CO537-3707 — Page 140

INWARD TELEGRAM

ALLTIDED COPY ADEBORENAR YEODETILOR) THE COLONIES

Cypher (0.T.P.)

PRO GONG KONG (31» A. Grantham)

271

3. 276 July 3. 27th

July, 3940.

!

08.40 hra.

INMEDIAT

No. 723 Secret.

Addressed to 9. of S.

Repeated to British Ambassador, Nanking, No.90.

(262)

(267)

Office.

1.

Your telegram No.759.

Eritish Ambassador's telegram No.561 to the Fore i ga

Kowloon City.

I have discussed vith the British Ambassador and at his request I elaborated reasons why I consider arbitration, even if unfavourable, better than Consulate compound.

2. My main reason is that responsible Hong Kong Chinese opinion is interes ted in this as a teat case of the policy of H.. Government on the question of future of Hong Kong. They are, and want to continue to be, on our side but if they get the impression that H.. Government is not (repeat not) serious about retaining Hong Kong at a whole, they might trim their sails.

3. They consider H.M. Coverinent and Hong Kong Government are in the right over the Kowloon City dispute. If therefore we hand over Kabloon City to the Chinese for 100 as Consulate, they will regard this as a gratuitous sign of weakness and an indication that cur policy vis-a-vis Chinese on the question of Hong Kong will be weak, Reference to International. Court of Korleon City moreover would not (repeat not) be interpreted as sign of weakness on our part.

As to whether Kowloon City as an enclave of Chineas territory (12) (group omitted tarbitration) went against uc), would be leag or more inconvenient to us than Consulate Compound with diplomatic privileges, it is impossible to say with certain by. On belence, I ireline to the view that the Consulate would be more objectionable since we should know less precisely where we stood. and where there is any uzeertainty Chinese would continually exploit the position to our disadvantages

M

th

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