SECRET

FM HONG KONG

TO IMMEDIATE FCO

TELNO 435

OF 181006Z MARCH 93

SECRET

HKB C12/1

RECE

23 M

ISTRY

PA

REGISTRY

ww: Take.

INFO IMMEDIATE PEKING, UKREP JLG HONG KONG

m

pa. Con syst

(Sen)

$5+6

40

072270

MDHIAN 3937

CONSTITUTIONAL DEVELOPMENT AND CONSULTATION OF ECONOMIC ISSUES:

THE WAY FORWARD

1. WE NEED TO CONSIDER THE WAY FORWARD ON CONSTITUTIONAL DEVELOPMENT AND ON THE ECONOMIC ISSUES ON WHICH WE NEED TO CONSULT CHINA. LU PING HAS SAID THAT I HAVE CLOSED TWO DOORS BY GAZETTING THE REMAINING LEGISLATION AND BY THE STATEMENT I MADE TO LEGCO ON 12 MARCH. UNDER THESE CIRCUMSTANCES, HE MADE CLEAR THAT ''IT IS IMPOSSIBLE TO GO AHEAD WITH THE TALKS

AT THE

SAME TIME HE HAS SAID THAT CHINA'S POSITION HAS BEEN AND WILL REMAIN TO STRIVE FOR A SMOOTH TRANSITION AND A SMOOTH TRANSFER OF GOVERNMENT IN 1997 SO AS TO ENSURE THE PROSPERITY AND STABILITY

OF HONG KONG.

2.

I DO NOT INTEND TO ENGAGE IN ARGUMENTS ABOUT THE ESTABLISHMENT OF ''STOVES''. BUT I WILL STRESS TWO POINTS IN

PUBLIC:

WE ARE SORRY THAT CHINA HAS TAKEN THE ATTITUDE IT HAS ON CONSTITUTIONAL DEVELOPMENT, BEFORE THEY HAVE PUT FORWARD ANY SPECIFIC PROPOSALS FOR DISCUSSION WITH US AND BEFORE LEGCO HAS CONSIDERED THE PROPOSALS ENDORSED BY EXCO.

WE NEVERTHELESS WELCOME CHINA'S COMMITMENT TO WORK FOR THE PROSPERITY AND STABILITY OF HONG KONG. THAT IS WHAT WE TOO ARE DOING AND WE SEE NO REASON WHY THE TWO SIDES SHOULD NOT CO- OPERATE ON THIS.

3. HOW SHOULD WE NOW PROCEED ON CONSTITUTIONAL DEVELOPMENT AND ON THE ECONOMIC ISSUES ON WHICH WE HAVE BEEN CONSULTING CHINA?

CONSTITUTIONAL DEVELOPMENT

4. I SEE NO POINT IN WRINGING OUR HANDS ABOUT THE QUESTION OF TALKS. AS SIR R MCLAREN HAS POINTED OUT, THE APPARENTLY SMALL DIFFERENCES WHICH SEPARATED US LAST WEEK MASKED A CHASM ON SUBSTANCE. THE LIKELIHOOD OF OUR OBTAINING ANY CHINESE

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