CO537-4849 — Page 11

7.

Communist efforts to penetrate further in education, which is in line with their traditional policy of catching them young, continue. Several middle schools are being carefully watched for suspected Communist activi- ties and a number of Communist-penetrated Workers' Schools, set-up by the Society for the Advancement of Workers' Education, a body established in 1946 by a group of Left- wing uniors, are now being taken over by the Education Department, which will more effectively control them. has led to inspired criticism in the Left-wing press, which protests. that the action of the Education Department is

urdemocratic". The Education Department has also in the last few weeks received a number of applications to open f free private night schools, which are believed to be nothing more than projects to further Communist propaganda and teaching.

This

8.

The labour situation has been quiet. May Day was celebrated by a Left-wing meeting at which 33 unions were

The meeting

represented and speeches were made stressing that the workers

to the

held by the right-wing Association of Trade Unions on the other hand was characterised by a speech in which workers were urged to assist the Government to maintain order. There were no strikes of any significance. In view of the rise in food prices consequent upon the local depreciation of the Hong Kong dollar there have been demands from labour for an increase in high cost of living allowance. This is being considered by the Labour Office and so far all is quiet.

9.

Conditions along the Hong Kong/China border remain disturbed. To the north of Mirs Bay the Communist East River guerillas are active, and in the next month they may well extend their control over some of the main towns in Po On district which is contiguous to the border. The Kowloon-Canton Railway however has so far not been inter- rupted. On 6th May two European Police Officers and a Chinese Detective Corporal were murdered on a Police launch by two members of the crew aided by outside accomplices. The boat was run into Chinese territory and arms stolen. Investigations on this case are still proceeding. The Chinese troops across the border acting on information supplied by the Hong Kong Police and spurred by the hope of a promised reward, surrounded a village in the hills across the border where a bandit gang was hiding and killed or captured the entire gang, who were known to have been responsible for ambushing a Hong Kong Police patrol, in which one Police Constable was killed and attacking a Police frontier post, which also resulted in a death. Arms captured in these two recent incidents were recovered as a result of this good piece of co-operation by Chine se forces. As a precaution against unrest and the possible influx of refugees a curfew has been instituted in a belt four or five miles deep along the border and a system of registration is in force for the villages in that area. Wiring of certain stretches of the frontier has also begun.

10.

As stated in paragraph 1 the month of May was a disturbed one for the financial market in Hong Kong as a result of the gold bar, which came under much criticism from the mercantile community. The H.K. was quoted in the open market at over $8 to the U.S.p. compared with a previous quotation of just over $5 a month or so previously. Besides its effect or public confidence, the effect on prices was not inconsiderable. Trade figures, despite the virtual closing of Sharighai under Communist attack, we re slightly better in May than in the previous month. Shipping with Tientsin continues, and it is evident that certain

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