SECRET
Hong Kong telegram No. 1406 to Commonwealth Office
فيين
2
that if necessary ocean going vessels will be used for delivery
(even though this would be in breach of the seamens strike). Finally, there is evidence of determination to hold the Canton Fair, for which invitations have already gone out to the Japanese. None of these reports is authoritative nor is their tenor incapable of other interpretation. Nonetheless, we feel that an economic thaw, however temporary, is discernible and that increasing reliance will be placed on political measures to solve the 'Hong Kong problem'.
7。 In this climate it seems possible that water supplies will be resumed on 1st October, though this will obviously be a difficult decision to take, politically, either in Canton or in Peking. We think it unlikely that rumours of damage
to the supply system through sabotage are true, since the whole lies within the border zone where the PLA has throughout exercised firm control.
8. The continuance of bomb incidents and small scale demonstra-
tions, despite the known wish of the local Communist hierarchy to lower the level of confrtonation before 1st October celebrations, is indicative of the looseness of their control over militant elements. There are indications from delicate sources that local Communist leaders realise that the campaign of violence has failed and that they will have to revert to more peaceful methods, such as ideological education and appeals to patriotism, in their continued confrontation with Government. This indicated change of policy could foreshadow a reversion to something like the state of affairs in Hong Kong which obtained in the immediate pre-confrontation period, though possibly with increased political activity, particularly in the United Front' field. Meanwhile the local Communists will attempt to consolidate their sympathisers and to recoup the losses which they have suffered, both financial and physical, as a result of confrontation.
It is clear from delicate sources that local Communist leaders realise themselves that even to attain these limited objectives will present prolonged and difficult problems.
F.0. please pass Canberra 96 and Washington 297. F.0. pass JIC Immediate.
Sent 04362 19 September Recd. 0500Z 19 September
O.A.G.
[Repeated as requested]
[Passed to Cabinet Office]
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H.K. & W.I.D. "C"
F.O. F.E.D.
I. & G.D.
Overseas Labour Adviser
F.E.P.D.
Overseas Police Adviser Mr. Hohler
J.I.P.G.D.
J.I.R.D.
Sir A. Galsworthy
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Mr. Hall
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