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4.

The argument about the rights of the Chinese Government to intervene in their capacity of lessors or, alternatively, the limited jurisdictional powers of the leanee, has also been introduced of late by the Chinese into the controversy arising from the recent expulsion orders against the squatters in the old city of Kowloon. Latually on this occasion the Ministry of Foreign Affairs, realizing perhaps the ruthless canner in which even the

ost irresponsible local authorities in China are permitted to ride rough-shod over property rights on the pretext of municipal development (the chosen victims in one or two notorious casce being British concerns), preferred not to prees thie contection but rather to take the line thrt, while they were prepared to admit in principle the justification or canitary grounds of such administrative monauroe in the interests of the community, they were naturally concerned to ensure that the poor and generally innocent Chinese pationals affceted were generously cared for.

5.

It is in fact evident that the Ministry of Foreign Affairs is anxi us at the moment to avoid the risk of any contentious issue relating to Hong Kong becoming the subject of undue publicity and propagandist agitation. This bas been further demonstrated, I thick, by the discreet wonner in which the Ministry has håndled the case mentioned in the preceding paragraph. Moreover the Administrative Vice-Minister for Foreign Affairs, Dr. George Yah, definitely Etated to B.A. Minister, whom he had summoned to the Ministry to discuss this particular item on 23rd December, that the Ministry of Foreign Affaire did not wish to be involved in any disputs relating to liọng Kong, including the Leased Territory, likely to inflame public opinion is China which regarded anything to do with Hong Long as a "hang over of the unequal treaties". That being the case, Dr. Yeh expresaed the hope that the Government of Hong Kong would be reallatie enough to avoid giving rise to incidente capable of becoming bones of contention. In this connection Dr. Yeh was at pairs to explain that the Chinese Government after all bad over-riding sovereign rights, at any rate in respect of the Lensed Territory, and was therefore bound to take an active interest in the welfare of the Chinese population, ever, he implied, where the action of the Hong Kong authori- tien wao primarily administrative.

6.

There is therefore reason to assume that the Chinese Government are not likely to prese their claim to hold elections in areas under the jurisdiction of the long Kong Government any more than to create difficulties with regard to the Kowloon squatters. At the same time the present state of truce cannot be expected to continue indefinitely, and the Chinese Government are sure, sooner or later, to renew the attack based upon the claim of sovereign rights which they have now placed on formal record. I am therefore of the opinion that we should in turn now reserve our position by officially stating our rejection of this unilateral doctrice, and subject to your approval i would propose to do so in a formal comurication as a plain statement of fact without any supporting argument. I should

nonstbeless

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