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Hong Kong telegram No.1771 to Commonwealth Office.
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On 20 November, senior Inspector Knight, who was abducted into C.T., at Man Kam To on 14 October, successfully escaped to Hong Kong (telegram No.1746 refers). As a result of negotiations at Shumchun between representatives of the new territories administration and Chinese border officials, which have been going on for some time. on 26 November two police constables, who accidentally entered China on 29 September 1967 were exchanged for five civilians from C.T., who had been arrested in the border area, and the Man Kam To bridge, closed since 15 October was opened. The two constables brought with them their motorcycle, the personal effects of senior Inspector Knight and a sterling gun and ammunition stolen from security forces by Lo Fong villagers during August 1967 (tele gram No. 1769 refers). Details of the understandings reached after ten meetings are in my telegram No.1767.
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The Communist campaign to boost morale and consolidate support within Communist labour circles continued during the week. At several meetings talks have been given by recently discharged prisoners who claim that there is nothing to fear from imprisonment. Arrangements are being made for the payment of December strike pay although, as with the last payment, strikers who have accepted alternative employment may no longer be paid this allowance.
At some Unions attendance at study group meetings will be made a condition for payment, Further disbursements have been made from 'dollar campaign' funds to unemployed members of some Communist Unions who are not strikers. Attendance at Union meetings is increasing and there appears to be an improvement in the morale of rank and file members.
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There is further evidence of increased activity in Communist controlled schools. At an assembly of teachers and students at one major school Government 'oppression' was denounced. Subsequently all lessons were cancelled for the day and students were instructed to write anti-Government essays which were later displayed on the school notice boards. At another school the works of Mao and CPG publication have been adopted as text books during Chinese literature classes. Formal mid-term academic examinations have been cancelled in a number of schools in compliance with Mao's recent directives -for educational reform in China. Students are also being encouraged
to invite members of non-Communist schools to participate in extra curricular political activities.
6. Reports from Hong Kong merchants returning from the Canton mid-Autumn Trade Commodities Fair indicate that business there was severely affected by the devaluation of the Hong Kong dollar. A number of contracts for the purchase of Chinese goods provisionally negotiated prior to devaluation were cancelled by CPG representatives. Following the revaluation of the Hong Kong dollar some CPG agencies continued to "devaluation exchange rates while others added à clause to contracts making provision for payment at the J.M.P./Hong Kong dollar rate prevailing at the time the goods are delivered. Reports indicate, so far, that attendance at the fair is lower than last year and that many merchants have cut short their visit due to uncertainty over exchange rates.
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