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JLG
10.
It was agreed that a meeting of the JLG was more in our interest than in the interest of the Chinese. The MFA spokesman has since confirmed that it will take place.
11.
The Governor asked whether there had been indications that some at least on the Chinese side were prepared to envisage a swap of West Tamar for Gun Club. Tony Galsworthy confirmed that there had been some such indications, but clearly no progress was possible in present circumstances.
Franchises and contracts
12.
It was agreed that we should indicate our willingness to continue discussions with the Chinese on major franchises and contracts, stressing the point in the Chinese statement about their taking a positive attitude towards post 1997 investment. If they blocked particular franchises we should not seek to hide this fact.
13.
If the Chinese raised franchises which had been granted before discussion started in the JLG in 1990, we should say that the Chinese had known about these for a long time and had never questioned them. We could obviously not reopen them: that would destroy all our credibility as an administration.
14.
It was agreed that we should keep quiet about smaller Government contracts straddling 1997 which had already been signed without consultation with China. China might not be aware of them and, if we could resolve the constitutional row, might not make an issue of them in future.
15.
I referred to press reports that the Chinese might be thinking of establishing a committee of their Hong Kong friends to scrutinise franchises and contracts. It seemed possible that at the JLG they would revert to their demand that we agree the principles which they have put to us for discussion of franchises and which we have so far not accepted; and threaten to discontinue discussion in the JLG if we did not accept these principles. It was agreed that a careful statement was needed for the JLG meeting which would emphasise our willingness to continue exchanges on franchises, point out that we had not granted any before discussions had been satisfactorily concluded, and that we saw no reason why this practice should not continue in future. That would preserve our legal position while coming close to the Chinese principles. In practice we were already agreed that it was most unlikely that we would grant a franchise straddling 1997 without Chinese acquiescence.
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