TOP SECRET
COLONIAL
OFFICE
As yet the Governor has taken no action against the Press or to deport,
detain or bar the entry of Communist leaders, under powers which it has
boon agrood ho might use if necessary. Use of those powers might be
considered in Peking as a direct challenge and could make it moro
difficult for Poking to withdraw from a policy of confrontation.
7. There are indications that the loadership which was in some dis-
array after the failure of its violent methods in the face of strong
public disapproval are now marking timo ponding a signal or instructions
from Poking.
Chinoso Intentions
8. There is no evidence that the disturbs.ces were deliberately started
by Poking. They appear to have resulted from local initiatives and to
have been the product of a moro militant atmosphoro among the Communists
in Hong Kong responding to the "cultural "ovclution" in China. But
Poking has supported the "demands" of the local Communists and continues
to do so; and, whatever the origins of the disturbances, Poking is now
closely involvod,
9. There is no ovidence of any basic chango in China's policy of
maintaining the status quo. Thoro are indications, howovor, that
Poking is undecided about how to handle the Hong Kong issue: in an
article in the Poo le's Daily of 3rd June the "compatriots" were
onjoined to await tho call for action to overthrow British imperialism
in Hong Kong.
10.
This hositancy could be the prelude to a slow and prolonged process
of backing down but it could equally reflect the conflicting pressures
in Poking. On the one hand there are the factors which support prosent
Chinese policy - notably the undounted economic benefit of Hong Kong
to China (about 40% of her foreign exchango carnings comos from Hong
Kong and is important in financing the grain imports) and the fact that
pullic opinion in Hong Kong has reacted with surprising firmness to
Communist action, showing the Chinese that they cannot hope for a cheap
TOP SECRET
/Macao-typo