TNAG-2989-FCO40-3575-Future-of-Hong-Kong-constitutional-development-talks-betwee-1992 — Page 53

CONFIDENTIAL

Foreign & Commonwealth

There remains strong support in Hong Kong forOffice Governor's approach despite Chinese efforts to undermine him. The markets are proving resilient. Legg6wvoted last week by 32-21 to support a motion giving general support to the Governor's package;

We are not complacent. We are aware of the signs of concern in the business community in Hong Kong and among some legislators (not surprising in view of Chinese intimidation tactics). We realise too that even if LegCo adopt the Governor's proposals, we face a long campaign by the Chinese to make them unworkable;

We have pressed the Chinese repeatedly to come up with alternative proposals and would still like them to do so. But that now looks very unlikely;

The Governor has encouraged groups in Hong Kong to put forward alternative ideas as well. Some are now doing We will seriously consider these if they meet his criteria (that arrangements for the 1995 elections should be open, fair, and command widespread support in Hong Kong);

We shall continue to look for ways of restoring dialogue on Hong Kong with the Chinese. Zhu Rongji's visit this week one opportunity. The Chinese know as well that they need to take into account the impact of their behaviour over Hong Kong, eg on the Clinton Administration;

It will eventually be for LegCo to decide whether the benefits of broadening democracy in the modest way the Governor suggests outweigh the risks of a campaign of non-cooperation from China. That in turn will depend (rightly) on views in the Hong Kong community.

J S Wall Esq CMG LVO 10 Downing Street

Yours

ever,

Steph Smith,

(J S Smith)

Private Secretary

CONFIDENTIAL