02 DEC '92 11:07 M & CO 3 LOMBARD ST.

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And they have threatened that after 1997 they will invalidate

contracts signed with the present Hong Kong Government, unless

they have been agreed with China in advance.

To us the Chinese reaction appears wholly disproportionate.

And it flies in the face of their own commitment to uphold Hong

Kong's stability and prosperity.

But to solve a problem you have first to understand how it

looks through the other fellow's eyes. Although Chris Patten has

stated explicitly that he wants to discuss his proposals with the

Chinese, China feels it should have been consulted in advance.

They have a point: the previous pattem has been for Britain

to discuss ideas for constitutional change with China before going

public. Turn the situation round and imagine that the Chinese

were to return the Isle of Man to British sovereignty in 1997. We

would certainly want to be consulted about proposed changes in

the way the island was governed.

To escape from the present deadlock is going to take

political creativity of a high order. But Chris Patten is rightly

renowned for that.

Two points are crucial to resolving the impasse.

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