CO537-2187 — Page 25

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main issue, I would recommend that immediate action should be confined to the suggestion at B/ in my minute of the 19th February, that is the preparation of a draft Cabinet paper.

The position regarding the loan is that the necessary legislation is being or has already been passed and it is hoped to raise a certain amount of the money locally. In the meantime, the Crown Agents have agreed to advance money from the J.C.F. We were advised last year that Hong Kong could not raise money in the City on the same terms as other Colonies and when the Crown Agents wish to retire the advances from the J.C.F., or when the need arises for further substantial sums, e.g. for an airport, we shall have to try to raise the money here on the best terms we can get. The question of Hong Kong's future will no doubt be raised and pressed in this connection.

As to the other point raised in your minute,

I think that the Governor should be informed of the present position, unless in view of Sir Mark Young's forthcoming departure, it would be better to pass the information on to Mr. MacDougall, in which case I will write to him.

Turning to Nos.98 and 99 on this file,

I think that we must let both the Governor and the Foreign Office have copies of the aide memoire which was left by the China Association at No.5 on 54377/46, and explain that when the deputation saw the Secretary of State, they put the case verbally on the lines set out in the aide memoire, and that the Secretary of State dealt with all the points raised without being too precise in regard to Hong Kong's future (see Mr. Creech Jones' minute dated 13th December on 54377/46). I submit a draft telegram to the Governor on these lines. The file should be recirculated to me to write to the Foreign xOffice, after the telegram has gone.

H. Magle

20.3.47.

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I agree that There is no point for the moment in replying 97. I have discured with I Mayle as regands other action vapee that we in' be preficering

a drap paper for submission

The right moment.

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15 The Cabinet at

It will be as well to be

thore explicit in the draft hater as to the hatière

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