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China might not permit even a moderate Chinese Government to negotiate a solution which we would regard as acceptable. China might prefer to use
an offer on our part to negotiate in order to lock us in the Colony:
it was most unlikely that we could evacuate more than a fraction of the 30,000 non-Chinese in the Colony. We should thus be leaving many hostages
to the Chinese.
In detailed discussion of the draft a number of amendments were agreed and the following main points were made
(a) The clothing and textiles that we imported from Hong Kong, mentioned in paragraph 6, were subject to quantitative control. It should be made olear
that any question of substitution would to a considerable extent depend on a policy decision.
(e) It was in our interest to ensure that Hong Kong's reserves should be
kept substantially intact and in sterling. As regards the effect of transactions in the Colony on the sterling area foreign exchange reserves as a whole, it was desirable to clear away any misapprehension that there was
a substantial drain through Hong Kong. The Commonwealth Office would consult the Treasury about a suitable formula to meet this point.
(f) In paragraph 9 the second sentence should read:
"But it could become
a major liability if a crisis of confidence led to a large reduction of economic activity in the Colony and/or the cessation or withdrawal of external
investment."
(g) Paragraphs 17 to 19 would be redrafted by the Commonwealth Office, in
collaboration with the Treasury and Ministry of Defence, in the light of the
Ministry of Defence paper dealing with the strength of the garrison and
its reinforcement.
(h) In paragraphs 20 to 25 the Commonwealth Office would consider the possibility of drawing a distinction between our responsibilities and our obligations.
They would also insert in this section a reference to the fact that the
Chinese would use Hong Kong as a hostage.
(i) In paragraph 48(c) it should be made clear that the "severe economic
setback" referred to in the first sentence might arise from importing countries becoming less liberal in accepting Hong Kong goods.
(j) In the last sentence of paragraph 49 the words "or that we are prepared
to go" should be inserted after "that China intends to end our rule in
Hong Kong".
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