4.
cause disenchantment with the Hong Kong Government and to discredit its intentions and those of HMG in regard to Hong Kong. It also involves the pro- gressive 'purchase of commercial influence through widening 'of the CPG stake in the Colony. I believe that insofar as the CPG's policy towards Hong Kong is formulated it is to achieve a situation similar to that in Macau in which the CPG enjoy all the commercial and financial advantages of the status quo while exercising complete control over policy and administra- tion - a power which at present they exercise with some discretion - through the influence on the Portuguese Government of their chosen unofficial representatives in Macau.
8.
In these from their point of view not unreasonable political endeavours, they tend to be handicapped by the population's intimate knowledge of conditions in Kwangtung and by the periodic vilent paroxisms which have characterised Maoist China. might add that above all they are frustrated by the economic success of IIong Kong which has enabled the population's standard of living to progress to levels unattainable in China.
9.
I
So the time-scale of the CPG's polier towards Hong Kong is long, and for the time being their shorter-term tactics are not making notable progress with the population. The question arisen what use the Hong Kong Government should make of thin breathing space.
10.
I think we should do everything we can to make Hong Kong a model city, of international standing, with high standards of education, technopy and culture, as well as industrial, commercial and financial facilities, from which China can gain great benefit, but which China might be reluctant to try to absorb while she still has some need of the material benefits it offers and while her own conditions remain so different. This might conceivably gain additional time for conditions in China to evolve, and might even influence the Chinese Government to consider an eventual continuing special status for Hong Kong, perhaps under Chinese sovereignty, which would to some extent safeguard the way of life of the population and
SECRET