CO537-4802 — Page 50

5.

No Communist activities to report.

Communist

penetrated schools are being watched. Strong evidence Communist influence among youth.

6,

Recruiting to Defence Force still not encouraging. Morale of police force remains good.

7.

Food and fuel stocks satisfactory. Food prices however risen average of 30% over last two months. Water supply satisfactory. Labour quiet; more wage demands expected.

8.

Deep Bay Field scheme occasioned enquiries by Chinese Ministry of Foreign Affairs in Canton, about scope of project. Some (corrupt groups requests, series of) petitions and some organised opposition may be expected.

9.

Telegraph communications with Tientsin restored 24th May and to other large cities in "liberated" China. Director of Posts in Tientsin has asked Postmaster General here to agree to exchanges of malls, thees to be carried by British ships. Trade between Hong Kong and North China sluggish; initial enthusiasm has waned owing to difficulties in trading on barter basis.

10.

Macao quiet. Garrison recently reinforced by three battalions commanded by officer formerly Commissioner of Police. Macao Colony greatly (Tappreciated) în relation to Hong Kong dollar.

11.

Attempt to estimate when threat to Colony might materialise will be made in the next appreciation.

Copies sent to:-

Lt. Col. J.K. Gardiner,

Joint Intelligence Committee

Ministry of Defence.

Foreign Office

#

售鳖

14

Mr. P.D. Coates. Mr. P.W. Scarlett.

Mr. M.E. Dening.

Page 50Page 51