DESKBY

4.

CONFIDENTIAL

The announcement of the scheme, by demonstrating the

Government's commitment to Hong Kong at a time when confidence

in the territory was at a low ebb, undoubtedly had a stabilising

effect on the public mood there. It also helped to encourage

other governments to provide similar assurance schemes for Hong

Kong people.

5. It is true that the number of applicants is lower than the

estimates which appeared in the press last year. But this does

not mean, as Mr Segal suggests, that Hong Kong people have

"snubbed" the offer. Because the points system under the scheme is fully objective and transparent, potential applicants were

able to assess accurately their prospects of success. It seems

likely that many of those who believed that they would not be

successful decided not to apply. It is also relevant that many people in Hong Kong have already obtained foreign passports, and are therefore ineligible.

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NEWS DEPT

PS/LORD CAITHNESS

MR MCLAREN

MR BURNS

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