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5.
(a) uo could not in any circumstances accept a Macau-type
compromiso;
(b) if Peking turned on the pressure to a point beyond which it became intolerable, we should have to seek to withdraw from the Colony;
(c) our aim should therefore he
(1) to identify as oarly as possible the point to which
it would become clear to us that there was no altomative to withdreval;
(ii) having done so, to try to nogotiate our withdrawal
in as orderly a nannor as possible;
(iii) to defino what our principal objectives should bo if
wo had to negotiate a withdrawal.
But our discussion in Hong Kong lod us to conclude
(1) that in practice we do not now havo a real option to
withdraw from the Colony: we are in fact trapped there, and have no alternativo but to sweat it out;
(2) if Peking docided to make an all out effort to bring us to our knees in Hong Kong, the chances of our then being able to nogotiate our withdrawal from the Colony with eny sonblance of orderliness or dignity would be virtually nil; we should rather have to face a humiliating capitulation.
The reasoning behind those conclusions is as follows.
6.
Our reading of the situation is that Poking do not at prosent wish to drive us out of Hong Kong, but would profer us to romain for the time being because of Hong Kong's economic value to China (which would at least be dramatically reduced if China were to absorb Hong Kong). Of course, Peking would like to put us in the same position as the Portuguese in Macau, which is one of complete subservience to her wishes. We would then, for example, bo forced to deny completely the use of Hong Kong to the U.S. armed services,
to
exclude the K.M.T. (perhaps handing over their local leaders to Communist China), and to return any of the refugees whom Peking might specify. Anothor aspect of Poking's attitude is a desire to humiliato Britain in order to ropay us for tho humiliations we are held to have inflicted on China in the past when wo were the dominant power.
7.
Against this background it might bo that, in a situation in which Poking had defcated us in Hong Kong, they would sook to obligo us to romain in nominal control of the Colony, though in fact in complete pawn to Poking, in order that they might continue for as long as possible to earn foreign exchango through Hong Kong. If this were their decision they might seek to provent any largo exodus of Europeans from the Colony, so as to onsure that they had a substantial number of hostages in their hands whom they would use to bring pressure to boar on H.M.G., and on British commercial concerns, to carry on in Hong Kong for China's benefit. (When the Communists took over control of Shanghai they did not permit the foreign firms to close dom, renove any assets, or withdraw their foreign omploycos). Alternatively, they might decide to forogo the (roduced) economic benefits
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THIS IS A COPY
THE ORIGINAL HAS BEEN RETAINED IN THE DEPARTMENT UNDER SECTION 3(4) OF THE FUBLIC RECORDS ACT 1958
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