CONFIDENTIAL
6. In recent months Sino/British relations have noticeably improved and there have been many indications that the Chinese do not wish to stir up trouble in Hong Kong. Since the end of the disturbances in 1967 the local Hong Kong communists appear to have been under instructions from Peking to observe the law and to concentrate on deriving the maximum economic benefit for China from the Colony. It is of course impossible to give any guarantee of what will happen in the years ahead; but basing ourselves on the situation as it is today and having regard to likely develop- ments we think it would be fair to say that the political risk of a major upheaval in Hong Kong over the next fifteen years is no greater than it has been in the last fifteen years,
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The Hong Kong Government will clearly have to assess the need for the underground railway against the demands on Government ravenue in other fields such as water supply, housing, roads, education; and we are confident that they will look very carefully at the viability of the scheme and that if they decide to go ahead with it this will be because they are convinced that it is not only essential, but also viable, and a commercially acceptable proposition.
In this connection, I am enclosing an extract from CLE's copy of the Final Report by Freeman, Fox and Partners. As you will see, this gives the Consultants' views on possible sources of capital funds for financing the scheme. The Report is stamped "Confidential Contents must not be divulged in whole or part to third parties without prior written consent of Freeman, Fox and Partners". CRE obtained it privately from one of their contacts in Hong Kong and the fact that we have it should not therefore be revealed to anybody connected with Freeman, Fox and Partners,
8. I am copying this letter, to Jones (Treasury), Thain (ODA) Rawlings (ECGD Toms, Robins and Watson (DTI), Lambert (B of E), and Blackwell (BTC Hong Kong).
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K O Laird
Copied also to Wade-Gery, FPAD and Willson, EPD.
CONFIDENTIAL