CO129-568-4 Estimates 1939 8-10-1938 - 6-7-1939 — Page 20

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be to establish herself firmly in Shanghai and the

Yangtse Valley and the Northern part of China. The

invasion of South China must, it seems to me, be

regarded as very much of a temporary war measure for

the purpose of crippling the military resistance of

the Chinese, Government. If that is so, Hong Kong's

beaufit from the

Na

future will esmate diversion to her the large

part of the foreign non-Japanese trade with China,

with

and all the financial and business activity which

the Colony's future

that means/can only be a more solid one than it has

been in the past. It seems to me that the Governor

clearly favours some such view as this.

Apart from the surplus reserve of $11 million

which the Governor refers to in paragraph 8 of his

despatch of 21st November (No. 4), it would, no

doubt, in an emergency be possible temporarily at any

rate, to draw upon the currency reserve which has

accumulated in the last two or three years since the

new currency régime was adopted. That would clearly

be an emergency measure, but I mention it in order

in any event

to show that/we need not apprehend a position arising

in which Hong Kong would find itself a grant-aided

Colony in the near future.

The Governor clearly appreciates the need

to keep a close watch on revenue developments

throughout the coming year, and we are already obtaining

from him a weekly air mail appreciation of the

well as

financial position as nanbare of the general Mude

economic and social tendencies which show themselves.

In case of a marked deterioration in any respect,

we have asked to be informed by telegram, and I

think, therefore, we can rely on being promptly

posted without needing on this occasion to call for

any special report.

As

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