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In the meantime it was most important that no indication should be
given that we were examining our long-term policy towards Hong Kong. Should it ever emerge that we were considering the possibility of with-
drawal confidence would be destroyed at once and the orderly administration
of the Colony would become impossible. For this reason knowledge of our thinking had been confined to a very small circle in Hong Kong
only the
Governor, the Chief Secretary and the Commander, British Forces.
In discussion it was argued that the paper did not make a complete
analysis of the nature of our negotiations with the Chinese when they became possible. Although our negotiating position was admittedly not very strong, it might not be as weak as the paper suggested, particularly if a more reasonable regime came to power in China. On the other hand, we had to realise that once we told the Chinese that we were prepared to consider negotiations to withdraw we should have in fact taken the decision to withdraw. We could not change our minds if we regarded the Chinese response as unsatisfactory. In approaching the Chinese we should have to
point out that we were making a gesture of goodwill in offering to terminate our lease ahead of time, that we controlled substantial assets (the sterling balances belonging to Hong Kong) and that we had valuable trading facilities to offer also. We should do our best at the same time to mobilise world opinion on our side, not only so as to influence the Chinese Government, but also in the hope of obtaining co-operation over the refugee problem which would arise. In this latter connection the paper did not face the unpalatable fact that it was not feasible for us to meet our responsibilities to the population.
On the other hand, the point was made that our bargaining counters were not very substantial when closely examined, and would become even
less so.
The United Kingdom share of Hong Kong's trade was declining and we were in no position to offer the Chinese Hong Kong's share of the United States market. It might be that by the time we withdrew from Hong Kong the United States Government would no longer embargo all trade with China, but this was a matter of speculation. Hong Kong's sterling balances were no more than the amount of foreign exchange which China could acquire in about eighteen months' trading through Hong Kong. Furthermore, if there were a moderate regime in Peking which would consider negotiating with us on a reasonable basis such a regime would want to preserve the advantages which they gained from the present state of the territory, rather than negotiate us out of it. At the same time it had to be recognised that as the end of the lease approached internal pressures in
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