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Communist
revolution in China and there was no evidence that they were inspired from Peking. policy in Hong Kong, as dictated once again by Peking, is now concentrating as it did before on maximising the economic benefits it derives from Hong Kong in British hands.
The basic threat is the possibility of a calculated change in Peking's policy towards Hong Kong, and this remains. It has been with us ever since 1949. Chinese policy has, however, been essentially pragmatic and not easily turned by considerations of short term advantage. In our relations with them over Hong Kong we have had our ups and downs, our alarums and excursions, in the 50's as well as the 60's. But their policy has, for strong reasons of economic advantage, remained consistently firm on maintaining the status quo in Hong Kong. We would not expect any import- ant change in this respect before the 1980's by which time the tunnel loan will have been
repaid.
It does seem to me therefore that the
political risk cannot be held to justify the onerous condition of a joint guarantee and that, unless ECGD have good reason to change their assessment of the commercial risk, it would be justifiable to reoffer the terms of April 1967, i.e., several (but not joint) guarantees.
Since the Tunnel Company now seems able to make the necessary financial arrangements, it would seem a pity that the project should fall down because of conditions that do seem to be
out of the ordinary. We cannot claim that it is of great importance to Hong Kong; but the Hong Kong Government does regard it as a worth- while project provided it does not make too much of a call on government resources, which are heavily committed elsewhere. It is not, of course, for me to state the considerable British interest in obtaining this contract. But I understand that if Costains got the contract they would be pioneering, outside America, a new Technique in tunnel-building by the use of a steel tube; this method could be increasingly used in future and the firm would be in a favourable position to exploit any such
/development...