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I would also mention I am mildly
sceptical of the vast amount of new trade that is to be done with China itself. They have no foreign exchange worth speaking of and they are planning over the next twenty years an industrial- isation programme which the Chairman of the Hong Kong and Shanghai Bank put to me as being of the order of three hundred to four hundred billion pounds sterling. Their best hope of getting the foreign exchange they need is by developing Hong Kong along with us. If an arrangement of the kind I suggest were reached there would be many side conditions but one of them should NOT be a Chinese viceroy or government official in Hong Kong. That would scare the pants off the local Chinese and wreck Hong Kong commercially which would not be to Peking's advantage. They may fly the Red Flag in China Hong Kong but firmly sitting under it must be British permanent administrators answerable to no one but Britain. Also there should be no talk of democracy by popular vote in Hong Kong. That would horrify Peking because they would then have no justification whatever for not absorb ing it formally as part of China.
that
Another piece of evidence the Chinese would be favourable to my notion is their willingness to allow Taiwan to be wholly autonomous with their own defence forces and foreign policy if only it will admit that it is part of China.
The Governor, as you know, is due to retire in August. The nature of the new one is very important. He should be a person of note