territory.
They nevertheless gain great advantage from the Geden existence. In particular Hong Kong provides China with a valuabl source of foreign exchange (some £750 million a year) from Juvisit earnings, as an importer of goods, mostly food for local ooncum! FL. and as an entrepot for Chinese exports elsewhere. It serves Cha as a point of contact with the Western commercial and financial world without the necessity of allowing foreigners to live in China.
20.
Hong Kong came under heavy pressure in 1967/1968 during the Cultural Revolution when widespread unrest throughout China ovepapilled into the Colony. The imprisonment of rioters and the refusal to bond to Chinese pressure for their release led to the sacking of the British Mission in Peking for which China has since apologised. China now displays a more pragmatic attitude towards Hong Kong and has 12 notably co-operative in recent years. It maintains large numbere of officials and many trading and other organisations in Hong Kon The Hong Kong Government has regular contact with them and there i : a relaxed and easy relationship.
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21.
There are, however, two outstanding though not very live png between us and the Chinese at present. The first concerng thr request to appoint an official representative in the colony. 1973 Sir Alec Douglas-Home explained to the then Chinese Foreign Minister that we would not accept the proposal. It has not been raised with the present Government but it is possible til. may come up again when the Foreign and Commonwealth Secretary visibo China in the spring of next year. The second issue relates to th level of Chinese immigration into Hong Kong. Between 1971-7. immigration from China into Hong Kong rose from less than 13,9 some 74,000, imposing a heavy strain on the Colony's resources. After representations to the Chinese the number of legal immi (those with Chinese exit permits) has been reduced. Also fol discussions with the Chinese all illegal immigrants apprehended on first entry into the Colony (except for humanitarian cases ami are now being returned to China.
INTERNAL POLITICAL AND SOCIAL BACKGROUND
22.
After the Chinese revolution in 1946, large numbers of G
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CONFIDENTIAL
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