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5. When we said that there was irritation amongst partners over the invitations, Hauswedell was unrepentant. He said that other EC partners had pushed through the ceiling on earlier bans on high Level visits (ie Ministerial and Heads of Government), often without consulting the rest of the Twelve. We said that we were disappointed by the decision. We needed all the EC solidarity we could get over China at the moment. This would only show the Chinese that they could succeed in driving wedges between us.

6. Hauswedell said that there had been no discussion of other EC measures with the Chinese (though at the briefing for EC diplomats, the Auswaertiges Amt said that the Chinese had asked Kohl to drop the reminaining measures). Hauswedell said that Germany was not considering dropping the other measures for the moment.

7. Hong Kong

Hauswedell said that Kohl had taken the line with the Chinese contained in Lyne's Letter to Bitterlich of 12 November and the Governor's letter to Kohl. Kohl had said that Hong Kong was not just a problem between the UK and China. There were also German interests and investments at stake. The investment climate should be protected. There were 450 German firms in Hong Kong. The Germans were concerned at the phenomenon of German firms repatriating profits from Hong Kong. Kohl hoped that the negotiations would be successful. Kohl had specifically used the Line of "one country, two systems" and the need to preserve the existing institutions post 1997.

8. The Chinese had not said much in response save that negotiations were on schedule and that they hoped there would be no unilateral moves by the UK. They were aware of the importance of investor confidence.

9. We are reporting other themes of Kohl's visit by teleletter.

Comment

10. Confirmation that China policy is Chancellery driven. Auswaertiges Amt seem to have been excluded from this decision (which would explain why Wallau, at Sir J Coles' talks, said firmly that Germany was sticking to the ban).

The

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