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- 3.
escaped from Chinese custody a few days before
the agreement was concluded. After the escape
the Chinese made no further reference to him.)
4.
The regulation of local problems of this sort
is clearly possible and desirable, but so long as
the present Chinese leadership remains in control
no fruitful negotiations on major matters such as
the future of the territory can take place.
{
5. The economy of Hong Kong has suffered surprisingly
little from the disturbances. The value of domestic
exports for the first nine months of 1967 reached
the highest figure ever recorded for the corresponding
period in any previous year; the number of tourists
has increased; and the port is working normally.
In fact port disruption has been minimal throughout
the disturbances despite communist propaganda reports
to the contrary.
6. We remain convinced that it is not the Chinese
intention to take over Hong Kong by means of a
military attack but rather to try to create a Macao-
type situation. So far they have been quite
unsuccessful but they may eventually hope to do so
by building up their "revolutionary base" and
conducting a long drawn out war of attrition against
the Hong Kong Government.
We feel confident that
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