CONFIDENTIAL
-7-
Mr. and Mrs. Self of the Hong Kong and Shanghai Bank and
Mr. Saunders, the Third Officer on a British ship, have been deported. The improvement in relations such as it is has been achieved without any concessions of substance in Hong Kong. Hong Kong itself is quiet and there is no sign whatever of a
return to violence. On the contrary all the signs are in the other direction and in certain sectors, notably labour, militancy has markedly decreased. While the price for "normalising" relations in respect of Hong Kong would for the Chinese ideally remain the securing of major concessions
amounting to a de facto abdication of the authority of the Hong Kong Government, in fact, the Communists have probably decided that this is impossible to achieve. How the situation
develops will depend to some extent on what happens in mainland China. The present signs are that the Cultural Revolution
is being brought to an end and that the forces of moderation
are re-asserting themselves. One report from secret sources
of the views of Chou En-lai indicates that he wishes to see a
return to the status quo ante in Hong Kong with the emphasis
once again on extracting the maximum economic benefit from the
Colony. It would be premature and unwise to place too much reliance on reports of this sort but they do suggest that while the Chinese will continue to give support to a policy of "struggle" in the Colony and will if possible continue to work in the long term towards the undermining of the Hong Kong Government, they may be content to see some sort of modus vivendi
/re-established.
CONFIDENTIAL