CO537-(1262-1649) — Page 949

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NOTE

7. The following appear to be the factors to be taken into consideration in formulating the line to be taken in the event of negotiations with the Chinese whether on our own initiative or on that of the Chinese.

(a)

Chinese goodwill and co-operation are necossary for the re-establishment of our position in China, in the Far East generally, and in Malaya in particular, whereas China has no essential need in which she is dependent on us.

(b) China is in a position at short notice to paralyse the entrepot trade of Hong Kong, on which the Colony depends.

(c) There is no distinction in the Chinese

mind between the ceded portion of the Colony and the leased area (the New Territories).

China wants the return

of the whole Colony.

(d) China would not expect an immediate

transfer of Hong Kong to Chinese control and would probably be content witn sovereignty, leaving administration and control in our hands very much as it is at present.

(e)

There is, however a proposal to

site the new aired in the coded area of the

To under consideration. The Atina Собаль

$10,000,000

(f)

The insecurity of our present tenure of the leased territory for new projects involving substantial expenditure (e.g. the airfield project estimated to cost

4,000,000).~

The present agreed policy with regard to the defence of Hong Kong is briefly that, since the Colony cannot be defended against attack by a major power in occupation of the Chinese mainland, Hong Kong should be regarded as an undefended port so far as fixed defences are concerned, but that plane and preparations should be made to enable the necessary mobile defences to be introduced at short notice should we require to use Hong Kong as an operational Naval and Air base in the event of a war in the Pacific, during which China was in friendly hands. The present and future garrison of Hong Kong, augmented by reinforcements from South East Asia, is considered strong enough to repel small scale aggression by a hostile Chinese war lord.

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