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Once LegCo resumes after the Easter recess, pressure from the liberals for the legislation to be introduced is likely to grow unless agreement on talks has been reached by then.

7.

The arguments pro and con the two options of talks, or leaving the initiative to LegCo, are finely balanced:

(i)

(ii)

The advantages of holding talks are as follows. The community in Hong Kong are in favour of trying the talks option. If we could reach with China an understanding covering the 1994/95 elections and the through train in 1997, this would ensure continuity for LegCo through 1997, and restore cooperation on other Hong Kong issues. (If the Chinese were willing to envisage a genuine through

train, it would be easier to accept changes to the Governor's proposals on functional constituencies and the Election Committee.) For as long as talks

lasted, work on other Hong Kong issues, eg

technical issues in the JLG, might resume.

Chinese plans to retaliate against British commercial interests would probably be shelved.

And the fact of talks, even if they were ultimately unsuccessful, might moderate Chinese

reactions to the eventual legislation passed by LegCo, provided that this was amended by LegCo members in the direction of Chinese wishes (but

this judgement is open to question: see para 8

below).

The disadvantage of talks is primarily that it is very unlikely that we would be able to reach an acceptable understanding, given the gulf between arrangements which we could accept, and the Chinese

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