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A number of amendments to the report were agreed and the following points
were also made
(a) Although China obtained 40 per cent of her foreign exchange earnings from Hong Kong, not all of this would be lost if the colony were incorporated in China, since much of Hong Kong's trade could be diverted to other ports. China would, however, lose the foreign exchange receipts from sales of food and other produce to the inhabitants of Hong Kong. In this connection the report might note that action by the communists against Hong Kong's food and water supplies would affect the economy of mainland China also, and would have adverse political effects for themselves.
(b) Although economic confidence in Hong Kong had been maintained to a remarkable degree during the current disturbances, the continuation of measures of harassment by the communists over a long period might erode confidence
This in the colony to a point when financial collapse might be imminent. should be considered in the longer-term study of prospects for Hong Kong.
(c) An immediate study should be made by the Treasury, in consultation with the Board of Trade and the Bank of England, of the economic and financial measures which should be taken in the event of evacuation from the colony
becoming necessary.
The Working Party -
Took note that the Chairman would arrange for the report to be
submitted to Ministers, as agreed in discussion.
Cabinet Office, S.W.1.
24th July 1967
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