CO537-3705 — Page 48

-2-

graversations at the Chinese Ministry of Foreign affairs it soon became clear that as a result of all the agitation the matter had by January 15th become one of "face". Support for this view is lent by a further cote from the Chinese Minister for Foreign Affairs formally demanding:

(1) the withdrawal of the Hong Kong police stationed in

Kowloon City;

(2) the payment by His Majesty's Government of appropriate

compensation for the physical injuries and property losses suffered by the inhabitants in Kowloon City;

(3)

an enquiry to establish who fired and who issued the order to fire in Kowloon City on January 12th and their punishment.

The only written communication which has so far been made to the Chinese on the British aide is contained in a note addressed to the Chinese Ministry of 24th January. In this we specifically decline to go into the jurisdictional issue but, after a full statement of the facts of the case, make it clear that the Hong Kong Government was fully justified in deciding to clear the area and showed every consideration for the squatters in the measures taken to evict them consistent with good administration and the meintenance of law and order. Further, that in His Majesty's Government's opinion it would be quite wrong for the Hong Kong Government on account of the jurisdiction issue, to refrain from taking such administrative measures in respect of Kowloon City as are necessary in the interests of the community as a whole. The note goes on to express regret at the standpoint adopted by the Fo On Magistrate and the local Press, and concludes with the request that steps be taken to bring the fa ts of the case before the Chinese public.

In conversations both in London and Nanking it has been represented to the Chinese from the first that they were deliberately confusing the issue by raising the question of jurisdiction in connexion with a purely administrative matter. We were not prepared to pander to Chinese agitation but all proper steps would be taken to see that no-one with a right to live in Kowloon City was expelled.

3.

(a)

B }

PROTO AL FOR A SETTLEMENT

The Chinese Minister has made the tertive and personal suggestion that since a Customs Agreement has been concluded recently between China and the Government of Hong Kong a possible solution of the Walled City controversy might be reached by allowing the Chinese Maritime Customs to use the site for their offices and customs sheds, This suggestion was put to the Governor who rejected it both on its merits, since the site is judged unsuitable and also because it would be regarded locally as complete surrender to the Chinese claim.

(b) The Chinese Minister for Foreign Affaire has proposed that the site be turned into an unfenced garden in which should be erected one building for the office of the Commission r for Foreig Affairs of the Provinces of Kwangtung and Kwangsi, any necessary police, guards or park-keepers being provided by the Hong Kong Government. The Governor considers this proposal open to even graver objection than that in (a) above.

(c)

The Government of Hong Kong have already announced their

intention/