CO537-3715 — Page 71

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In view of the violence of the denunciations of Chiang Kai Shek a letter was sent by this Government to

Marshal Li warning him of his previous verbal undertakings to refrain from activities which would harm the friendly relations between Hong Kong and China. In a written reply, the Marshal said that the policy of his committee is change by persuation and not by force. There are strong rumours that Feng Yu-Hsiang, the "Christian General", at present in the U.S.A., may come to Hong Kong and join this group.

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The Chira Democratic League, which has transferred its headquarters to Hong Kong, has also been holding what it terms its "Third Plenary Session" under the Chairmanship of Shen Chen-Ju. It appears that nearly 30 out of the 44 members of the Central Committee of the League have been present. A public statement was released on January 5th, in which the C.D.L. declared its continued existence in defiance of the Nanking Outlaw Order. Meetings are still continuing, but there seem to be signs of a rift between those elements who favour close co-operation with the Chinese Communist Farty, and those who do not.

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Hong kong has in recent weeks given two further examples of its sincere desire to co-operate with China. With effect from January 5th, further provisions of the Financial Agreement with China are being enforced. include the institution of a Certificate of Origin System for certain specified produce from China; restrictions on the amount of Chinese National currency which can be carried by travellers; legislation to control the activities of banks in Hong Kong; and the stamping of manifests of ships leavings Hong Kong for China. On the 13th January, the Hong Kong-China Customs Agreement was announced. Agreement gives the Chinese Maritime Customs permission to exercise certain functions in Hong Kong, and it represents a considerable waiver of sovereignty on the part of this Government. The above gestures by Hong Kong, which are designed to help China cope with smuggling and currency problems during her present difficulties contrast with the chauvinistic attitude of certain sections of Chinese officialdom in connection with the Kowloon City question, and it is evident that this nationalistic fervour will be exploited against Hong Kong even though Hong Kong makes the most far-reaching gestures to co-operate with China.

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