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CONFIDENTIAL

Chinese attitude towards

Hong Kong

Benefits of Hong Kong

Hong Kong's

Policy towards China

inevitable unfamiliarity with the position in dependent

territories of staff who come in fresh from posting overseas.

RELATIONS WITH CHIN A

12. The Communist Peoples Government of China (CPG) - like

previous Chinese Governments regard Hong Kong as Chinese

territory, wreated from the mainland during a period of

weakness and to be recovered in due course. The Chinese

official attitude, pronounced in March 1963 and reaffirmed

in 1965, is that Hong Kong is a legacy from unequal treaties

in the past and that China's claim will be settled peacefully

through negotiations when the time is ripe. But there is

at present no indication that the Chinese intend to

press their claim in the near future.

13. The Chinese derive considerable benefits from the

Colony, which provides them with easy access to world markets

and serves as an invaluable base for travel and intelligence

activities. With the rapidly changing situation in

South-East Asia, the value of the Colony as a listening

post and staging point will increase. Hong Kong also

depends heavily on Chiae for essential supplies, especially

food and so is of direct economic value to China; between

a third and a half of China's foreign exchange earnings

comes via the Colony. These earnings play a major role in

financing China's trade deficits with other areas of the

non-communist world.

14.

Hong Kong's policy towards China has been one of "firmness without provocation"; in particular, the

Government is careful not to cause offence, e.g. by avoiding

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CONFIDENTIAL

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