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The Governor of the Bank of England and the PUS have nevertheless had a private conversation about the state of Hong Kong's morale and confidence in the future and have agreed that this should not be dealt with through normal interdepartmental machinery.
We already have Sir E Youde's telegram giving his assessment of the current state of confidence. He is
ready to repeat this exercise at regular intervals. In any case Hong Kong Department and I follow the subject closely because of its enormous political importance.
3. May I suggest that because of the very close link between the negotiating contacts with the Chinese and business confidence
in Hong Kong, the right way of dealing with this is not to have separate assessments of economic confidence, which are likely
to over-emphasise the financial factors. Instead, where appropriate, we could include, in the JIC's regular studies of progress in the negotiations, passages mentioning the current effect on confidence (both political and commercial). The Governor's telegram of 10 June could neatly provide the basis for a codicil on the state of morale for the next JIC study on Hong Kong.
4. It would be unwise to attempt to take this further without the full concurrence of the Governor of Hong Kong. He will be here between 1-5 July and I would have thought it was essential that you should see him at some time so that he can explain the dangers in involving too many people in this type of work.
5. At the meeting on 30 June, I would be very grateful if you could hold the position until you have aired it thoroughly with the Governor of Hong Kong.
Artmald
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A E Donald
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