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4. The Chinese took an increasingly harsh position in the period before Christmas. They said that the Governor must withdraw his
proposals as a precondition for any discussions. They kept up a virulent propaganda campaign against the Governor personally and
his proposals, and have put pressure on businessmen and LegCo
members. They cast doubt publicly on the continuing validity of
contracts and franchises spanning 1997, and denounced Jardines.
Work in the Joint Liaison Group came to a standstill. There were
suggestions in the press and from other sources that the Standing
Committee of the National People's Congress (meeting from 22 to
28 December) would establish a committee with representation from
China and Hong Kong to make unilateral preparations for Hong
Kong's post-1997 institutions. Some reports suggested that this body could be given a role to interfere in pre-1997 matters such
as contracts and franchises. There were also signs that Chinese
officials had been told to draw up contingency plans for even
more severe measures, including in extremis an early takeover.
5.
Since mid-December, Chinese spokesmen have however moderated
the tone of their public statements, and have publicly ruled out
a number of the more extreme measures which had earlier been
mooted. The main signs have been:
(i)
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