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of world production. She probably has the largest standing army in the world and the total manpower strength of her defence forces is second only to the Russian. They are, however, essentially defensive in nature and have a vast country and a long coastline to defend. Attacks on Chinese territorial integrity and independence during the nineteenth century, the Sino-Japanese war and the Soviet "betrayal" of the 1960s have left deep scars. Possession of a growing nuclear force and the development of long-range means of delivery provides an increasingly credible strategic deterrent for the future.
5. China is the promoter of the second main stream of Communism in the world, a permanent member of the Security Council and shares disputed boundaries with the second and third most populous nations in the world, India and the Soviet Union. She is a close neighbour of the world's third economic power, Japan, and is of great importance to the calculations of the world's strongest military power, the USA. She provides a radical model for the developing world, and poses as such in the UN and its subsidiary bodies. Inevitably therefore China, for all her self-containment, occupies a key position in the world today. Some basic statistics setting out China's position in the world and comparing her pre- war and present economic situation are at Annexes A and B.
Britain and China
6. Is this position of central importance to the United Kingdom? Peking is six thousand miles from London. Apart from China's long-term claim to Hong Kong, neither country has any claim on the other's territory and neither is effectively capable of proselytizing or dominating the peoples of the other. Mutual trade, totalling £140 million in 1975, is not of dominant importance to either state. China is essentially a vast peasant nation, not unlike India, although without the marked variations between rich and poor: yet no-one today would credit India with anything approaching super-power status or concede her a central position in world affairs. Why then does China matter to the United Kingdom in an era when our geographical commitments, our military strength and even to some extent our essential overseas economic activities are all contracting to our European/Atlantic base? The following paragraphs review some of the ways in which British and Chinese interests may conflict or coincide.
Hong Kong
7. While Hong Kong remains a British responsibility, we are inevitably affected by Chinese policies generally and towards Hong Kong in particular. Instability in China could spill over into Hong Kong as in 1967, affecting both the administration of the Colony and our relations with China. The economies of China and Hong Kong are closely linked, and each benefits from the status quo. Hong Kong provides China with some 40% of her foreign exchange earnings, a market for Chinese goods, particularly foodstuffs, and an entrepôt for Chinese exports elsewhere. Likely developments in Chinese attitudes towards Hong Kong and possible options available to Britain are examined in a companion paper.
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