CO537-4999 — Page 235

Sir,

ANNEX II

COPY OF HONG KONG DESPATCH NO. 16 OF 3RD MAY, 1949

I have the honour to refer to the recent developments in the Chinese civil war and to address you on the subject of the effect of those developments on public opinion and public morale in this territory.

2. Since the beginning, last autumn, of the Chinese Communist armies' sweeping successes, there has been a growing though for the most part latent uneasiness, both in European and in Chinese circles here, about the future of this Colony.. It is generally felt that if the whole of China is brought under Communist control then it will be only a matter of time before some kind of rendition campaign is started.

3. Bearing this background in mind it may be readily under- stood that such official statements as have been made in the United Kingdom over the last few months have done little to reassure the people here. It has been possible in each case, as I have pointed out in earlier communications, to detect a reluctance to make a blunt and forthright statement that Hong Kong will remain British and will, if necessary,

be held against all comers. Public attention and speculation has therefore centred not so much on what has been said as on the significance of what appears to have been purposely left unsaid.

4. Before proceeding to describe the effect on public morale of the very recent military developments in the Yangtze valley, I should perhaps fill in some details of the state of mind on which these developments have been superimposed. The reaction to the appeal launched at the end of February for recruits for the Hong Kong Defence Force is a typical instance: the response to this appeal has so far been disappointing, a fact which I attribute primarily to a wide- spread doubt whether it is the policy of His Majesty's Government to take the measures necessary for the defence of the Colony in the circumstances likely to arise, and only secondarily to revulsion from the discomfort and inconvenience of voluntary military service so soon after World War II. The events of 1941, when the Hong Kong Volunteer Defence Force suffered severe casualties in a token defence under- taken with an inadequate regular garrison, are freely recalled.

5.

My attention had also been drawn, before the crossing of the Yangtze by the Chinese Communist forces, to many other factors indicating that public morale left much to be desired: for example, dealing in stocks and shares on the Hong Kong Stock Exchange showed a steady shrinkage during March and the first half of April; morbid conclusions were being drawn from the delay in the announcement of the Deep Bay airfield project; those of all races whose fortunes, families and futures are bound up with the future of the Colony made no effort to conceal their uncertainty whether the approaching Communist menace would or could be effectively resisted.

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