CONFIDENTIAL
FM UKREP JLG HONG KONG
TO DESKBY 03090OZ F C O TELNO 139
OF 03030OZ APRIL 92
• CONFIDENTIAL
INFO IMMEDIATE PEKING, HONG KONG
HKA 233/1
TOP COPY Q'DIS
209
052364
MDHIAN 9206
Pa
~314
CORRECTED VERSION PARAGRAPH 3
200
YOUR TELNO 270: HMOCS
1 I REGRET THAT, DESPITE THE DESKBY AND THE FACT THAT THE TELEGRAM WAS CORRECTLY ADDRESSED, I DID NOT RECEIVE YOUR TELNO 585 UNTIL THIS MORNING (2 APRIL).
2.
ON THE QUESTION OF PHASED PAYMENTS, I AGREE WITH HONG KONG TELNO 905 AND PEKING TELNO 470 THAT THE PHASING OF PAYMENTS IS UNLIKELY TO BE A STICKING POINT WITH THE CHINESE.
WE ARE
3. ON THE QUESTION OF FUNDING (YOUR TELNO 270) THERE IS NO MISUNDERSTANDING. WE ARE CLEAR THAT THE COMPENSATION/INCENTIVE SCHEME WILL BE PAID FOR BY HMG AND I HAVE TOLD GUO THIS. EQUALLY CLEAR THAT THE FUNDING OF STERLING SAFEGUARDS IS IN CONTENTION. BUT WE MUST DISTINGUISH BETWEEN THE SUBSTANCE OF YOUR NEGOTIATIONS WITH THE TREASURY AND HKG AND WHAT IS SAID IN PUBLIC. ANY IMPLICATION, HOWEVER VAGUE, WHICH REACHED THE CHINESE NOW THAT FUNDING FOR ANY OF THE HYPOTHETICAL BENEFITS FOR HMOCS MIGHT FALL TO THE HKG WOULD, AS PEKING RIGHTLY POINT OUT, AROUSE CHINESE CONCERNS AS PROTECTORS OF THE INTERESTS OF THE HKSARG. THIS WOULD NOT ONLY COMPLICATE FUTURE CONSULTATIONS WITH THE CHINESE OVER STERLING SAFEGUARDS, BUT WOULD ALSO RISK STIRRING THEM UP NOW ON THE INCENTIVE/COMPENSATION SCHEME. IN FACT I THINK IT CERTAIN THAT THE CHINESE WOULD REFUSE TO CONTEMPLATE ALLOWING THE SARG TO PAY FOR ANY BENEFITS, INCLUDING STERLING SAFEGUARDS: IF THEY GOT WIND THAT WE SAW THIS AS A POSSIBILITY THEY WOULD STAKE OUT THEIR POSITION NOW. I CANNOT SEE THAT THIS WOULD BE HELPFUL TO THE TREASURY'S CASE.
GALSWORTHY
YYYY
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