TNAG-0032-FCO40-68-Relations-with-China-1968 — Page 38

CONFIDENTIAL

now

important/after the disruption in her exports caused by the

Cultural Revolution and with the prospect of a poor harvest

Economically, China has a vested interest in

this year.

a considerable degree of stability in Hong Kong.

8. It is therefore unrealistic to argue that no kind

Nevertheless it may

of dialogue is possible with the Chinese.

still be said that the Chinese terms for a settlement would be

extravagant and unacceptable, that while eschewing violence

they are bent on achieving a Macao-like situation in Hong Kong

by means of quict pressure on British subjects in China and

that they will not settle for less. Although it is impossible

to be quite sure of Chinese objectives, I greatly doubt whether

this is the case. Chinese behaviour points rather to the need

to emerge from the struggle with something to their credit, rather

than to the theory that they are conducting all-out offensive

for a success along the lines of Macao. The abandonment of

violence, the reduction of financial support for strikers and the concentration on the question of prisoners all suggest

an essentially defensive tactic. Their need to rebuild a

following in Hong Kong and their current united-front tactics

point to the same conclusion. We have to bear in mind the

immense loss of face the Chinese have already suffered in having to call off the campaign of violence and admit that the struggle in Hong Kong cannot be won in the immediate future.

CONFIDENTIAL

/Their