CC

SIR JOHN COLES' VISIT TO JAPAN 9

12 NOVEMBER

HONG KONG

Points to make

file.

Prospects for Hong Kong look good.

South China economic

development irreversible. Hong Kong's success hinges on its

economy. But we also need to create the right political

environment.

As Douglas Hurd told Mr Watanabe in New York on 22

September, we are grateful for Japan's efforts to influence

China.

Useful that China is told frankly that the developing

democratic system is essential to the maintenance of Hong

Kong's stability and prosperity and that Chinese attacks on it undermine business confidence in the One Country Two Systems

policy.

-

On 7 October Mr Patten proposed a package of measures

designed to develop vigorous democratic institutions in Hong

Kong, while maintaining an efficient, executive-led

Government. These were well received in Hong Kong.

- Mr Patten discussed his proposals with Chinese leaders in

Peking on 21 and 22 October. The meetings were unproductive.

But we are ready to continue talking, to seek an outcome that

is in the best interests of Hong Kong. Hope you can help persuade China that dialogue is better than confrontation.

ptm.colejap.BTC

JEB

CONFIDENTIAL

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