TNAG-2355-FCO40-3426-Visit-by-Douglas-Hurd--Secretary-of-State-for-Foreign-and-Co-1991 — Page 28

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HKG not yet at the limits of its flexibility but close to them. Cannot predict whether the talks will succeed.

- If the talks fail, both sides will probably have an interest in avoiding public acrimony. We can say that

contacts will continue; the project may be delayed, not

cancelled. Hong Kong opinion at present seems fairly

philosophical. But delay will send a negative signal to

international investors etc. We shall need to consider the

implications. But must go on trying to make Joint

Declaration work, cooperating with China to ensure smooth transition while maintaining authority of HKG.

Future handling of relations needs further thought.

ACMAAT/2

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