CO537-4802 — Page 49

INWARD TELEGRAM

TO THE SECRETARY OF STATE FOR THE COLONIES

Cypher (0.T.F.)

Drey. on 94001/35/49

FROM HONG KONG (Sir A. Grantham)

D. 27th May, 1949. R. 27th

09.25 hrs.

5

PRIORITY

No. 514 Secret,

Addressed to S. of S. Repeated

**

"Commissioner General Singapore

No. 169

"Consul General Canton by savingram.

Hong Kong Intelligence Appreciation for week

ended 25th May.

Slight improvement in public morale as result of Communist delay in taking Shanghai and slowing down of Communist advance into South China. Reports of economic difficulties facing the Communist regime in North China have had reassuring effect. Many believe this will make the Communists adopt more reasonable policy when they (?reach omitted) Hong Kong border. Public confidence is more undermined by continued depreciation of the Hong Kong dollar following the ban on gold dealing and consequent sharp rise in the coat of living see paragraph 7 below. This, together with ill-informed publicity about Hong Kong by U.K. and U.S. Press has had adverse effect.

26

New Societies Ordinance banning political parties with foreign affiliations introduced in the Legislative Council 18th May has had fair recaption by Chinese (and omitted) Malays (?punctuation omitted) K.M.T. are worried; the Commanists and so called

democratic group show signs of irritation »

3.

Recent military developments in China bave not had appreciable effect on the border situation, Communist guerilla seizure of seven large towns in East River and North Kuangtung districts may be first step in the advance towards the Hong Kong frontier. Chinese Police constable killed and arms (?group omitted) in successful bandit raid on the border police post 17th May. Chinese Army force across the frontier, as result of information from Hong Kong police, successfully attacked bandit hide-out few days later, killing number and recapturing arms seized in the above and in ambush of Hong Kong police patrol few weeks ago.

440

Influx of refugees from Shanghai decreased as the Communists closed in on the city but off-set by large influx from Canton as a result of order by Kuantung Governor that people should leave Canton and disperse to the country area. Net influx since 30th November, 1948 is 111,721, of which week ended 22nd May (group omittad -? accounted) for 12,034.

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