CONFIDENTIAL
37. On the northem edge of South East Asia, Hong Kong and Taiwan pose special problems in the West's relations with China. The Chinese and British interests in Hong Kong are roughly converse; for the Chinese People's Government, Hong Kong is a part of Mother China to be taken back in due course, but it is also a forward base from which to mount political activities in the outside world and a valuable source of foreign exchange; for Britain it is a listening post to Communist China, an international communications centre and a centre of important commercial activity. Other Western countries also have a considerable interest in Hong Kong as is evidenced by their sizeable diplomatic and commercial representation there.
38. In the short term, the Chinese ideally would like to produce a situation, in which they would control events in a nominally British colony so that activities conducive to their interests could still go on. In the longer term, their aim is to remove this colonial excrescence on the fair face of China and they will continue to regard Hong Kong as an integral part of China. Logically, they should do this only when they consider that their economic strength is such as to enable them to dispense with the economic advantages which they derive from Hong Kong under present arrangements. But logic may not prevail and an earlier takeover bid (before 1997 when the New Territories on the mainland are due to be returned to China) must be counted a distinct possibility.
39. At the moment Taiwan is also for the mainland Chinese national territory but
falls in the category to be regained as soon as possible. The U.S. presence and the considerable strength of the Chinese Nationalist forces are a sufficient deterrent to precipitate action. But to what extent could the mainland Chinese profit from any instability that followed the death of Chiang-kai-Shek (now 80)? Would his successor regime continue to warrant the support of American public opinion? *Or might a successor not either be wooed into "autonomous province" status by Peking or even voluntarily seek it (if he thought he could avoid the experience of Tibet)? Or will a switch in U.S. policy lead to withdrawal of their support and possibly hasten a rapprochement ? The idea of "two Chinas" or "one China, one Taiwan" seems unacceptable everywhere at present, but could this change?
India and Pakistan
40. The moves in Chinese relations with India and Pakistan have been broadly straightforward; when she was the friend of India in the '50s, Pakistan was her enemy, an active member of SEATO. With the cooling of Sino/Indian relations leading to the war of 1962, Pakistan (disillusioned with SEATO as a source of help against India) became China's friend. Such is the Sino/Indian/Pakistan triangle today.
41. What changes are we likely to see in the '70s? As long as India has the friend- ship of both the Soviet Union and the United States, she is unlikely to feel the need for accommodation with Peking. But although after 1962 India can never trust China again, she might be ready to reach a settlement on the border questions if she could be certain of those with whom she was dealing in Peking. An additional advantage to India in an accommodation with Peking would be the possibility of undermining Chinese support for Pakistan.
42. How does China view India? It is debatable how far she set out in 1962 to "put India in her place" but in Asian power terms that is certainly what she achieved. Will she continue, by noisy threats on the border, to keep India looking north and could she see advantage in repeating the lesson of 1962? How far will she work India for a Peking-orientated Communistina? Or, recognising that in the long-term
she is unlikely to control any united India, will she work for (or sit back and await) a disintegrated India, in some of the successor states of which she might reasonably hope for more effective influence? An Asian Albania in Kerala? The scope, in many directions, for Chinese disruption of stable Indian development is great - encourage-
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