CONFIDENTIAL covering TOP SECRET Annex
4. We shall continue to work for the restoration of normal working
relations between Hong Kong and China. An agreement was reached
with the local Chinese border authorities at the end of November.
The Chinese have claimed the agreement as a total "victory" for them,
but in fact it is generally regarded in Hong Kong and elsewhere as
an indication that despite "confrontation" the Chinese are prepared
to negotiate with the Hong Kong Government on practical matters.
The regulation of local problems of this sort is clearly possible
and desirable, but so long as the present Chinese leadership remains
in control no fruitful negotiations on major matters can take place.
5. We remain convinced that it is not the Chinese intention to
take over Hong Kong by means of a military attack but rather to
try to create a Macao-type situation. So far they have been quite
unsuccessful but they may eventually hope to do so by building up
their "revolutionary base" and conducting a long drawn-out war of
attrition against the Hong Kong Government. We feel confident
that the Hong Kong Government have the means to resist such a
campaign.
6. The Communists have tried to exploit alleged inadequacies in
the social welfare and labour policies of the Hong Kong Government.
The Government have faced unique problems in that more than a
million refugees have entered the Colony since the Communists took
power in China. The Government's project for the resettlement of
squatters and refugees in large estates is probably the greatest
single re-housing operation that has taken place in Asia since the
A million people have been resettled since the programme
started in 1954: this represents more than a quarter of the
entire population of the Colony, But, given the scale of the
problems posed by the influx of refugrees and by the rapidity of
economic development, there were bound to be instances of hardship
and social injustice. The Hong Kong Government are well aware of
this, and are making a serious and determined effort to put them
war.
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