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Whatever our views on the merits of the Governor's

proposals, it cannot be helpful to foster these Chinese misconceptions.

We

Can reassure you that we and the Governor have no intention of blinding ahead regardless of any risks. have monitored the Chinese reactions very carefully and do not underestimate the strength of their opposition.

But there have been signs since mid-December of a moderation of tone on the Chinese side (Lu Ping's comment to the pro-China LegCo members visiting Peking before Christmas; his public comments to a Hong Kong TV station; all this supported by other information). Reasons not entirely clear. Clinton may have been a factor. Also signs that Chinese did not want to do real economic damage

to Hong Kong.

Chinese have also now understood that although the Governor will put forward his proposals to LegCo, they could well be amended in the course of lengthy LegCo debate. We have made clear that we will abide by the

result of that debate. Several LegCo members have put forward alternative proposals. Others will do so. End

result could well be some amendment of the Governor's

proposals in the direction of Chinese interests, particularly over the functional constituencies and the

Election Committee.

Several LegCo members intend to discuss their proposals with the Chinese before tabling them. We will also look for opportunities to re-establish our own dialogue with the Chinese on these issues. The Secretary of State's next meeting with Qian (Easter recess) likely to come in the middle of the LegCo debate.

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