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10. I think we should do everything we can to make Hong Kong a model city, of international standing, with high standards of education, technology 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 the British and other foreign interests in the Colony. Conversely if we made a mess of things in Hong Kong, so that it became so impoverished that China could draw no benefit from it, and its international standing was correspondingly low, I see no reason why China should not take it over immediately. So both for these political reasons, and in any case because I am sure it is what Her Majesty's Government would wish on its merits, we should go for Hong Kong as a model city. But we should do so from a low posture saying little, and throwing down no overt challenge to China.
11. I think we should also get a move on. Firstly because there is much that needs doing, secondly because to retain the interest and loyalty of the population progress must be visible, and thirdly because we do not know how long the present state of good relations_with_China will last, and some of the conditions of life that exist at present are easy to exploit for political purposes. Yet another and conclusive reason for a spurt is that the shadow of the end of the lease in 1997 will start to make itself felt in the '80s. This will be the time to do everything possible to increase confidence and profitability and thus promote employment and living standards in the Colony. It will be a time to decrease rather than increase taxes and charges. So problems should be faced and solved now, within the next decade, at whatever cost is necessary compatible with the continued expansion of the economy and its attractiveness to investors, in the hope of being able to ease up in the '80s. This at least is how I myself and my advisers see it. Hong Kong's exposure and vulnerability in the '80s and '90s will be very great in any case, for obvious reasons outside the control of the Hong Kong Government, but it will be that much worse unless many of her traditional social problems are solved in the 70's.
12. These problems consist of the exigencies forced on Hong Kong through the quadrupling of its population in a quarter of a century. While great progress has been made over them their solution has been delayed through Hong Kong's total dependence on export markets, which always makes control of her economy and forecasting of revenue extremely difficult; by the sense of insecurity and instability created by the Colony's relationship with China, which in turn requires the prospect of quick profits and consequently of a low tax structure to retain and attract investment and thus provide employment and revenue; and finally by the absence of the development aid which many other developing countries have enjoyed.
13. However we have concluded that a major effort must now be made to put a term to the deficiencies that exist and have therefore drawn up major programmes, to be completed within the next decade in the fields of Housing, Education, Medical and Health Services and Social Welfare. The Department are familiar with the details and I will not recapitulate them here. Suffice it to say that when completed there should be little about Hong Kong for which any European observer need feel shame, and much for which Asians will feel admiration. The programmes have caught the imagination of the public, and generally improved its confidence in the Government and in the Government's concern for public welfare.
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