONG GOVERNMENT HAD SERIOUSLY DISTORTED THE FACTS AND MADE GROUNDLESS ACCUSATIONS AGAINST CHINA. THIS WAS A MOST UNFORTUNATE ACT. NCNA EXPRESSED THE DEEPEST REGRET OVER IT. THE STATEMENT CONCLUDED BY SAYING THAT AN ASSERTION BY THE HONG KONG PRESS SPOKESMAN THAT STRONG PROTESTS HAD BEEN MADE WAS NOT CORRECT (WE HAVE, IN RESPONSE TO THIS SEMANTIC POINT, MADE CLEAR THAT GRAVE CONCERN HAD BEEN EXPRESSED TO NCNA).

5. AFTER EXCO ON 8 MAY I SAID IN RESPONSE TO PRESS ENQUIRIES THAT IT WAS NOW HIGH TIME THAT THE INCIDENT WAS SORTED OUT THROUGH THE NORMAL BORDER LIAISON CHANNELS, NOT THROUGH STATEMENTS WHICH RAISED THE TEMPERATURE. THE FACTS OF THE CASE AS WE KNEW THEM WERE AS WE

HAD STATED THEM.

6. WHEN CONTACTED ON THE AFTERNOON OF 8 MAY, NCNA SAID THAT A MEETING THROUGH BORDER LIAISON CHANNELS TODAY WAS TOO SOON FOR THE GUANGDONG SIDE. THEY WERE NOT YET PREPARED. NCNA UNDERTOOK TO COME

BACK TO US AS SOON AS THEY HAD A MORE DEFINITE RESPONSE.

COMMENT

7. THIS LAST REPLY DOES NOT WHOLLY SHUT THE DOOR ON A POSSIBLE WAY

OUT OF THIS INCIDENT. WE MUST HOPE THAT THE GUANGDONG SIDE SOON AGREE TO DISCUSSION. IT WOULD BE MUCH BETTER IF WE CAN, TO DEAL WITH THE MATTER THROUGH THESE CHANNELS RATHER THAN BY FOR ME TO RAISE THE PROFILE LOCALLY BY CALLING IN ZHOU NAN OR REFERRING THE MATTER TO PEKING. BUT WE MUST KEEP BOTH IN RESERVE IF GUANGDONG DECIDES NOT TO COOPERATE. THE CHINESE ATTITUDE SO FAR, PARTICULARLY THAT OF NCNA, IS VERY ODD IN FACE OF WHAT APPEARS TO BE CLEAR EVIDENCE OF SERIOUS MISBEHAVIOUR, FOR WHATEVER REASON, BY CHINESE SECURITY PERSONNEL.

8. WE ARE SEPARATELY CONSIDERING FOLLOW-UP ACTION TO DEAL WITH OPERATIONAL PROBLEMS ON OUR SIDE REVEALED BY THE INCIDENT.

WILSON

PAGE 2 CONFIDENTIAL

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