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negotiations for grain deals with Australia and Canada have
often taken place in Hong Kong. Western firms, too, can
readily make contact with Chinese commercial organisations
in the Colony.
Hong Kong as hostage for our good behaviour
34. China could at any time bring pressure to bear on the
Colony with a view to influencing our policies or actions
elsewhere than in the Colony. This might be used in the
promotion of China's interests and to the detriment of our
interests.
Significance of Hong Kong's Economic Value to China
Could
35. Hong Kong in our hands is of considerable economic value
to China but its contribution to China's economy is clearly not
indispensable and as that economy develops the Colony's
importance as an earner of foreign exchange wi diminish.
Conversely, in present circumstances, Hong Kong in their hands
would be conomically almost valueless, since its two major
sources of income (exports to Western markets and tourism)
would largely dry up. The Chinese might have to resettle in
Whose livelihood would have driappeared. China some 2 million people who would be out of work in Hong
Kong
up to
36. Such evidence as we have indicates that there are
differences within the Chinese leadership between the extremist
group inspired by Mao who are unreservedly in favour of pushing the Cultural Revolution to the limit and encouraging "making
revolution" inside China and outside it, and a second group
of a more moderate and realist attitude including the Prime
Minister, Chou En-lai. It is possible that the first group
disposed might be willing to sacrifice the economic benefits derived
/from
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