CONFIDENTIAL
4.
We shall continue to work for the restoration of normal
working relations between Hong Kong and China. An agreement
was reached with the local Chinese border authorities at the end
of November. The Chinese have claimed the agreement as a total
"victory" for them, but in fact it is generally regarded in
Hong Kong and elsewhere as an indication that despite
"confrontation" the Chinese are prepared to negotiate with the
Hong Kong Government on practical matters, 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 can take place.
5. 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 the Hong Kong Government have the means to
resist such a campaign.
6. The Communists have tried to exploit alleged inadequacies in
the social welfare and labour policies of the Hong Kong Government.
The Government have faced unique problems in that more than a
million refugees have entered the Colony since the Communists
took power in China. The Government's project for the
resettlement of squatters and refugees in large estates is
probably the greatest single re-housing operation that has taken
place in Asia since the war. A million people have been
resettled since the programme started in 1954; this represents
more than a quarter of the entire population of the Colony.
But, given the scale of the problems posed by the influx of
refugees and by the rapidity of economic development, there were
bound to be instances of hardship and social injustice. The
/ Hong Kong
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CONFIDENTIAL
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