TNAG-0041-FCO40-77-Future-Sovereignty-of-Hong-Kong-Defence-Review-Working-Party-1967 — Page 17

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Note by the Minister of State for Commonwealth Affairs

HONG KONG

The Committee has before it the interim report, prepared

by officials, on the prospects for withdrawal from Hong Kong

if it were suddenly forced upon us. They have recommended

that a team should be set up to prepare urgent contingency

plans (see paragraph 20 of the report).

2. But in considering the report the Committee may wish

to be aware of some of the possible circumstances which could

lead to such a withdrawal. These are as follows:

(a) The authorities in Hong Kong will restore order, but

there will be continued spasmodic troubles from the local communists (strikes, minor riots, guerilla activities), with China continuing to give only moral support. The danger here is that the internal situatio

in Hong Kong will snowball into a degree of disorder which could be controlled only by using troops. Because of Hong Kong's population density, it is likely that the position would be more difficult than

that in Aden. Such a deterioration would flow from the fact that Hong Kong's economy must grow 6 to 8 per cent annually in order to absorb the young people entering the labour market. There are already signs of a falling-off in investment and in the placing of orders for industry. A prolonged period of troubles could well accelerate this process, and

unemployment could follow. In such an economic

context, local communists would be likely to

increase their support and, consequently, their

activities,

(b) Order is restored in Hong Kong, and the local

communists are defeated, The communists in China

decide that they cannot accept the moral defeat of having failed to create a Macao situation, and

create confrontation along the border. The danger

here would be one of escalation.

(c) Order is restored in Hong Kong but the local

communists continue activities on a limited scale,

The Chinese make an irrational decision to sacrifice

economic benefits, and decide to force us out of

Mone Kon”.