CONFIDENTIAL
the Anglo-Italian bid for their Underground Railway
system. Instead they will negotiate only with the
Japanese. In doing so they have allowed commerein]
calculations to override the political importance of
3. Discontent with Britain is focused in Hong Kong's
largely Chinese business community and in Legislative
and Executive Councils. Their fears are not wholly
irrational. As a successful and expanding economy,
Hong Kong's direct interests and ours are often
different. But the underlying problem is insecurity ·
Concem about the arising from political impotence and the absence of
any secure future. There is an official majority in
Legislative Council, and Executive Council is advisory
to the Governor. But he cannot use his powers to
override Chinese public and business opinion without
risking a crisis of confidence in the British
administration.
4. The constitutional position also makes it
difficult to argue the full British case in Hong Kong.
The Governor is the queen's representative; but he and
his administration have to remain sensitive to the
local situation, and cannot be seen to argue with
themselves. Nor could we set up an independent
mission in Hong Kong for this purpose, since this
would undermine the governor's position.
5. The
# stad Sua sit will provide an
opportunity Le at the record straight. The air 1.
(ANSIDENTIAL
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