CO537-4849 — Page 18

To:

Secretariat File: 9/3571/48s.

SAVIN

Secretary of State for

the Colonies.

2 3 APR 1949

No.65.

G R A M.

SECRET.

10.

(R) British Embassy, NANKING (No.H/)

Consulate-General, SHANGHAI

(No. 16)

Comm.-Gen., S.E.A., (No. So.) British Embassy, BANGKOK (No. 6Y) Con.-Gen., CANTON (No. 24)

High Comm., KUALA LUMPUR (No. 68 British Legation, MANILA (No. 09.) G.0.C., Hong Kong.

Copy to D.S.0. (separately).

Hong Kong Political Summary for March 1949.

A perceptible feeling of uneasiness grew beneath the sur- face in Hong Kong during March, as negotiations for the opening of peace talks in China between the Communists and the Nationalists continued in an atmosphere of constant vituperation by the Commun- ists. This uneasiness was reflected in the Stock Market, which showed marked deterioration. The Chinese in Hong Kong appear apathetic and resigned to eventual Communist domination over the whole of China. The implications of this for Hong Kong are not favourably regarded. The average Chinese is carefully trimming his sails. This is especially evident in respect of the Chinese press, and merchants are also taking steps to reinsure themselves. Those with K.M.T. background are now quietly trying to disavow their former connections.

2.

The first direct mention of Hong Kong by the Chine se Communists came in a broadcast on March 24th of a statement issued in Peking over the signature of Marshal Li Chai-sum and twelve other "democrats", almost all of whom had in the post-war years enjoyed the asylum and freedom of Hong Kong. This statement accused Britain of persecuting overseas Chinese in Malaya and Hong Kong.

It specifically accused the British in Hong Kong of suppressing demo- cratic liberties, and it quoted the searching of private houses and closing the Tat Tak College as oxamples. Lolaya was specifically accused of brutalities against overseas Chinese. It would appear that the Chinese Communists are not yet ready to turn the full blast of their propaganda on Hong Kong. It is interesting that they chose to make this first attack through the indirect channel of fellow travelling stooge "democrats", who should be grateful to Hong Kong for the asylum which they enjoyed.

3. With the re-opening of frequent shipping connections with Tientsin an increasing number of Chinese "democratic" personages are leaving for North China. They include many Left-wing intellec- tuals and publicists who had congregated in Hong Kong during the past few years. Among them were Mrs. Herman LIU ( or LIAO Chung- kai), CHOU Hsin-min, (Secretary-General of the China Democratic League and former professor at Tat Tak), Mrs. LI Chai-sum, LIU Ya Tzu, Professor MA Yin-chu (a noted economist), and many others. Members of the C.D.L. and others of the Third Party Group are prominent among the departures. The C.D.L. formally moved its headquarters to Peking on March 16th. They had been in Hong Kong since October 1947 after the Party was outlawed in China.

4.

During March there was a very marked increase in the intensity and violence of Communist propaganda in the pro-Communist press in the Colony. The three main Left-wing newspapers, the Hwa Shiang Pao, Wen Wei Pao and the Ta Kung Pao, have all been toeing the Party line with complete correctness. As regards China they have consistently impugned the sincerity of LI Tsung-jen's peace endeavours, and their articles, many of which come from the Commun- ist New China News Agency, are marked by increasing use of invective and intemperance. The same decadence of language is shown in the various Communist magazines in the Colony, including the English-