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Compensation payments for U.K. property seized in
Hong Kong) the effects, depending on the precise terms
of any deal, could range from beneficial to the U.K.
economy to marginally damaging.
19. The foregoing is hypothecated on a situation of a
forcible take over (or analogous situation) which would
justify the immediate blocking of Hong Kong's sterling
balances (and no trade concessions to the enlarged China).
Even in these circumstances, however, H.M.G. might feel
constrained to make economic concessions for strictly
political purposes perhaps the most obvious possibility
is "ransom" for U.K. citizens "captured" in Hong Kong by
the Chinese.
20. The loss of Hong Kong might however take place in
quite different circumstances i.e. there might be a
negotiated withdrawal in the context of which blocking
the balances would be inappropriate not least because
the balances would be a major, if not the major, U.K.
bargaining counter in any negotiation.
21. We might therefore be faced with a situation in
which after our loss of Hong Kong, China acquired a
significant part of the balances at present held by the
Colony (at present totalling about £330 million).without
Dependingx¤¤xtkexproporáİQ¤xinxqu¤¤±±¤¤x±hisÕDERİd
xepresentxxxsubzkankiaixdate making offsetting financial
or economic concessions to the U.K. Depending on the
proportion in question this could represent a substantial
deterioration on the 1966 situation. In the first instance
(and not least because of the loss of the foreign exchange receipts which she currently gets from Hong Kong) China
would be much more likely to run down her reserves to pay for imports than Hong Kong; and in the second instance
sterling balances in her hands would be much more volatile
than in the hands of the Hong Kong colony. How far a expectation run down or sterling balances held by China (or the/
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