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or grain deals with Australia and Canada have often taken place in
trong hon.
Western Tirms, too, can readily make contact with Chinese
commercial organisations in the Colony.
8.
Hong Kong as hostage for our good behaviour
140116ioned in Section b , paragraph 2 zveze,-China could at
ally time bring pressure to bear on the Colony with a view to
influencing our policies or actions elsewhere than in the Colony.
This might be used in the promotion of China's interests and to the
detriment of our interests.
9.
Hong Kong in our hands is of considerable economic value to China
but its contribution to China's economy is clearly not indispensable
and as the economy develops its importance as an earner of foreign
exchange will diminish. Such evidence as we have indicates that
there are differences within the Chinese leadership between the
extremist group inspired by Mao who are unreservedly in favour of
pushing theCultural Revolution to the limit and encouraging
"making revolution" inside China and outside it, and a second group
of a more moderate and realist attitude including the Prime Minister,
Chou En-lai. It is possible that the first group might be willing
to sacrifice the economic benefits derived from lion hong in the
interests of intensifying the confrontation with the Hong Kong
Government, while the second group would be disposed to control the
level of confrontation in order to avoid disrupting the Colony to an
extent which would damage China's economic interests. In the present
state of confusion in China it is by no means certain that the second
group would prevail. Soviet jibes about China's tolerance of foreign
colonial possessions on its territory will not be helpful to them.
D. CHERASE INTENTIONS TOMANDS HONG KONG
1.
The Chinese Government regard Hong Kong and the New Territories
as part of China. This has been repeated in several official
It is doubtful whether they statements during the past few months.
sou any Gilference in the position of the ceded areas of Hong kong
and the leased area of the New Territories.
The Chinese regard the
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