CO129-571-16 New Territories 13-4-1938 - 12-12-1938 — Page 27

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Sir G. Northcote first revived the

question of purchasing from the Chinese Government

an extension of the period of our occupation of

the New Territories in his letter to the late

Secretary of State of the 13th April. The two

basic arguments were:-

(1) that China, in present circumstances,

is in urgent need of financial

assistance;

and

(2) that the New Territories are essentially

necessary to Hong Kong from the economic

as well as the defence point of view.

We consulted the Far East Department of

the Foreign Office, and their reply was to the

effect that assuming it is our intention to retain

Hong Kong and to defend it if necessary against

Japan in the future, it would be worth while to pay

a reasonable price now for the acquisition of more

extensive rights in the New Territories (which are

at present "leased" to us for 99 years from 1898).

They have warned us:

(1)

(2)

of political risks in giving financial

assistance to China, in view of Japan's

attitude;

the risk of a Japanese-sponsored puppet

government of China establishing itself

in time and repudiating any such

engagement entered into by its

predecessor;

(3)