TNAG-0031-FCO40-67-Relations-with-China-1968 — Page 116

418

SECRET

590

Cypher/Cat A

PEKING TO FOREIGN OFFICE

Telno 585

SECRET

20 June, 1968

Addressed to Foreign Office telegram No.585 of 20 June, Repeated for information to Hong Kong.

583

My telegram No.558.

Apart from considering diplomatic and publicity campaigns against the Chinese, we should also be giving further thought to the possibility of other types of pressure, in particular economic pressure. Earlier exchanges on this (resting with my telegram No.257) have been inconclusive, and I suggest that we now need to study more urgently and in detail the various possibilities in this field.

2. Hitherto we have been considering only fairly drastic economic measures. I still think it important to make a thorough study of these now, since we may eventually need to use those measures that seem practicable. My immediately following telegram contains a list of questions relating to such measures to which it would be useful to have the answers.

3. I suggest, however, that these measures are not what we need at present stage. Our immediate aim is to try and force the Chinese to soften their attitude on Sino-British relations, and measures such as freezing of funds and closing of banks would be likely to have opposite effect. What we need to discover for our more immediate purposes are ways in which we might indirectly warn the Chinese, that we are not prepared to allow them to get away with their present behaviour indefinitely. Two particular methods occur to me:

4.

(a) Pin Pricks.

►

Could we for example start on introducing slight "administrative signs" into transactions with the Bank of China or with other organisations connected with Chinese trade? These would of course be unexplained but it would not take long for their purpose to become clear to the Chinese. We should of course have to consider carefully 'the likelihood of Chinese making administrative difficulties

for this mission in retaliation;

(b)

Veiled Threats.

An example which occurs to me concerns British import quotas for Chinese goods. Representatives of British companies to whom the Chinese customarily allot a large part of quotas (e.g., Cave of Biddle Sawyer) might be summoned, and requested that because of the persistent bad state of Sino-British relations it might not be possible to maintain these quotas much longer. This would certainly get back to the Chinese before long.

I should be grateful, for your urgent views on this, and for any other suggestions you may have about the ways in which we might gently but firmly bring our point home to the Chinese.

Foreign Office please pass Hong Kong 427.

DEPARTMENTAL DISTRIBUTION

R

589

591

Sir D.Hopson.

[Repeated as requested]

F.0.

F.E.D. P.U.S.D.

NEWS DEPT. A.M.T.D. E.R.D.

C.O. H.K.D.

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