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Chinese reaction to the announcement of our package of measures

has been critical. We are trying to reassure them that we have no intention of undermining the Joint Declaration. In fact, quite the

reverse, we are trying to ensure the future prosperity of Hong

Kong.

DEMOCRACY

We

Clear during the Secretary of State's visit to Hong Kong last

month that the community wants a faster pace of democratisation.

are committed to making a substantial start on the upward path

towards more democratic government by the introduction of proportion

of directly elected seats to Legislative Council in 1991.

- We are also keen that this should be the beginning of a process

which will continue and develop both before and after 1997. in Hong Kong's best interests.

Clearly

This means we have to take account of the Chinese dimension:

Chinese are currently drafting Basic Law which sets out Hong Kong's post-1997 political structure.

If however it proves impossible to achieve an arrangement which is

continuous and progressive, we will have to make our own decision about Hong Kong's development in the period for which we are responsible.

RELATIONS WITH CHINA

Important to maintain dialogue with China. There are vital issues concerning Hong Kong which we must discuss with them.

In no one's interests, least of all Hong Kong, for differences to

be aired publicly. We are keen to return to rational discussion

through private exchanges.

Visit to Peking by Sir P Cradock and Governor of Hong Kong are

part of this process.

MT HAPQ (2)

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