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weakness and would probably result in still greater intensi- fication of pressure. When it became known in Hong Kong and outside it would also result in a rapid loss of confi- dence which would have serious economic consequences and make our exercise of control in the colony still more difficult.
5. It cannot be excluded however that, even during the current anarchic phase of the Cultural Revolution or more likely afterwards, some of the regional areas might break away from control by Peking and pass under the leadership of more rational Party or Army groups. If this occurred in Kwangtung, the province bordering on Hong Kong, it might be possible to arrange a modus vivendi which would relieve some of the pressures on the colony. So far, however, the evidence available shows that the Army remains in control along the frontier and subject to Headquarters in Peking. Further back, however, in Canton there has been considerable disorder and this could conceivably spread throughout the whole province.
Y
6. Looking beyond the Cultural Revolution, which is at the root of all the present troubles, and which is likely to end or, at least, lose much of its present fury and irrationality when Mao leaves the political scene, it is possible that a more orthodox and pragmatic government will emerge. Its first task would be to end the present confusion and re-assert central control to enable it to deal with China's pressing internal problems. It would be unlikely to reverse China's general policy of hostility towards the West. But over a period it might modify this attitude, as did the Soviet Union, and revert to China's earlier policy of accepting the status quo in Hong Kong. At this stage, if we were prepared to move quickly, we might be able to negotiate a gradual handover to China of a viable Hong Kong and to arrange for our orderly withdrawal. With our present hindsight, it would be most unwise to wait again until the situation once more deteriorated in China before considering how we could best divest ourselves of the colony. This and other aspects of the long-term future of Hong Kong are now being studied in detail by the Defence Review Working Party which will be reporting soon to the D.0.F.C.
X
7. Meanwhile we do not consider that, in the short term, the Chinese intend to launch a military attack on Hong Kong nor even that they wish to create an internal security situation which would offer them a pretext to intervene to restore law and order. Their maximum objective seems to be the creation of a Macao-type situation in which we would continue to exercise nominal control but they would be in a position to dictate all major decisions and at the same time continue to reap substantial economic benefits from the colony. There is, however, a danger that if the situation in China, particularly in Kwangtung province (where there have been persistent reports of unrest and armed clashes), deteriorates still further there might be a sudden influx of a large number of Chinese refugees into the colony which in itself could lead to immense problems both of security and of general admini- stration (i.e. food). In present circumstances the Chinese Government might be unwilling or unable to control such an exodus. Their ability to do so would depend largely on the attitude of the Chinese Army in Kwangtung province. Up to now the Army, while permitting Red Guards and others to carry out incursions across the Hong Kong border, has in general
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