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With the Compliments of the
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29/12
16/12/09
DECRET
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Mr. K.C. Jay telephoned during the afternoon of Tuesday, 9th December
asking for an early meeting: accordingly I arranged to see his later
that afternoon.
2.
Jay said that he had asked for a brief discussion as he vas most
concerned at the changing attitude on the part of local communists,
including LI Cho-chih himself. Apparently, after my meeting with Jay on
Saturday, 29 November, he had taken an early opportunity to inform LI of
our discussion, and in particular my response concerning the South China
Iron Works land at Tsuen Van. LI had immediately said that this was yet
another example of the H.K.G.'s hardening of attitude against the
communists. Jay claims that he attempted to explain to LI that this did
not reflect a change in policy but for the X.I.Q. vas a normal and
proper way in which to handle a land matter. Jay felt that LI was far
from convinced on this and that undoubtedly he would be reporting back
to Peking his version and interpretation of the H.K.G.'s attitude on the
8.C.I.W. land.
3.
Jay said that he had asked for a rather urgent meeting as in the past
week or so he had detected a very definite change in attitude on the
part of leading communists and that to some extent this was reflected in
the local communist press: bence the personal attacks on H.8. the
Governor and the criticisas of the Festival of Hong Kong. Jay also
thought that the H.K.G. policy on the S.C.I.V. land had probably put
back the date of Mes. Martin's release. I immediately picked this point
up and asked whether he was seriously suggesting that indirectly the
H.I.G. was being asked to pay for Mrs. Martin's release. Jay hotly
denied this but explained his rather casual comment by saying that it
had been his firm expectation at the end of November that Mrs. Hartin
would very soon be released: that in searching for a credible reason for
her continued detention he could only assume that the Chinese had been
influenced by what they detected as a change or hardening of H.K.G. and
therefore British Government policy towards them. Be hastened to add
that he personally, of course, appreciated that this was not the case
but that LI and his colleagues had convinced themselves that there had
been a change in policy on the part of the H.K.G. and Jay felt that it
would take some time and a lot of good will on both sides before there
was a change for the better.
(J. Cater)
16th December, 1969.
c.c.
Mr. J. Murray (P.C.0.) Hr. J.B. Denson (Peking)
D.S.B.
H.8.0.
3.8.8.
DECRET
1
Mr. Mupray
125
A
Jacks
Its Affle you.
29/12
With the Compliments of thRECEIVED IN
REGISTRY NƆ.50
Political Adviser 31 DECIUS
TSX 4/68
Hong Kong
Failt
12.69
Political Adviser
SECRET
Mr. K.C. Jay telephoned on the morning of Saturday, 29th November asking
for an early appointment: accordingly I arranged to see him at about
12.30 p.m. in the event, I had lunch with him and finally left him at
about 3.45 p.m.
2.
Jay started by saying that there was increasing evidence that Peking
once again, after a rather blank period, was anxious to seek his advice
on matters to do with Hong Kong and Britain. He and others, including LI
Cho-chih, had been invited to Macau about 10 days ago to meet with a
visitor from Peking - apparently from the Prime Minister's office. In
the event, Jay had excused himself on the grounds that he did not wish
to leave Hong Kong at that time and that in particular he had no wish to
meet with HO Yin who was almost certainly going to be present at one or
more of the meetings with the Peking visitor. Consequently, Charlie CHAN
was invited to Macau in Jay's place. From later discussions it was Jay's
assessment that the Facau meetings were of little value and were
confined almost completely to very general topics.
3.
Recently Jay had received a number of enquiries from Peking seeking his
advice and views. These enquiries were in the main confined to such
topics as the appointment of a new Governor, various H.K.G. policies and
decisions, but the most important subject concerned the possibility of
war between China and Russia. In this context Jay's views were solicited
as to possible reaction of particularly the foreign population of Hong
Kong, bankers and senior Government officials. Jay was further asked
whether he had any advice to offer as to how China's views might best be
put across to the Western world and in particular what action Peking
might be advised to take in order to gain friends in the Western world.
It was Jay's view that Peking, and in particular his contacts in the
Prime Minister's office, were fully aware of his views on such matters
but they were wanting him to repeat them in order that they might be
used in policy discussions and decisions in Peking: Jay clains that he
repeated yet again the importance of China enhancing and maintaining
good relationships with Britain. Jay said that from previous
communications with the Prize Minister's office he was avare that CHOU
En-lai favoured improving relationships with Britain but that at this
stage CHOU was seeking selected and known views "even from me" in order
to strengthen his policies in Peking.
4.
whilst in his office Jay told me that he was fairly confident that Mrs.
Martin of the Hongkong & Shanghai Bank in Shanghai would soon be
released and that she would soon be followed by Johnston of the
Chartered Bank. Later, at lunch, after having taken some rather obvious
measures to ensure that he was not over- heard, Jay said to me that his
news about Mrs. Martin's impending release was quite firm: that the
Shanghai authorities vere particularly anxious that the Hongkong &
Shanghai Bank should reverse its decision to close down the Shanghai
office, and additionally Peking would be pleased if the Hongkong &
Shanghai Bank would represent their interests in the matter of the
s.c.I.V. land at Tsuen Wan. These two factors, comments made recently by
SECRET
/contd....
18
SECRET
LI and broad generalisations from Peking suggested an early release for
Mrs. Martin.
5.
Jay said that Peking had now given further thought to the matter of the
land at Tsuen Wan and now wished it to be known that they would be
prepared to accept an offer of HK$9 million. Jay asked whether I would
have this information passed back to the authorities concerned. I
reminded Jay that several months ago I had said that the H.I.G. offer
could be of the order of HK$7.8 million, with an upper limit of HK$8
million. I further reminded him of the latest discussion we had had on
the S.C.I.W. land when I informed him that as a result of an approach
made by Deacons on behalf of some "menbers of the Board of Directors" I
had suggested that it might be preferable to leave further discussion in
the hands of more orthodox channels i.e. the owners of the land or their
legal representatives. Jay at once asked whether I was refusing to pass
on the message:
I said that this vas certainly not the case, that I was merely reminding
him of the position reached at a very recent meeting. Jay seemed a
little put out by this and said that to him it seemed a very simple
matter there were three possible courses of action: (1) to agree to the
new Peking offer; (2) to turn it down, perhaps repeating the previous
proposal of Br$8 million; or (3) simply to ignore this recent approach.
6.
In a very broad and diffuse discussion over lunch, Jay made various
points but the only points of consequence were:-
He
(1) his concern that the H.K.G. might be considering using another
channel. This is a recurring these but one which he had not put to me
for some months: I assured him that he was the only contact and that
there were no intentions of changing the channel. seened reasonably
satisfied with this answer but later took the opportunity of emphasising
how unimportant Dick LEE and P.C. woo were to the communists, presumably
an attempt to point out that if the H.L.G. were thinking of using either
of these gentlemen it would be an error;
(2) Jay talked at some length in admiring terms as to how well CHOU
En-lai vas playing his hand in Peking. Jay had no doubts whatsoever that
CHOU was now by far the most important man in Peking but, being a
politician, could not resist the temptation from time to time of making
things more complex than they really need be. Jay felt that the only
real threat at present case from the extremist, YAU Ving-yuen, but that
this was a problem CHOU would resolve as and when he could find time to
tackle it.
5th December, 1969
C.C. Mr. J. Murray (r.c.0.)
Mr. J.B. Denson (PEKING)
D.S.B.
#:3:9:
必
(J. Cater)
SECRET
MR MURRAY.
Mixi My
6 Ner.
My tilful The Center 29/12 Mr Wilson
With the Compliments of the
+S+ 4/68
Political Adviso
Hong rong
IRE DVD IN
31 DEC MOD
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22
Fax folding
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17
Political Adviser
Mr. K.C. Jay telephoned me on the morning of Monday, 27th October asking
whether I could see him fairly urgently: accordingly I arranged to see
him at 4.30 p.m. that afternoon,
2.
Jay started the discussion by saying how surprised he and local
communists had been to learn of the detention in Shanghai of Mrs. Martin
and Mr. McBain. Jay claimed that he personally had a little prior
varning but that the news case as a complete shock to LI Cho-chih and
other members of the communist hierarchy in Hong Kong. Indeed, Jay said
that when he telephoned LI to tell him the news, LI vas quite convinced
that Jay had mis- understood the situation and that in fact two more
people had been released: in order to emphasise the complete lack of
knowledge here in Hong Kong, Jay said that even next morning, after
having beard the news on the radio, LI still did not understand the
situation ("his Cantonese is very poor") and telephoned Jay rather
triumphantly to say that Jay obviously had been in error later when LI
had seen the news in the newspapers, he again telephoned Jay to
apologise and then to ask for an early discussion. Mean- while, Jay
claims, other communist leaders from N.C.N.A. and China Resources had
also telephoned to say how surprised they were at the news, particularly
in the face of recent instructions that positive action must be taken to
improve relations with Hong Kong and Britain.
3.
-
Allegedly the discussion between LI and Jay was very lengthy: at first
CHAN Hung had been present at the discussion but after a while LI had
sent him away so that both he and Jay could speak freely. It was their
agreed opinion that the Shanghai de- tentions could be explained by one
of the following:-
(1)
(11)
Mrs. Martin and Mr. McBain had in fact been found to be acting in
contravention of the law: this they thought highly unlikely,
particularly in the case of Mr. McBain who they understood had been
unwell for some time and was only allowed out of bed for a fev hours
each day;
it was a well known fact that the policies of Peking were not always
acceptable to Shanghai and that this may have been an attempt on the
part of the Shanghai authorities to embarrass Peking and at the same
tine to indicate that they did not agree with recent policy changes in
respect of Bong Kong and Britain: this explanation was considered far
more likely than (i)
above.
There was a third possibility which Jay favoured more than the two
mentioned above: be claims that in recent weeks the Hong Kong & Shanghai
Bank had adopted a very soft line towards the Chinese and in particular
the Bank of China: it was Jay's opinion that some members of the Bank of
China, and in particular ̊CHAN Hang, had detected this and probably
advised his contacts of the situation and that they, anxious to take
advantage, had attempted to obtain bargaining power with the detention
of Mrs. Martin. I informed Jay that I was not really impressed by this
explanation -
/contd.....
in any event this might conceivably explain the detention of Mrs. Martin
but what about Mr. McBain? But Jay had little hard information to go on
and clearly was working on intuition and, it turned out, à feeling that
the Hong Kong & Shanghai Bank had not consulted him on matters to do
with the Bank of China and accordingly had made errors: by way of
explanation he said that some weeks ago he had reported to me the
unfortunate and rather stupid manner in which Martin Curran had accepted
the 1. of C. invitation to the 1st October celebrations: at that time he
fully expected that Jake Saunders would have consulted him about the
invitation issued to Saunders in which event Jay would have strongly
advised Saunders not to accept as he might find himself in a
compromising situation, being head of Hong Kong's most important bank
and at the same time à member of Executive Council. In the event, and to
Jay's great surprise, Saunders had not consulted his and had attended
the 1st October cele- brations "a very silly and stupid thing to do".
before
Jay
4.
It was Jay's opinion that senior people in Peking did
he vas not know of the detention of Mrs. Martin and Mr. Kelain: quite
sure, however, that the Shanghai authorities would have contacted
somebody "probably somebody at a low level" acting in order that they
might later claim that they had reported the matter to Peking before
acting. It was Jay's opinion that Mrs. Martin and Mr. Mclain would be
released "very soon" directly Peking had been able to rationalise the
situation. said that he had over the week-end written a personal note to
the Prime Minister's office asking for early consideration of the case
and pointing out that his task of "red face" to the financial and
commercial community in Hong Kong would be quite impossible if the
Shanghai type of incident vere to be repeated. In particular, both Jay
and LI felt that it was important to clarify recent instructions which
seemed in conflict with the Shanghai action. Accordingly, LI was
planning to go to Canton on Wednesday, 29th October and proposing to
arrange a brief visit to Peking in order to press for an early solution
to the Martin/McBain problem.
5.
Jay clearly was embarrassed by the whole affair and time and again
emphasised how shocked he and others had been at the news. I said that I
and others had been shocked by the barbaric treatment that the Chinese
had given to Anthony Grey and others but that this detention of Mrs.
Martin and Mr. McBain vas utterly incredible and beyond all
understanding.
6.
Jay Visit of Mr. Stafford Northcote, Chartered Bank: expressed concern
that lorthcote might, like Püllen last year, press for an interview with
LI Cho-chih. This, according to Jay, would be a serious error: Jay had
spoken to Mr. Peter Graham about the matter but Graham had said that,
whilst he would not encourage Northcote to seek an interview with LI,
nevertheless he could not stop him as Northcote is his senior officer
and in any event would think it wrong not to take the opportunity of
pressing for the early release of Johnston as and when the opportunity
arose. Jay asked whether the H.I.G. could pass a message back strongly
urging Worthcote not to seek openly or directly a meeting with LI. Jay
was anxious that his name should not be associated with such a request
"it might be bad for my
but he assured me that LI relations with the Chartered Bank"
had expressed concern that Northcote might seek an interview and was
toying with the idea of staying in Čanton in order to save himself
embarrassment✔y H
opinion that, with the
/contd..
22
3
possibility of Johnston being released soon, it would be the worst
possible timing if Northcote were now to insist on an interview with
the 1. of C. Manager. According to Jay, the proper thing to do would be
for the Chartered Bank to invite LI Cho-chih to their cocktail party for
Northcote: if LI found it possible to attend then other matters might
develop.
7.
Other matters discussed were:-
(1) VONG Cho-fan - Jay said that VONG had now been told quite firmly
that be vas to behave reasonably and in accordance with Government's
rules: Jay was confident that WONG would keep in line, at least for the
time being.
(2) Newspapers Jay spoke at some length on the alleged improved tone of
the Ven Wei Pao: be said that quite specific instructions had been given
to the Wen Wei Pao and it was expected that in the weeks to come other
communist newspapers would follow the softer line. Jay explained that
Peking would find it extremely difficult to give precise instructions to
newspapers other than the Ven Wei Pao but it was common for that
newspaper to be considered the leader in political comment. As for the
Ta Kung Pao, Jay believed that this paper would also gradually toe the
line, especially now that its Chief Editor, Mr. FEI Yi-ming, had been
disciplined.
(3) Petitions for retention of the Governor Jay said that 'of course you
do not have to reply to this question"but locally the communists had
been surprised that in recent days there had been what looked like a
special campaign to retain the services of H.F. after his ters of office
expires next April. Jay wanted to know whether these petitions had been
inspired by the Governor himself. I assured him that this was utter
nonsense : that the Governor vas just not that sort of person and that
in any event a few seconds' thought would soon show in what an
impossible situation the Governor would be placed if he had inspired
such a campaign. Jay asked what then was behind the campaign: I
suggested that it was a simple matter of a number of people and
organisations genuinely wanting the Governor to stay on for a further
term of office: that they had been impressed by the results achieved
during his administration. Jay was still not satisfied by this and
wondered whether among the petitioners vere those who were out for self
gain: I said that of course this was possible but it was my belief that
the majority were genuine petitioners. I also reminded Jay that it was
common in Hong Kong for petitions of this sort to be raised whenever
holders of certain posts like that of Governor, District Comissioner,
Secretary for Chinese (now Home) Affairs left such posts: if a petition
had not been raised in respect of such officers it would be taken as a
severe criticism of their ability.
(4) Referring to a conversation of some four months ago, Jay said that
in response to a question I had assured him that the British Government
would not appoint a Chinese to be Governor or Colonial Secretary! he
asked whether I would confirm this and accordingly I did so. Jay said
that he was asking this question again as Peking had been surprised, in
the light of this information, to read in certain newspapers that the
British Government was now considering æpointing a Chinese as Deputy
Governor Peking "thought it impossible" in the light of what had been
said previously but would nevertheless like confirmation.
SECRET
/contd.
I said at
୯
once that my remarks concerning the posts of Governor and Colonial
Secretary would of course apply equally to a post of Deputy Governor:
that I had not mentioned such a post previously as there is no such post
at present in Hong Kong. (5) South China Iron Works Jay said that he and
LI Cho-chih had now had the opportunity to discuss this further and LI
had asked Jay to inform me that, in respect of this 8.C.I.V. land, the
cost to the B. of C. vas of the order of HK$11.28 million. He thought it
yould be "a very good gesture indeed" if the H.K.G. were to increase
their offer for this land to HK$11.28 million. I reminded Jay that the
figure I had quoted to him some while ago of HK$7,8 million had only
been årrived at after a great deal of consideration: that the H.K.G. and
H.E. in particular had been anxious that such a price should be "fair to
all concerned". I saw no possibility whatsoever of an increase of the
magnitude now suggested being approved: vhen the offer had been made I
had said that the outside limit would be HK$8 million. I further said
that in any event my calculations of the loans outstanding, interest,
etc., showed the sum owing to the B. of C. as being very much less than
the figure quoted by LI and probably of the order of about HK$7 million.
Jay said. that he would have the figures re-checked and speak to me
later. Jay said that he had given further thought to the information I
had passed on at our last meeting that the "Board of Directors" had made
certain enquiries through Deacons about land conversion rates, etc.: Jay
explained that some time ago the 3. of C. had insisted as part of the
loan arrangements with the S.C.I.W. that the S.C.I.V. would only deal
through Johnson, Stokes & Masters: it was clear to Jay that TSANG and
other directors (not nominees of the 3. of C.) vere using the device of
calling themselves "Board of Directors" and not the Company itself in
order to circu vent this previous arrangement.
In discussing the whole matter with LI, LI had apparently suggested to
Jay that the sooner the matter vas resolved the better and that Jay
should put pressure on the K.K.G.: Jay clainS that he told LI to "use
his head" on this using the Hong Kong & Shanghai Bank as the the
transaction and Jay did not think that like doing favours for the B. of
C, in the of Hrs. Märtin in Shanghai.
their plans envisaged main intermediary in the Bank would feel face of
the detention
ле
(J. Cater)
29th October, 1969.
c.c.
Mr. J. Murray, CHG (P.c.o.) Mr. J.B. Denson, OBE (PRKING) D.S.B.
M.5.0.
B.3.5.
SECRET
འ་
MR. MURRAY.
Mite My N. 23
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24/10/69
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Political Adviser
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TS+4/68
SECRET
Political Adviser
Mr. L.C. Jay telephoned during the afternoon of 22nd October asking
whether we could meet "soon": accordingly I made arrangements to see him
next day for lunch,
2.
Jay was in a happy mood smug and self-satisfied. He said that the
previous day he had been asked to see LI Cho- chih concerning a message
from the Prime Minister's office. Although the message vas in Fairly
general terms nevertheless Jay thought it to be of substantial
importance and a very definite indication of desire to improve relations
between China and Britain and between China and Hong Kong. The main
points made vare:-
(1) Jay was instructed to extend his contacts within the commercial and
financial world and among senior civil servants. In particular, it was
suggested that he should cultivate contact with H.E. the Governor and
the Colonial Secretary.
(2) The need to improve relations with Britain was particularly
important at the present time as China would find it necessary and
desirable to have a friendly Britain to support her on the international
scene.
(3) As regards the report made by Jay to Peking in September:-
(a)
(b)
(c)
(d)
Peking was pleased to receive such reports on the local Hong Kong scene
and were anxious that Jay should feel free to subait such reports in the
future as and when he thought it appropriate;
as to the release of British prisoners in China, this would be affected
over a period of time: the time scale would not be as short as perhaps
the British would want but the decision to release prisoners had been
taken;
South China Iron Works Land at Tsuen Wan: Peking vere very appreciative
of the offer made by the H.K.G. as it indicated to them that the H.I.G.
wished to be helpful and friendly wherever practicable. The hope was
also expressed that the fact that the Chinese were prepared to come to
the H.K.G, with such a request would also be recognised as a gesture of
good will · - an indication that they, too, would like to normalise
relations. Some disappointment had been expressed at the low price
offered but the instructions had been given that Jay and LI were to take
the matter further with a view to reaching agreement in principle;
Peking had taken particular note of Jay's comments on the continued
anti-British tone in the Hong Kong communist press. Instructions had
already been given that the communist newspapers should tone down their
editorial comments and get back to a pre-1967 posture. Jay's special
comments on the TA KUNG PAO and its Chief Editor, Mr. FEI Yi-ming, had
been noted and the necessary disciplinary action
/contd..
+
SECRET
· 2
(unspecified) was being taken.
3.
Having passed the above messages to Jay, LI allegedly said that in the
circumstances perhaps the Chinese could now expect some type of response
from the H.I.G. and the British Government. Jay claimed that he feigned
some anger at this and said that the message contained very little that
was of specific value indeed he found the whole thing very much a re-
hash of vague proxíses made over the past several veeks. LI then
suggested that Jay should read the Peking message for himself
(apparently an unusual thing as LI suggested to Jay that the latter
might take the opportunity of looking at the report on the desk whilst
LI went to an outer office to see to other business). Jay stated that he
had been very pleased to see that the message vas couched in firm terms,
vas precisely along the lines which LI said it was and undoubtedly gave
him (Jay) a great deal of face. Although LI was well aware of Jay's
"red-faced mission" in Hong Kong it vas important to Jay that it should
be specifically spelt out: he felt that he had gained a great deal of
face in LI's eyes.
Jay
4.
In view of the message concerning the S.C.I.V. land, I took the
opportunity of clarifying one or two points. confirmed that the object
of the exercise to date, although spread out over many months, vas
simply to confirm that firstly, the H.K.G. would be prepared to bay back
the land at Tsuen Wan and secondly, to establish the approximate price
which the H.I.G. would offer for such land. Jay Further confirmed that
before any official approach vere made on this matter action will
have
AS
n taken to ensure that the person/organisation making such an approach
would have a clear title to the land without encumbrances. I enquired as
to whether any definite decision had been made as to who would be making
the approach: Jay said that as yet no decision had been made but that he
personally favoured" operating through the Hongkong & Shanghai Bank.
agreed earlier at a meeting with the Attorney General, I then informed
Jay that Government had received a letter from Deacons, the solicitors
acting on behalf of "the Board of Directors" of the 8.C.I.V. and
enquiring whether the terms concerning the conversion of the land, läst
mentioned in 1966, vere still acceptable to Goverment. I suggested to
Jay that it was a little odd that such a request should have come at
this time and might perhaps indicate a leak to the effect that the
possible sale of the S.C.I.V. land was being considered.
categorically but suggested that at most it was a coincidence, that
these people, noting the very high price being offered for industrial
land, vere wondering whether they could make some quick profits. Jay
then proceeded to talk at some length about the 8.C.I.V. problem: he
said that TSANG (the main shareholder in S.C.I.V.) was "an absolute
crook" and a very tricky customer *he way be trying to do something but
there is nothing that be can do without the Bank of China approval". Jay
said that it would be surprising to him if all the director of the
S.C.I.V. had made the approach through Deacons as several of them vere
the nominees of the Bank of China and it was inconceivable that they
would act without first clearing their position with hia or LI Cho-chih.
I asked whether it was possible that the directors vere thinking of
attempting to obtain sufficient financial support to pay off the loans
etc. to the Bank of China in order to be able to sell the land at a
later date. Jay thought
appr
SECRET
/contd.
SECRE
3.
this quite impossible: the Bank of China estimated that at the present
moment the S.C.I.V. owed them in loan capital and interest something
like HK$11.28 million.
5.
Other Hatters discussed:-
(1) Sand Monopoly Jay said that he had now had the opportunity of
speaking to both the Bank of China and China Resources concerning Mr.
Henry FOX's claim that China Resources had put the price of sand up from
$1.50 to $2.00 per cubic yard, Jay said that it was now quite clear that
the original proposal had come from FOK himself ́and that the China
Resources certainly in these circumstances would not expect to get the
full 50%
-
increase. It was Jay's opinion that the H.I.G, should now reply to FOX
saying that they had noted the contents of his letter but that they were
not prepared to pay him any increase in the price of sand i.e. that FOI
should be expected to absorb the alleged increase into his own costings.
During Jay's discussions with the Bank of China and China Resources the
question of a contractor arose. Both organisations thought that it would
be advisable for the H.K.G. to obtain the services of another