CO129-618-5 University of Hong Kong- proposed grant for rebuilding and development 28-3-1949 - 27-9-1949 — Page 6

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provided by H.M.G. would be invested in the loan and used now on rehabilitation (to meet Item 5-4 of the Schedule of Expenditure under the Rehabilitation loon-grant to Hong Kong University), while the

Hong Kong Government would provide 8347,300 a year for 15 years towards recurrent development expenditure. We do not know whether we could persuade the Treasury that that procedure was in accordance with the Chancellor of the Exchequer's expressed wish that the grant should be used for the rehabilitation and development of the University.

4. Even if it were agreed that it does not conflict in any way with the Chancellor's wish, there remains the big difficulty discussed in peragraph 12 of your despatch thut at the end of the fifteen years the University's income would suddenly drop by £347,300 a year, and an alternative source of income would have to be found if the additional staff were to be retained. If therefore the £250,000 is to be invested by the University so that the income can be used to finance annual development expenditure it would seem to be wiser to invest in such a manner as to produce a continuing, although admittedly smaller, income which would not cosse at the end of fifteen years.

5. All these uncertainties add up in our minds to a doubt whether the University is not planning too boldly. The new or widened studies which it is proposed to introduce, as they are outlined in your paragraph 11, are all undoubtedly desirable, and we recognise the vision which has gone to their planning. But planning must be related to possibilities, and, putting possibilities at their worst, the prospect must be faced that if no C.D. & V. assistance is ultimately

/ available