2
(Secret) Sir,
SECRET
Hong Kong,
27 May, 1974.
This it the first of three despatches about Kong Kong which I am addressing to you. They are intended to provide, before my visit to London in mid-June, a picture of the principal objectives of this Government and the problems which concern it.
2. This first despatch covers the broad picture within which this Government is operating, including the implications of its relationship with China, the main objectives of current domestic policy, and the salient factors in the budgetary and financial position within which they must be pursued at present. The second examines such special problems as exist at present, the third deals with the constitutional position and the possibilities of change in it.
3. The normal objectives of a Colonial Government are to prepare the population for self-government and probably independence. Here, owing to the attitude of China neither apply. Nor is the population one Great Britain has conquered or forcibly subjected to British rule. On the contrary the population has migrated into the Colony because its conditions are preferable to those of China, and this process continues. As I see it, in these unusual circumstances, the objectives of the Hong Kong Government must be to manage things so that: Internally
(a) the swollen population is employed with-as far as economic realities
allow—an ever rising standard of living, and
(b) the confidence, loyalty and cohesion of the population are retained: and
Externally
(c) good relations are retained with China subject only to (b) above;
(d) nothing should be done vis-à-vis China to call in question the status quo; (e) that (a) to (d) should make the minimum call on Her Majesty's Govern-
ment in financial, diplomatic or parliamentary terms.
4.
It is (c) and (d), Hong Kong's relationship with China, that is the aspect of the Colony which most interests outside observers. In considering this I suggest it is helpful to keep in mind two points:
(a) Hong Kong continues to exist because on balance the Chinese People's Government (CPG) considers it beneficial, the political disadvantages being outweighed for the time being by other considerations. The latter include foreign exchange earnings drawn from and through Hong Kong (nearly £600 million in 1973), but also the financial, commercial and cultural (including propaganda) contacts Hong Kong provides with the outside world without the inconvenience of accepting large numbers of foreigners in China. The degree of trouble which the CPG calculate a change of sovereignty would involve no doubt also forms part of the equation. By and large the future of the Colony will depend on what weight successive Chinese leaders give to these different factors and how they calculate the balance of advantage. We must therefore watch this balance very carefully.
(b) Hong Kong were more or less forcibly re-incorporated in China, the effect on this population of 4 million emigrants and on the extensive British and foreign interests involved, could face Her Majesty's Government with very difficult problems which could scarcely be solved without loss, humiliation and strained relations with China.
SECRET