(97793)
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Copy of a letter from Mr. S.H. Wright, Treasury to Mr. E.M. Rose, Cabinet Office, dated 22nd September 1967
Hong Kong
Conclusion (1) of item 3 of OPDO(DR)(67) 35th Meeting invited the Treasury in consultation with the Department of Economic Affairs, Commonwealth Office and the Board ofTrade, to prepare a "study of the econonic consequences to the United Kingdom of no longer possessing Hong Kong"
2.
I am sending you herewith a paper designed to cover this question. It has been prepared in consultation with the Board of Trade, Department of Economic Affairs and Bank of England and the Commonwealth Office have been kept in touch with the progress of the work.
3. As you will appreciate, it is in any case difficult to arrive at any precise quantifications but it is the more so because of the intrinsic difficulty of making realistic political assumptions. We have tried to meet this difficulty by making in Section I of the paper a somewhat arbitrary isolation of Hong Kong/United Kingdon relations from the general complex of United Kingdom/China relations and by trying, in Section II(b) of the paper, to cover briefly the implications for the United Kingdom economy
I need hardly of various possible "political" developments with China. add that the speculations in Section II of the paper are intended for strictly analytic purposes and in no way prejudge the view which the Treasury, or indeed other economic Departments, might take of any specific propositions.
4.
There is one more specific point to which I should draw your attention, namely that the £10 million balance of payments saving on United Kingdom forces identified in paragraph 5 of the paper is not to be taken as telling the whole story in terms of the implications for defence expenditure. If we no longer had commitments in Hong Kong this must have implications for other defence expenditure overseas (and perhaps also at home) which could well be very significant. We feel sure that the final report to Ministers should include naterial on this point, We have not drafted on it at this stage, because some of the Departments
but we would mainly concerned were not members of our drafting group, hope that there will be an early opportunity to discuss it in the
Working Party.
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