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7. Hong Kong is financially self-supporting, and the cost of local works and services is met entirely from local revenue. But its people face formidable natural obstacles in the development of the territory's economy. The pressure of population is probably without parallel anywhere in the world. Four-fifths of the colony consists of marginal land and most of the colony's food has to be imported. Hong Kong depends on industry for its livelihood, yet it suffers from lack of raw materials, of an adequate supply of fresh water, and of enough land suitable for industrial purposes. Despite these disadvantages, Hong Kong has built up a textile and garment industry which accounts for more than half its exports. It has also built up other important light industries, including plastics and metal ware, and there is an increasing emphasis on light precision engineering, including aircraft repair and maintenance. Heavy industry is in general not suited to the colony's resources, but ship repair and building, ship-breaking and steel rolling have been established. The colony's success in developing and expanding its industry is facilitated by the existence of a free port, freedom from trade restrictions, excellent shipping and commercial facilities, low taxation and a plentiful supply of labour.
The Question of Sovereignty
8. The Colony of Hong Kong consists of:
(i) Hong Kong Island, ceded by China to Great Britain in perpetuity under
the Treaty of Nanking, 1842.
(ii) Part of Kowloon Peninsula, with Stonecutters Island, Ap Lei Chau and
Green Island, ceded by the Peking Convention, 1860.
(iii) The New Territories, an area of 3651⁄2 square miles, leased to Great Britain for 99 years under the Peking Convention, 1898. This convention included a proviso allowing Chinese jurisdiction in Kowloon Walled City, an area of 61 acres, except so far as might be inconsistent with the military requirements of Hong Kong ". In 1899, to end acts of violence against British personnel, the area was occupied and made. part of the colony.
9. The question of sovereignty over the leased territories is not entirely free from doubt. The present position seems to be as follows. Britain has sovereignty over the ceded areas of the colony. China retains ultimate sovereignty over the leased territories, but during the term of the lease Britain is entitled to exercise full sovereignty, subject to the qualification regarding Kowloon Walled City. Because of this qualification, it is not considered advisable to make a wholesale denial of Chinese claims to sovereignty.
10. The Chinese Nationalists have not challenged the state of affairs in Kowloon Walled City since 1948 and have not raised the question of sovereignty over the leased territories in the United Nations since 1949, when the United Kingdom representative reserved Her Majesty's Government's position. The Communist Government has not officially taken up the question of the leased territories and the question of the status of Hong Kong as a whole has never been raised directly with Her Majesty's Government by any Chinese Government. In January 1963 it did, however, challenge British jurisdiction in the Walled City; since when it has been considered prudent not to assert full British jurisdiction over it. In March 1963 an inspired editorial in a Chinese newspaper spoke of the need to renegotiate" unequal treaties" in due course, referred to Hong Kong in this context and stated that in the meantime China would be content to see the status quo maintained.
Discussion by the Committee of Twenty-four
11. Hong Kong cannot be considered as in the same category as other non- self-governing territories. This is both because a large part of the territory is held under lease from China, due to expire in 1997, and more particularly because, being geographically part of China, its circumstances are inevitably dominated by the cold war in which it could become embroiled at any moment. The Communist Government has chosen so far not to make an issue of Hong Kong, but discussion of the territory in the United Nations might make it difficult for them to remain silent, and the Chinese Nationalists would become involved also.
12. Any policy of developing self-government in Hong Kong, or preparing it for independence, would probably be regarded as provocative by Peking. Any changes in the foreseeable future are therefore likely to be of only a minor character and, in particular, it will not be possible to introduce elections to the Legislative
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