TNAG-0042-FCO40-78-Future-Sovereignty-of-Hong-Kong-Defence-Review-Working-Party-1967 — Page 75

TOR

SECRET

DRAFT

HONG KONG

We were asked to consider the economic consequences

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

2.

Contimed or recurrent Chinese pressure on the

colony can be expected eventually to lead to a reduced

level of economic activity in Hong Kong adversely

affecting the level of trade and other economic

relationships with the U.K. (It might conceivably call

for some measure of U.X. 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. Section I below examines the possible affects on the

U.I. balance of payments (including the reserve position)

and on the U.K. economy of the loss of Hong Kong to China.

On the broad assumptions that Hong Kong would cease to exis'

a separate economic entity and that current U.X. trade

and other economic dealings with her would not to any

extent be replaced by increased business with an enlarged

China. More specifically the following assumptions are

made:-

(1)

that the access for exports from the "enlarged

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

market would be subject to precisely the same

rules and restrictions as those obtaining at

present for China (without Hong Kong);

1

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