CO537-4999 — Page 236

6. It is in the light of the background described above that I must ask you to take note of the public reaction here to the crossing of the Yangtze, the fall of Nanking, and the forthcoming fall of Shanghai. These developments were not difficult to anticipate indeed they were no doubt militarily inevitable - but it is perhaps understandable that they should have had a profound effect on public opinion here and that the attack on H.M.S. "Amethyst" should have gravely aggravated the misgivings already entertained by all communities.

7. Informed and moderate unofficial opinion here on the present and prospective political and military development in China may be summarised as follows:

If there was any doubt that the Chinese Communist Party would shortly control at least all the maritime provinces of China, it has now been resolved; the thesis that the Chinese Communist Party stands mainly for comparatively mild agrarian reform and that the keynote of its relations with Western powers is likely to be opportunism, has at last been effectively discredited; Chinese Communist regular forces may be expected to reach the border of this territory between September, 1949 and February 1950; force must be the basis of dealings with Communists in the Far East, just as in Eastern Europe, and if we are to hold this Colony we must be in a position to array a military force on this side of the Hong Kong-China border comparable to that which can be deployed by the Chinese Communists on the other side: there is no evidence that His Majesty's Government is determined to make this force available.

8. Public opinion appears to be divided on the question whether the Colony is dcfensible against a concerted attack by regular Chinese Communist forces: many people believe that such an attack would not be launched if British forces comparable in strength to those which could be deployed against the Colony were available, together with air forces sufficient to secure and maintain local air superiority; all agree that with the present apparent reluctance to make a firm statement about the future, and with the present exiguous military garrison, the arrival of Communist forces on the border would produce an internal situation of extreme political instability which might well result in the Government's position being made untenable without the use of military force at all..

9. I have at my disposal no effective means of combatting the apathy engendered by the train of thought described in the preceding paragraphs. The purpose of this despatch is to inform you that in my considered view the situation here might at any time deteriorate seriously and rapidly unless early measures are taken to reassure the people of this territory.

10. It may well be that before you receive this despatch a suitable opportunity may already have arisen in the House of Commons or elsewhere and an unequivocal statement on the future of this Colony may have been made: if not it would have a most heartening effect on public opinion here if such a statement could be made at a very early date.

-5m