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5. Li said further that the Chinese did not want to institute formal talks in either Peking or London because they did not wish to appear to be seeking a solution. If the troubles in Hong Kong continued na would suffer economically, but Britain would suffer not only economically but politically. The Chinese were therefore unwilling to give the impression of a weakening in their attitude by an approach in London or Peking but they were prepared to see what could be achieved through an approach by Jay in Hong Kong. An approach by e.g. the Head of NCNA here was not favoured because it made the manoeuvre much too official from the start. Chou had said that until there seemed some real prospect that Jay's approach would lead to a successful conclusion he should indicate that he was acting on his own initiative. In the meantime, in Peking, the Chinese Government would give the impression that they were not feeling the need for any settlement. If, however, the Hong Kong Government seemed prepared to respond and a settlement seemed a real possibility, the Chinese would provide Jay with whatever indication might be necessary to satisfy the Hong Kong Government that he had their authority to speak on their behalf.
6. We are inclined to believe the substance of this account. It is established that Li did in fact call on Jay. Jay has been a good source of information during the disturbances; and a man of substance in Hong Kong who would stand to lose a good deal if he were fabricating or passing false information to us. He has also given the gist of all this to the Chairman of the Hong Kong and Shanghai Bank for whom in the past he has on several occasions conducted fruitful negotiations with the CPG and who believes in his bona fides in making the present approach.
Foreign Office please pass Immediate Peking 108.
Sir D. Trench
[Repeated as requested]
[Copies sent to Cabinet Office for
Sir Burke Trend and Secretary J.I.C.]
FILES
C.O. P.S.
P.S. to Lord Shepherd
Head of I. & G. Dept.
Head of H.K. Dept.
Mr. Hall
Mr. Robb
Head of Political Affairs Dept.
F.O. P.S.
QQQQQ
Sir D. Allen
Sir D. Greenhill
Mr. Wilkinson
Head of F.E.D,
Head of P.U.S.D. DIS MOD
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