CO537-2187 — Page 197

discuss the line to be taken in the event of the

Chinese seeking the discussions on the New Territories

which were contemplated in 1943.

The need for a reassuring statement has been

pressed very strongly by the Governor of Hong Kong

and in other quarters. The uncertainty is seriously

impeding the rehabilitation and development of Hong

Kong. I am reliably informed that businessmen will not

consider long term projects and that Hong Kong's credit

in the City is certainly not so good as that of other

Colonies. The undertainty is also affecting the

Colony in another way. The Chinese population are,

naturally enough, continually looking over their

shoulders at Nanking, and the Kuomintang, which was

able to establish itself quite firmly in the Colony on retained the surrender of the Japanese and has since

its position, is thus able to increase its influence

over the Chinese population by reason of all this

Made vele uncertainty. This has recently been demonstrated by

that wet ta

the apprehension exhibited by a proportion of the

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E acsûr shop the new

population towards proposals for Constitutiona

advance.

It is in there seem sams, that I feel the

arch!!

I personally feel that, in the interests of the

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Colony and its inhabitants and if we are to make any Alf when the admine laun to feed what progress whatsoever with its rehabilitation and

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development, it is essential that a reassuring statement

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should be made as soon as possible.

The other matter which is dealt with in the paper,

namely, the line we should take in the event of

discussions with the Chinese on the New Territories,

is of some urgency because until we have made up our.

minds whether or not we are going to make continued

control over installations in the New Territories one

of the essential conditions to any premature termination

of the lease, we cannot very well take a decision as to

whether