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treaties by which both those arrangements were made as "unequal",

as having been forced upon China at a time of national weakness and

hence no longer valid.

2.

The Chinese Government have nevertheless been prepared to

tolerate the existence of Hong Kong ever since they came to power inl

1949. We cannot be certain to what extent the Chinese have now

altered their policy of tolerating the status quo. It seems likely

that the Chinese have made no fundamental new policy decisions over

Hong kong but are merely taking ad hoc decisions as the situation

develops. But the cumulative effect of a series of such decisions

has been to create a policy of hostility towards the Hong Hong

Government which it would take some time to reverse even if the

present crisis came to an end. While China remains in turmoil, and

while the Cultural Revolution campaign continues, it is unlikely

that this policy of hostility will alter.

3.

TheChinese Givernment's present maximum aims are apparently to

bring about a lacao-type situation in Hong Kong in which the British

would remain nominally in control but in practice be dependent on

Chinese approval for all important decisions. There are no

indications so far in Chine se propaganda, or in what we know of secret instructions, that the Chinese wish to expel us from Hong Kong

at this stage.

4. The Chinese have so far failed to achieve their presumed

objective of a Macao-type situation.

Assuming that they continue

their present hostile policy, the two methods open to them are either to porsevere with the same tactics and try by intensified terrorism

and disruption to undermine the control of the security forces and

the administration until they are forced to make a public gesture of

or to change their policy and take over the Colony by

militery force. The Chinese have sufficient troops within easy

re.ch of Hong Kong to do the latter without much difficulty. reasons why the Chinese are unlikely to resort to military force are

Lobably threerold; they would prefer to see Hong kong remain in

sufrender;

The

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