TNAG-1356-FCO40-1797-Constitutional-development-in-Hong-Kong-1985 — Page 26

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2. XU'S REMARKS WERE WIDELY INTERPRETED AS SIGNALLING OFFICIAL

CHINESE DISAPPROVAL OF THE RECENT CHANGES TO THE STRUCTURE OF GOVERNMENT. THE HANG SENG INDEX FELL BY ALMOST 50 POINTS ON THE

FOLLOWING DAY (BUT HAS SINCE LARGELY RECOVERED).

LINE TO TAKE.

3. YOU SHOULD NOT INITIATE DISCUSSION OF THE SUBJECT. BUT IF IT IS RAISED WITH YOU, YOU SHOULD FOLLOW CLOSELY THE LINE TAKEN IN HONG KONG AND LONDON IN RESPONSE TO PRESS QUERIES :

(A) BOTH THE BRITISH AND CHINESE GOVERNMENT ARE FULLY COMMITTED TO MAINTAINING PROSPERITY AND STABILITY AND ENSURING A SMOOTH TRANSITION: WE ARE CONFIDENT THAT THE TWO GOVERNMENT WILL AT ALL TIMES BE ALIVE TO EACH OTHER'S CONCERNS AND VIEWS, AS WELL AS THE VIEWS OF HONG KONG PEOPLE. ON THESE FOUNDATIONS, IT SHOULD BE POSSIBLE TO CONSTRUCT A FRAMEWORK OF ENDURING INSTITUTIONS WHICH WILL MAINTAIN CONFIDENCE AND ENSURE A SMOOTH TRANSITION IN 1997.

(B) WE HAVE NO IDEA WHAT MR XU MEANT BY HIS REFERENCE TO DEPARTURES FROM THE JOINT DECLARATION: BOTH THE BRITISH AND CHINESE GOVERNMENTS ARE FULLY COMMITTED TO IT.

YOUDE

UMITED

HKO

FED

NEWS D.

MR WILSON

COPIES TO·

MKGS LONDON.

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