CONFIDENTIAL

143756 MDHOAN 2059

round of talks in December.

(111) WHY HOLD ELECTIONS ON THIS BASIS IN 1995 WHEN

THE CHINESE HAVE SAID THEY WILL HOLD NEW ONES IN 1997?

- It is our plain duty to administer Hong Kong to the best of our ability until 30 June 1997. That includes holding these elections.

- The Legislation we will be introducing responds to the evident desire for more democracy in Hong Kong; they are consistent with the Basic Law, and in many respects reflect agreed positions in the talks.

- A good deal of water will flow under the bridge between now and 1997.

- The Chinese Government has a strong interest in a smooth transfer of power in 1997. If the arrangements in place are then working well- and are consistent with the Joint Declaration and the Basic Law - cannot see whey they should be changed.

BACKGROUND (CONFIDENTIAL, FOR YOUR INFORMATION ONLY)

4. We had hoped to reach agreement with China first on the urgent issues - which are also the less controversial ones. This would have allowed us to get Legislation underway and given a Little more time for resolution of the more complex problems. There were some signs in advance of the collective ministerial discussion, including the Governor, in London on 10 November that China too was prepared to finesse outstanding problems in order to secure a first-stage agreement.

PAGE CONFIDENTIAL

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THIS IS A COPY THE ORIGINAL HAS BEEN

CLOSED UNDER

FOI EXEMPTION NO. 27.1.)..

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