CONFIDENTIAL

3. As Mr Paul says, the main advantage of this otherwise unwelcome over-heating of the political atmosphere is that the CRC and their sympathisers are now prepared to say what they think publicly, not just behind closed doors. The ambiguity is now rather in the liberal camp. The logic of

their position on democracy and membership of ExCo is that they are prepared to risk a serious row with China and uncertainty over key aspects of the transition. It is unlikely that any of them in fact want that, but if they

admit it publicly the intellectual coherence of their

position is shot to pieces.

4. In the longer term our problem may turn out to be not

that the United Democrats oblige us to 'confront' China, but

that they lose heart, and the values they stand for fade

away in Hong Kong.

1. Saunders

KAM Saunders

KS1ADL/2

CONFIDENTIAL

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