2
Unofficial Members that Hong Kong should pay a larger contribu- tion was to demonstrate to them that the Colony was gaining greater economic benefits from the presence of the Garrison. (a) With one less najor Army unit (6 instead of 73) local spending would be about £2 million less. Assuming thet half o that reduction rej resented economic gain to Hong Kong, the figure of £8 million a year should come down to £7 million a
year.
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(e) In the light of the estimate of local expenditure at 1970 prices the Financial Secretary calculated that he had over-
estimated local spending by £.9 million. An additional 2.45
million should thereïore be deducted from the £8 million. (x) However, the Governor was most anxious to avoid an annual
row over the defence contribution when the budget was debated. Moreover, he recognised that a degree of escalation of costs was inevitable. He had therefore proposed a mid-point figure of £7.5 million as an annual contribution over the period of the new agreement. This allowed for something under 7 per cent inflation per annum (in Hong Kong a more reasonable assumption would be 3-31⁄2 per cent) and not 10 par cent as stated in his letter. The 10 per cent figure had been based, by mistake, on
a four year agreemen“.
6. In considering this question the Governor and the FCO
must take into account the prospects facing Hong Kong Political
(a) Hong Kong exiss under British rule because Chine finds it convenient and economically profitable (a substantial part, between a quarter and a half, of China's foreign exchange earnings come via Hong Kong). Hong Kong will continue to exist aз long (but only as long) as China finds it convenient, and the date of 1997 (though it will give rise to considerable uncer- tainty in the Colony and elsewhere as it approaches) may not in fact have the conclusive significance for the Colony's future
which is sometimes assumed.
(b)
More real is the constant watchful presence of Peking.
A failure of exports to expand sufficiently to keep pace with a
Secret
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