TNAG-0056-FCO40-92-Evacuation-plan-1967 — Page 100

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ECONOMIC CONSEQUENCES TO THE UNITED KINGDOM OF THE LOSS OF

HONG KONG

We were asked to consider the economic consequences to the United

Kingdom 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 adversely affecting the level of trade and other economic relationships with the United Kingdom. (It might conceivably call for some measure of United Kingdom 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 was lost

and in particular how its loss would affect our economic relations with

China. Section I below however examines the possible effects on the United Kingdom balance of payments and on the United Kingdom economy of the loss of Hong Kong to China, on the arbitrary (and somewhat unrealistic)

basis of disregarding any possible consequential effects on our economic relations with China proper. More specifically the following assumptions

are, nade

(1)

(2)

that Hong Kong would cease to exist as a separate economic entity;

that the access for exports from the "enlarged China" (incorporating Hong Kong) to the United Kingdom market would be

subject to precisely the same rules and restrictions as those obtaining at present for China (without Hong Kong) and that

existing trade with Hong Kong would not therefore to any extent be replaced by increased trade with China; (see paragraph 13); (3) that Hong Kong's sterling balances would be blocked and

releases would be made from them only to selected claimants resident outside the enlarged China;

(4) that China would take over United Kingdom property in Hong Kong (which may be worth about £80 million) and there would be no

compensation.

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(97793)

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