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4. My object was to build on what Vice Premier Gu Mu had said to Philip Haddon-Cave about the distinction between the main issue, on which China was not yet prepared to make concrete proposals, and technical problems, which the two sides should discuss and solve. I wanted to bring the matter of land leases in the New Territories within the ambit of these latter technical issues, and to suggest that they could be dealt with in advance of the more fundamental issue of post-1997 on which decisions did not yet have to be taken. I am enclosing a record of the discussion which ensued.
5. As I expected, Liao did little more than take note, repeat the assurances already given by Deng, and speak at length about the complexities of the international situation. In so doing his sense was that with so many uncertainties ahead which might or might not be relevant to the future of Hong Kong he favoured a decision later rather than earlier. However he seemed to understand what was being said and to make a small step towards what I was trying to suggest by saying, in part of his response, that concrete problems should be discussed. Quite apart from what I said to him, I am sure that some of the local businessmen whom he has seen will also have spoken to him about the effect of uncertainty about the future. Liao's long stay here should thus, at the least, have contributed towards educating the decision-makers in Peking about the problems we, and they, must face.
6.
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In closing down Liao said "we should continue to keep in touch to improve relations It was ambiguous whether he meant this personally or generally, but it is likely that he intended to imply that he would have a continuing role himself.
Cc:
HE Sir P Cradock KCMG
Peking
RD Clift Esq HKGD, FCO
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