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Colony as a listening post and staging point will increase.
Hong Kong al 30 depends heavily on China for essential supplies,
especially food and so is of direct economic value to China;
about one third of China's foreign exchange carnings comes via
the Colony, These earnings play a major role in financing China's
trade deficits with other areas of the non-communist world.
Moreover, the Chinese are currently deeply preoccupied with their
dispute with the Soviet Union; in the event of hostilities the
commercial importance of the Colony would increase particularly
in the event of a Soviet blockade of the China coast. Balanced
against these solid advantages the presence of a flourishing
colonial society on Chinese territory must be a source of some
embarrassment to Peking. The Russians continue to tease the
Chinese on this point but the Chinese have so far swallowed their
ideological pride presumably because of the tangible benefits
which the Colony brings.
Future Chinese Policy
7. Much will depend on how the Chinese leadership evolves over the
next decade. At present the moderates seem firmly in the saddle.
As long as they remain at the helm, it is reasonable to expect the
policy towards Hong Kong cf comparative restraint and realism to
continue. A rosurgence of radical policies certainly cannot be
ruled out; but this seems unlikely at present. It is much more
difficult to predict the course of events after Mao dies. The
advent of a more flexible and cutward-looking leadership might
improve the day-to-day working relationship between China and the
Colony. But in the very long run it is highly doubtful whether
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/ any