TNAG-0030-FCO40-66-Relations-with-China-1968 — Page 128

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PEKING TO FOREIGN OFFICE

elno 257

CONFIDENTIAL

Coton HWA 21/11 edon

30 March 1968

418

CONFIDENTIAL

Addressed to Foreign Office telegram No. 257 of 30 March. Repeated for information to Hong Kong.

92

HWA21/11/78

Hong Kong telegrams Nos. 365 and 369 to you.

I agree that economic pressure seems a promising field for investigation. Bank of China Manager's reaction to Blue Funnel action as reported in paragraph 2 of second telegram under reference shows that there are some fields at least where Chinese are sensitive to pressure. Many forms of pressure would, however, simply rebound on us and we should have to examine implications of each carefully.

2. An embargo, total or partial on British exports to China might not affect them much since many United Kingdom goods could be supplied by other industrialised countries. The Chinese appear to be placing few orders for industrial cargo in United Kingdom or elsewhere at present.

3. An embargo on imports from China might worry them more but I doubt whether it would affect them vitally. If quantity of Chinese goods available for export in 1968 does not return to pre-1967 level they might find it easier to divert some goods to other customers.

4. We must also bear in mind likelihood that Chinese might react to an industrial trade embargo by "freezing" exit visas of British technicians, and possibly businessmen, who were in China at the time.

5. I have already remarked on China's apparent sensitivity on shipping in paragraph 1 above. Once "Demodocus" is free, it may not be so easy to persuade Blue Funnel (or Glen Line) to suspend sailings to Chinese ports. There is also question of charters. Would it be possible to prevent Chinese chartering British ships? And would they find it easy to charter from other countries.

6. Above are only tentative views and from my position here I cannot make detailed suggestions. But I assume that all possible options are under study and I should be grateful for chance to comment on your conclusions.

7. As regards Hong Kong, I appreciate Governor's point in paragraph 1 of first telegram under reference that Chinese have ways of retaliating against a trade embargo by the Colony. Limitation on trade through Hong Kong would, however, hit Chinese much harder than any embargo by United Kingdom. I suggest urgent study should be made of feasibility and effect of limitations on Chinese exports through Hong Kong and of ways in which effect of any Chinese reaction could be mitigated.

Foreign Office pass Hong Kong 178. Sir D. Hopson

[Repeated as requested]

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