TNAG-2989-FCO40-3575-Future-of-Hong-Kong-constitutional-development-talks-betwee-1992 — Page 54

CONFIDENTIAL

HONG KONG : CALL ON THE PRIME MINISTER BY SIR PERCY CRADOCK

POINTS TO MAKE

We do not underestimate the strength of the Chinese reaction. Ministers had no illusions about the difficulties when they took a collective decision to endorse the Governor's constitutional proposals;

We recognise that the Chinese feel they should have been consulted privately first. But it was politically impossible for the Governor to do that on an issue of this importance before explaining his thinking to the people of Hong Kong;

We have not breached the agreement in the Joint Declaration. We have all along offered them dialogue. It is the Chinese political stance which is causing difficulty.

There remains strong support in Hong Kong for the Governor's approach despite Chinese efforts to undermine him. The markets are proving resilient. LegCo voted 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);

CONFIDENTIAL