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acceptable to all parties. He did not share the CRC's pessimism, but he did share their determination to resolve the present difficulties.
3. Various members of the group expressed doubt about the health of the wider bilateral relationship and suggested that if relations were so good, it was all the more puzzling why there was no dialogue. As they saw it from Hong Kong's perspective, relations were bad. Howard Young recalled that he had told the Prime Minister at the end of their meeting "I share your hope but not your optimism". The group intended to visit Peking to urge the Chinese side to discuss these matters. If the Chinese were equally optimistic about Sino/British relations the CRC would be reassured, but he feared the British were misreading the Chinese. Mr Goodlad said that our policy was to discuss these matters with China in the spirit of cooperation and aiming for a smooth transition. If we had misread China's position, was the CRC suggesting that we should change that policy?
4.
Selina Chow said that, at their meeting with the Governor on 6 January, he had suggested that discussions with China could continue on the basis of the Joint Declaration and the Basic Law and the 1990 exchanges. The CRC did not understand, if both sides were saying they could continue on that basis and the Governor's proposals were flexible, why discussions were not now taking place. Mr Goodlad confirmed that the 1990 exchanges did not constitute an agreement He could not go beyond what the Prime Minister had said on the question of discussions with China.
The way was open from our side for discussions to continue. He was grateful to Mr Lee and his CRC colleagues for taking the trouble to come to London. It was very helpful to have this very frank discussion in private. There had always been differences with China in the past but we had resolved them through cooperation. This remained our policy. (Mr Goodlad handed over a copy of the Secretary of State's remarks to the press of 19 January)
Distribution
PS
PS/Mr Goodlad
Sir J Coles
Mr Hum
HKD
FED
Mr Bickham, Special Advisers
record.lee.MORRIS
JEB
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By Fax:
PS/GH Hong Kong Mr Cox, Peking
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