TNAG-0042-FCO40-78-Future-Sovereignty-of-Hong-Kong-Defence-Review-Working-Party-1967 — Page 60

1

DRAFT

TO SECRET

84/2

T

ONG_RO

We were asked to consider the economic consequences

to the U.I. of no longer possessing Hong Kong.

2. If there is renewed sustained and heavy Chinese

pressure on the colony, this can be expected eventually to lead to a reduced level of economic activity in Hong Kong advercely affecting the level of trade and

(It might other economic relationships with the U.K. conceivably call for some measure of U‚K, economic assistance to Hong Kong.) However as the effects of such pressure cannot be quantified the analysis in this paper is as a matter of convenience essentially in terms of a contrast between the state of affairs which might obtain following the loss of Hong Kong with that

obtaining in 1966.

3. Much would depend on the circumstances in which Hong Kong were lost and in particular how its loss would affect our economic relations with China.

Section I

below however examines the possible affects on the U.K. balance of payments and on the U.K. economy of the loss of Hong Kong to China, on the basis of disregarding any possible consequential effects on our economic relations with China proper. More specifically the following

assumptions are made:-

(1) that Hong Kong would cease to exist as

separate economic entity;

a

(2) that the access for exports from the "enlarged

China" (incorporating Hong Kong) to the U.K.

market would be subject to precisely the sume

1

TOR SECRET

Page 60Page 61