TOR
SECRET
DRAFT
HONG KONG
We were asked to consider the economic consequences
to the U.K. of no longer possessing Hong Kong.
2.
Contimed or recurrent Chinese pressure on the
colony can be expected eventually to lead to a reduced
level of economic activity in Hong Kong adversely
affecting the level of trade and other economic
relationships with the U.K. (It might conceivably call
for some measure of U.X. economic assistance to Hong Kong.)
However as the effects of such pressure cannot be quantified:
the analysis in this paper is as a matter of convenience
essentially in terms of a contrast between the state of
affairs which might obtain following the loss of
Hong Kong with that obtaining in 1966.
3. Section I below examines the possible affects on the
U.I. balance of payments (including the reserve position)
and on the U.K. economy of the loss of Hong Kong to China.
On the broad assumptions that Hong Kong would cease to exis'
a separate economic entity and that current U.X. trade
and other economic dealings with her would not to any
extent be replaced by increased business with an enlarged
China. More specifically the following assumptions are
made:-
(1)
that the access for exports from the "enlarged
China" (incorporating Hong Kong) to the U.X.
market would be subject to precisely the same
rules and restrictions as those obtaining at
present for China (without Hong Kong);
1
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