submitted to the Secretary of state a ammorundum on the economão importance to Hong Kong of the retention of the New Territories on the expiration of the existing lease. He expressed the opinion that the retention of the leased territory is a condition of survival of Hong Kong as a British Colony. Already building essential to the life of Hong Kong has been extended into the New Territories. In addition to residential and industrial buildings, there already exist barracks, civil and military aerodromes, a prison, and important oil installations. Most important of all, Hong Kong depends largely for water supplies on the great reservoirs in the leased area, on which the Colonial Government have spent very considerable suns, In the Governor's opinion, it is essential that the continous urban area extending into the New Territories should remain under a single administrative control, especially in relation to sanitation and the maintenance of order. Apart from the requirements of defence, it would be impossible, without the New Territories, to provide the Colony with air communications or an adequate wirelens service; while, should the lessed islands surrounding the Colony revert to China, it would be practically impossible for ships to reach Hong Kong Harbour without passing through Chinese waters.
41. Sir G. Horthcote understood that at the time (1938) the Chinese Government wore enxious to obtain a loạn for the support of the currency; and he thought that the opportunity might be taken to obtain from the Chinese Government a cession of the leɛsed territories in conɛideration for the grant or such a loan, or in return for a direct cach payment. sa tentative figure, he suggested the sum of £20,000,000; but it seems that this figure was breed rather on China's needs than on any estimation of the value of the cession.
The Governor's proposal was discussed at an inter- departmental conference attended by representative of the Treasury, Colonial, and Foreign offices, and the ervice Depart:ents. The Service representatives were fully agreed a to the importance of retaining the New Territories for the security of the Naval Base; but they did not regard the question, from their point of view, as in any way urgent. In view of the rapility of change in the conditions of warfare, they were not prepared at this early dɛte to consider the hypothetical military situation arising from the prospective loss of the leased territories in 1997. Though they
did not expressly suggest it, they gave the impression that they counted on being able to retain control of the area, if the military situation required it, whatever the political circumstances of the time.
43. Thus it appeared that, if inediate action for the extension of the lense were in contemplation, support mast be sought in examination of the commercial and economic interests involved, rather than in any military considerations. It appeared that the Treasury representatives were, at that time, opposed on general grounds to the grant of financial assistance to the Government of China; and they pointed to the absence of any data for esl mula ting the importance of Hong Kong to British trade, or for esti ting the present value of an extension of the lease of the New Territories. It was clear that the Treasury would be opposed to any acceptance of the Governor's proposals; and they were inclined to suggest that, if any payment to China for an exten: ion or the lease became a matter of practicni politics, Hong Kong should find the money. There was, however, a general doubt whether any agreement for the extension of the lease would be of value at that time, since we could have no confidence that it would not be repudiated by a subsequent government of China, possibly under Japanese influence.
44.
It has been suggested, sumemiter
mbtgebly, that, even
if the leased territories ultimately revert to China, the interesta of liong Kong might be sufficiently safeguarded by working arrangements with the Chinese Dovernment for the control of essential services in the area,
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